The Law of Demand states that:
A. Consumers buy a good based on many other factors other than the price of the good
B. Consumers buy less of a good as its price increases and more of a good as its price decreases
C. Firms produce more of a good as its price increases and less of a good as its price decreases
D. Consumers buy more of a good when their income rises and less of a good when their income decreases
2. What does the term "quantity demanded" refer to?
A. It refers to both the amount of a good that consumers want to buy at a specified price and the amount that suppliers want to sell at that specified price
B. It refers to the demand for a good over a specified time period
C. It refers to the number of a good available for purchase at a specified price
D. It refers to the amount of a good that consumers want to purchase at a specified price
3. In general, demand curves have a:
A. Negative slope because consumers buy less of a good as its price rises
B. Negative slope because more of a good becomes available as its price falls
C. Positive slope because consumers value a good more if its price rises
D. Positive slope because price and quantity demanded move in opposite directions
4. What does the term "demand" refer to?
A. It refers to the total quantity of a good available for purchase at various prices
B. It refers to the total quantity of a good that consumers want to buy at a specified price over a given time period
C. It refers to the relationship between various prices and the quantities that consumers want to buy at these various prices over a given time period
D. It refers to the positive relationship between price and the quantity that consumers want to buy
5. Which of the following best exemplifies the Law of Demand?
A. AT&T Wireless Services laid off 70% of its IT staff as it outsourced some of its information technology work to lower-cost operations overseas
B. High gasoline prices have increased the demand for public transportation
C. Health conscious consumers are purchasing more and more organic produce
D. Steep discounts in the price of digital cameras have contributed to increased sales
6. How does one derive the market demand for root beer?
A. The market demand for root beer is calculated by taking the product of the average quantity demanded by consumers and the average price of root beer over a given time period
B. The market demand for root beer is calculated by summing up the individual quantities demanded at each price
C. The market demand for root beer is derived by calculating the total sales over a specified time period
D. The market demand for root beer is calculated by summing up the individual quantities demanded over a range of prices
7. A demand curve shows the relationship between price and quantity demanded, ceteris paribus. What does "ceteris paribus" mean?
A. It means there are many other factors other than price and quantity that affect demand
B. It is the Latin phrase for "over a given time period"
C. It means that there are many other factors besides the price that affect demand
D. It means all other factors that affect demand other than price are held constant
8. Studies have shown that olive oil, which is high in antioxidants, may help prevent breast cancer and colon cancer. Which of the following shifts best describes the effect of this information in the market for olive oil?
A. The supply curve shifts to the right
B. The demand curve shifts to the left
C. The demand curve shifts to the right
D. The supply curve shifts to the left
9. If an increase in the price of rice causes an increase in demand for pinto beans, then rice and pinto beans are:
A. Complementary goods
B. Substitute goods
C. Inferior goods
D. Normal goods
10. Wal-Mart found that at its new, upscale store in Plano, Texas-where the median household income is nearly twice the national average-its wine section generates more sales per square foot than at its other stores located in lower income cities in Texas. What does this information suggest?
A. It suggests that wine is a normal good
B. It suggests that high income individuals like wine more than low-income individuals
C. It suggests that wine is an inferior good in low-income areas and a normal good in high-income areas
D. It suggests that wine prices in its upscale store must be higher than those in its other stores
11. If an increase in the price of tortillas causes a decrease in demand for rice, then tortillas and rice are:
A. Inferior goods
B. Normal goods
C. Complementary goods
D. Substitute goods
12. Market supply is determined by:
A. Adding the number of goods that each producer will supply at each specified price
B. Assuming each producer produces the same quantity at each specified price and multiplying that quantity by the number of producers
C. Calculating the average quantity produced by each firm at various prices
D. Adding the prices each producer will charge for each quantity
13. What is the difference between "supply" and "quantity supplied"?
A. Supply refers to the number of goods suppliers want to produce at a particular price while quantity supplied refers to the relationship between various prices and quantities produced at those prices over a given time period
B. There is no difference between the two terms; they can be used interchangeably
C. Supply refers to the amount of goods that producers bring to the market for sale while quantity supplied refers to actual sales
D. Supply refers to the entire relationship between various prices and quantities supplied at those prices over a specified time period while quantity supplied refers to the number of goods suppliers want to produce at a specified price
14. The Law of Supply states that firms:
A. Produce more of a good if the price of inputs fall and less of a good when input prices rise
B. Will sell more of a good when consumers' incomes rise
C. Sell less of a good as its price increases and more of a good as its price decreases
D. Produce more of a good as its price increases and less of a good as its price decreases
15. The Teamsters union successfully negotiated a wage increase for workers in the package delivery industry. How does this affect the market for package delivery services such as UPS and DHL?
A. It raises the wages of workers and therefore shifts the demand for package delivery services to the right
B. It raises the wages of workers and therefore shifts the demand for package delivery services to the left
C. It raises the cost of producing package delivery services and therefore shifts the supply curve to the right
D. It raises the cost of producing package delivery services and therefore shifts the supply curve to the left
16. Suppose the supply of flat-panel televisions has increased. Which of the following would you reject as an explanation for this increase?
A. An increase in the price of flat-panel televisions
B. A fall in the prices of digital display processors used in the production of flat-panel televisions
C. An increase in the number of firms producing flat-panel televisions
D. Technological advancements in the production of flat-panel televisions
17. When economists say the demand for a product has decreased, they mean that:
A. Consumers no longer value the product
B. The demand curve has shifted to the left
C. Consumers are now willing and able to buy more of this product at each possible price
D. Product price has increased and as a consequence consumers are buying less of the product
18. An inferior good is a good for which:
A. An increase in a person's income results in reduced demand for the good
B. An increase in a person's income results in increased demand for the good
C. An increase in the price of a good results in a higher quantity demanded
D. There are no substitutes
19. A change in demand can result from:
A. A change in price
B. A change in consumer expectations
C. A change in supply
D. A change in quantity demanded
20. David survives college on a tiny income and packets of dehydrated soup at 25 cents each. When he graduates with his economics degree, his income increases to $50,000 a year and he stops eating soup and starts eating out at restaurants more often. For David,
A. Soup and restaurant meals are both normal goods
B. Soup is a normal good and restaurant meals are an inferior good
C. Soup is an inferior good and restaurant meals are a normal good
D. Soup and restaurant meals are both inferior goods
21. Which of the following would shift the supply curve for candy to the right?
A. A more health-conscious society
B. An increase in the price of sugar
C. The development of new, more efficient candy-making machinery
D. The approach of Halloween
22. A legal minimum price below which a good cannot be sold is a:
A. Price break
B. Price floor
C. Price discount
D. Price ceiling
23. A persistent surplus will result when the government imposes a:
A. Price ceiling below the free market equilibrium price
B. Price floor below the free market equilibrium price
C. Price floor above the free market equilibrium price
D. Price ceiling above the free market equilibrium price
24. Minimum wage laws dictate the:
A. Lowest wage rate that employers may pay for labor
B. Average wage rate that employers must pay for labor
C. Highest wage rate that employers may pay for labor
D. Minimum qualifications for labor services