Question 1

Kariuki decreases his consumption of grapes after his income goes up. For Kariuki

Accepted Answer

A)  grapes and income are substitute goods. 
B)  grapes and income are complementary goods. 
C)  grapes are an inferior good. 
D)  grapes are a superior good. 
A)  grapes and income are substitute goods. 
B)  grapes and income are complementary goods. 
C)  grapes are an inferior good. 
D)  grapes are a superior good.

Question 2

Which of the following is NOT a determinant of demand?

Accepted Answer

A)  consumers' incomes 
B)  prices of other goods 
C)  consumers' tastes 
D)  production technology 
A)  consumers' incomes 
B)  prices of other goods 
C)  consumers' tastes 
D)  production technology

Question 3

The law of supply states that there is

Accepted Answer

A)  an inverse relationship between price and technology, ceteris paribus. 
B)  a direct relationship between profit and quantity supplied, ceteris paribus. 
C)  no relationship between price of resources and number of suppliers, ceteris paribus. 
D)  a direct relationship between price and quantity supplied, ceteris paribus. 
A)  an inverse relationship between price and technology, ceteris paribus. 
B)  a direct relationship between profit and quantity supplied, ceteris paribus. 
C)  no relationship between price of resources and number of suppliers, ceteris paribus. 
D)  a direct relationship between price and quantity supplied, ceteris paribus.

Question 4

A shift of the demand curve to the left represents

Accepted Answer

A)  an increase in demand. 
B)  a decrease in demand. 
C)  an increase in quantity demanded. 
D)  a decrease in quantity demanded. 
A)  an increase in demand. 
B)  a decrease in demand. 
C)  an increase in quantity demanded. 
D)  a decrease in quantity demanded.

Question 5

-At a price of P0 in the above figure, which of the following statements is FALSE?

Accepted Answer

A)  Quantity demanded equals quantity supplied. 
B)  There is an equilibrium in the market. 
C)  P0 is the market clearing price. 
D)  There is a surplus equal to Q0. 
A)  Quantity demanded equals quantity supplied. 
B)  There is an equilibrium in the market. 
C)  P0 is the market clearing price. 
D)  There is a surplus equal to Q0.

Question 6

The law of supply implies that the supply curve is

Accepted Answer

A)  flat. 
B)  upward sloping. 
C)  downward sloping. 
D)  vertical. 
A)  flat. 
B)  upward sloping. 
C)  downward sloping. 
D)  vertical.

Question 7

We observe that people buy less steak and more potatoes when the price of steak relative to potatoes increases. This indicates that steak and potatoes are

Accepted Answer

A)  substitutes. 
B)  complements. 
C)  inferior goods. 
D)  unrelated goods. 
A)  substitutes. 
B)  complements. 
C)  inferior goods. 
D)  unrelated goods.

Question 8

In economic terminology, an inferior good is a good

Accepted Answer

A)  that no one will purchase. 
B)  that doesn't work properly. 
C)  that has no monetary value. 
D)  for which demand increases as income decreases. 
A)  that no one will purchase. 
B)  that doesn't work properly. 
C)  that has no monetary value. 
D)  for which demand increases as income decreases.

Question 9

The market supply curve is found by

Accepted Answer

A)  surveys of consumer groups. 
B)  vertically summing up the equilibrium prices of individual firms. 
C)  horizontally summing up the supply curves of individual firms. 
D)  estimating what the supply curve would be of one huge firm large enough to serve the entire market. 
A)  surveys of consumer groups. 
B)  vertically summing up the equilibrium prices of individual firms. 
C)  horizontally summing up the supply curves of individual firms. 
D)  estimating what the supply curve would be of one huge firm large enough to serve the entire market.

Question 10

-Suppose a change takes place and the new equilibrium is at point A in the above figure. This change could have been caused by

Accepted Answer

A)  an increase in the per-unit tax on CDs. 
B)  a decrease in the income of consumers. 
C)  a reduction in the wages paid to workers in the CD industry. 
D)  a reduction in the price of CD players. 
A)  an increase in the per-unit tax on CDs. 
B)  a decrease in the income of consumers. 
C)  a reduction in the wages paid to workers in the CD industry. 
D)  a reduction in the price of CD players.

Question 11

The data points on a supply curve come from

Accepted Answer

A)  survey analysis. 
B)  the same place from which we get the data points on a demand curve. 
C)  the supply schedule. 
D)  companies' annual reports. 
A)  survey analysis. 
B)  the same place from which we get the data points on a demand curve. 
C)  the supply schedule. 
D)  companies' annual reports.

