Microeconomics Test 1 Answers

question

C
answer

Ceteris paribus, when transportation costs are high relative to selling prices, markets are __________ and __________. a. numerous; global in scope b. few; global in scope c. numerous; geographically limited d. few; geographically limited
question

C
answer

The law of demand refers to the: a. decrease in price that results as more units of a product are demanded. b. increase in price that results from an increase in demand for a good of limited supply. c. inverse relationship between the price of a good and the quantity demanded. d. increase in the quantity of a good made available when its price increases.
question

B
answer

The law of demand indicates that as the price of a good increases: a. suppliers wish to sell less of it. b. buyers desire to purchase less of it. c. more of it is produced. d. more of it is desired.
question

B
answer

Which of the following is true of a competitive market? a. The rules of supply and demand do not apply to it. b. Buyers and sellers have little market power. c. Each buyer’s or seller’s effect on market price is substantial. d. Few sellers offer similar products.
question

D
answer

The law of demand asserts that: a. output prices are more important than input prices. b. when people want a good badly enough they will find a way to pay for it. c. people want to buy more of goods that are priced very high because of their prestige. d. the quantity of a good that people will buy is inversely related to the product’s price.
question

B
answer

In economics, the demand for a good refers to the amount of the good people: a. would like to have if the good were free. b. will buy at various prices. c. need to achieve a minimum standard of living. d. will buy at alternative income levels.
question

B
answer

When the price of a good falls relative to other goods and the consumer consequently buys more of this good, it is called the: a. income effect. b. substitution effect. c. complement effect. d. net effect. e. demand effect.
question

A
answer

The demand curve for a typical good has a(n): a. negative slope because some consumers switch to other goods as the price rises. b. negative slope because consumer incomes fall as the price of the good rises. c. negative slope because the good has less “snob appeal” as its price falls. d. inverse slope because as the price goes up, the good has more profitability. e. positive slope because price is a clear indicator of need.
question

C
answer

The demand schedule for a good: a. indicates the quantity that people will buy at the prevailing price. b. indicates the quantities that suppliers will sell at various market prices. c. indicates the quantities that will be purchased at alternative market prices. d. is determined primarily by the cost of producing the good.
question

C
answer

The law of demand refers to the: a. negative relationship between the price of a good and the willingness of producers to sell it. b. price increase that results from an increase in demand. c. inverse relationship between the price of a good and the quantity demanded. d. increase in the quantity of a good made available when its price increases.
question

D
answer

A downward-sloping demand curve shows: a. the direct relationship between price and quantity supplied; as price increases, the quantity supplied increases. b. the inverse relationship between price and quantity supplied; as price increases, the quantity supplied decreases. c. the direct relationship between price and quantity demanded; as price increases, the quantity demanded increases. d. the inverse relationship between price and quantity demanded; as price increases, the quantity demanded decreases. e. how supply varies with demand.
question

D
answer

If the demand for milk is downward sloping, then an increase in the price of milk will result in a(n): a. increase in the demand for milk. b. decrease in the demand for milk. c. increase in the quantity of milk demanded. d. decrease in the quantity of milk demanded. e. decrease in the supply of milk.
question

C
answer

A demand curve slopes: a. down and to the left. b. down and then up again in a u-shape. c. down and to the right. d. up and to the right.
question

C
answer

Assume the demand schedule for cookies is downward sloping. If the price of cookies falls from $2.50 to $2.25 per dozen: a. the demand for cookies will fall. b. the demand for cookies will rise. c. a larger quantity of cookies will be demanded. d. a smaller quantity of cookies will be demanded.
question

E
answer

When a demand schedule is drawn in a graph: a. price is measured on the vertical axis. b. quantity is measured on the horizontal axis. c. the resulting curve has a negative slope. d. other variables are held constant. e. all of the above are correct.
question

C
answer

Which of the following explains why the quantity of a good demanded decreases when its price increases? a. Consumer preferences change when the price of a good changes. b. The nominal income of consumers falls when the price of a good increases. c. Substitutes become relatively cheaper when the price of a good increases. d. Complements become relatively cheaper when the price of a good increases. e. None of the above provides a reasonable explanation.
question

E
answer

The quantity of a good demanded tends to increase as its price falls because: a. a decrease in price shifts the demand curve to the right. b. a decrease in price shifts the demand curve to the left. c. a decrease in price shifts the supply curve to the right. d. at lower prices, suppliers are willing to supply a greater quantity to the market. e. a decrease in price leads consumers to substitute toward this now relatively cheaper product.
question

A
answer

A change in which of the following variables does not cause a change in demand? a. prices of unrelated goods b. incomes of demanders c. the number of demanders d. tastes of demanders e. expectations of demanders
question

D
answer

When quantity demanded decreases in response to a change in price: a. the demand curve shifts to the right. b. the demand curve shifts to the left. c. there is a movement down along the demand curve. d. there is a movement up along the demand curve. e. the supply curve shifts to the right.
question

A
answer

Which of the following groups are likely to determine the demand side of the market? a. Firms that buy inputs b. Firms that produce and sell goods c. Resource owners who sell their inputs d. Workers in a firm
question

C
answer

If consumers are less willing and able to pay for each level of output than they were previously, then apparently: a. demand has increased. b. supply has increased. c. demand has decreased. d. there has been a movement down along the demand curve. e. there has been a movement up along the demand curve.
question

D
answer

Which of the following would not cause a change in the demand for cheese? a. an increase in the price of crackers, which are consumed with cheese b. an increase in the income of cheese consumers c. an increase in the population of cheese lovers d. an increase in the price of cheese e. a decrease in the price of crackers, which are consumed with cheese
question

D
answer

Which of the following would not cause an increase in the demand for cheese? a. a decrease in the price of crackers, which are consumed with cheese b. an increase in the income of cheese consumers, assuming that cheese is a normal good c. an increase in the population of cheese lovers d. a technological advance that makes it cheaper to produce cheese
question

C
answer

After widespread press reports about the dangers of contracting “mad cow disease” by consuming beef from Europe, the likely economic effect on the demand curve for beef from Europe is: a. a shift of the demand curve for beef to the right. b. a movement down along the demand curve for beef to the right. c. a shift of the demand curve for beef to the left. d. no change; only the supply curve for beef is likely to be affected.
question

A
answer

A demand curve shows the relationship between price and quantity demanded, “other things remaining constant.” The other things that remain constant include all of the following except the: a. price of the product. b. price of complementary products. c. price of substitute products. d. number of consumers in the demographic group purchasing the product. e. preferences of consumers.
question

B
answer

Which of the following would increase the demand for 35mm film? a. a reduction in the price of film b. a reduction in the price of 35mm film cameras c. an increase in the price of vacation packages d. a reduction in the price of digital cameras (that do not use film) e. an increase in the price of film developing
question

A
answer

All of the following would shift a product’s demand curve except a(n): a. increase in the price of the product. b. decrease in consumer income. c. increase in the price of a substitute. d. increase in the price of a complement. e. change in consumer preferences.
question

D
answer

Which of the following will not increase the demand for iced tea? a. an increase in advertising that makes drinking iced tea more appealing b. an increase in the price of iced coffee, a substitute product c. an increase in the income of consumers (assume that iced tea is a normal good) d. a decrease in the price of iced tea e. a decrease in the price of lemons, a complement to iced tea
question

B
answer

If the price of tennis rackets were to increase, we would expect: a. the demand for tennis balls to increase. b. the demand for tennis balls to decrease. c. the supply of tennis balls to increase, leading to a movement along the demand curve for tennis balls. d. the supply of tennis balls to decrease. e. both b. and d. to occur.

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