Question 12

An increase in the relative price of a good cannot be caused by

Accepted Answer

A)  an increase in the nominal price of the good that is greater than the increase in the nominal price of the other good. 
B)  a decrease in the nominal price of the good that is less than the decrease in the nominal price of the other good. 
C)  a decrease in the nominal price of the other good while the price of the good itself remains constant. 
D)  an increase in the nominal price of the other good while the price of the good itself remains constant. 
A)  an increase in the nominal price of the good that is greater than the increase in the nominal price of the other good. 
B)  a decrease in the nominal price of the good that is less than the decrease in the nominal price of the other good. 
C)  a decrease in the nominal price of the other good while the price of the good itself remains constant. 
D)  an increase in the nominal price of the other good while the price of the good itself remains constant.

Question 13

A shortage will occur when

Accepted Answer

A)  the price equals the market clearing level. 
B)  the price is above the market clearing level. 
C)  there is an excess quantity supplied. 
D)  the price is below the market clearing level. 
A)  the price equals the market clearing level. 
B)  the price is above the market clearing level. 
C)  there is an excess quantity supplied. 
D)  the price is below the market clearing level.

Question 14

Assuming that turkey, chicken, pork, and beef are substitutes, suppose that the price of turkey has fallen. This will, other things being equal

Accepted Answer

A)  reduce demand for chicken, pork, and beef. 
B)  leave demand for chicken, pork, and beef unchanged. 
C)  increase demand for chicken, pork, and beef. 
D)  increase quantity demanded of beef. 
A)  reduce demand for chicken, pork, and beef. 
B)  leave demand for chicken, pork, and beef unchanged. 
C)  increase demand for chicken, pork, and beef. 
D)  increase quantity demanded of beef.

Question 15

When the price of a good rises, there is

Accepted Answer

A)  an increase in supply. 
B)  a decrease in supply. 
C)  a decrease in quantity supplied. 
D)  an increase in quantity supplied. 
A)  an increase in supply. 
B)  a decrease in supply. 
C)  a decrease in quantity supplied. 
D)  an increase in quantity supplied.

Question 16

What type of relationship does the law of demand demonstrate?

Accepted Answer

A)  direct 
B)  positive 
C)  inverse 
D)  static 
A)  direct 
B)  positive 
C)  inverse 
D)  static

Question 17

In economics, "demand" refers to

Accepted Answer

A)  the intensity of desire for a good. 
B)  the amount of a good people need rather than the amount they want. 
C)  the satisfaction a good will provide a person. 
D)  the quantities of a good that people will buy at various prices. 
A)  the intensity of desire for a good. 
B)  the amount of a good people need rather than the amount they want. 
C)  the satisfaction a good will provide a person. 
D)  the quantities of a good that people will buy at various prices.

Question 18

"A shortage is the same thing as scarcity." Do you agree or disagree with this statement? Why? What can cause a shortage to disappear in a market? What can cause scarcity to disappear?

Accepted Answer

Disagree with the statement. Scarcity is

Question 19

For a demand schedule, which of the following is held constant?

Accepted Answer

A)  relative prices 
B)  quantity demanded 
C)  quality of the good 
D)  nominal prices 
A)  relative prices 
B)  quantity demanded 
C)  quality of the good 
D)  nominal prices

Question 20

-Refer to the above figure. Which panel shows the effect of an increase in the price of a good on the demand curve of that good?

Accepted Answer

A)  Panel A. 
B)  Panel B. 
C)  Both panels. 
D)  Neither panel. 
A)  Panel A. 
B)  Panel B. 
C)  Both panels. 
D)  Neither panel.

Exam 3: Demand and Supply

Kariuki decreases his consumption of grapes after his income goes up. For Kariuki

Which of the following is NOT a determinant of demand?

The law of supply states that there is

A shift of the demand curve to the left represents

-At a price of P0 in the above figure, which of the following statements is FALSE?

The law of supply implies that the supply curve is

We observe that people buy less steak and more potatoes when the price of steak relative to potatoes increases. This indicates that steak and potatoes are

In economic terminology, an inferior good is a good

The market supply curve is found by

-Suppose a change takes place and the new equilibrium is at point A in the above figure. This change could have been caused by

The data points on a supply curve come from

An increase in the relative price of a good cannot be caused by

A shortage will occur when

Assuming that turkey, chicken, pork, and beef are substitutes, suppose that the price of turkey has fallen. This will, other things being equal

When the price of a good rises, there is

What type of relationship does the law of demand demonstrate?

In economics, "demand" refers to

"A shortage is the same thing as scarcity." Do you agree or disagree with this statement? Why? What can cause a shortage to disappear in a market? What can cause scarcity to disappear?

For a demand schedule, which of the following is held constant?

-Refer to the above figure. Which panel shows the effect of an increase in the price of a good on the demand curve of that good?

The Nature of Economics

Scarcity and the World of Trade-Offs

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

-At a price of P₀ in the above figure, which of the following statements is FALSE?