AP Econ Fall Final Review Unit 2

D

A decrease in demand is shown as a: A) movement from a higher point to a lower point on an existing demand curve. B) movement from a lower point to a higher point on an existing demand curve. C) rightward shift of a demand curve. D) leftward shift of a demand curve.

D

A decrease in supply is shown as a: A) movement from a higher point to a lower point on an existing supply curve. B) rightward shift of a supply curve. C) movement from a lower point to a higher point on an existing supply curve. D) leftward shift of a supply curve.

B

A decrease in the price of cameras will: A) cause the demand curve for film to become vertical. B) shift the demand curve for film to the right. C) shift the demand curve for film to the left. D) not affect the demand for film.

C

A market: A) reflects up sloping demand and down sloping supply curves. B) entails the exchange of goods, but not services. C) is an institution that brings together buyers and sellers. D) always requires face-to-face contact between buyer and seller.

D

A normal good is one: A) whose amount demanded will increase as its price decreases. B) whose amount demanded will increase as its price increases. C) whose demand curve will shift leftward as incomes rise. D) the consumption of which varies directly with incomes.

B

A recent study found that an increase in the Federal tax on beer (and thus an increase in the price of beer) would reduce the demand for marijuana. We can conclude that: A) beer and marijuana are substitute goods. B) beer and marijuana are complementary goods. C) beer is an inferior good. D) marijuana is an inferior good.

D

An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction is based on the assumption that: A) there are many goods that are substitutes for bicycles. B) there are many goods that are complementary to bicycles. C) there are few goods that are substitutes for bicycles. D) bicycles are normal goods.

C

An increase in consumer incomes will: A) increase the demand for an inferior good. B) increase the supply of an inferior good. C) increase the demand for a normal good. D) decrease the supply of a normal good.

C

An increase in demand is shown as a: A) movement from a higher point to a lower point on an existing demand curve. B) movement from a lower point to a higher point on an existing demand curve. C) rightward shift of a demand curve. D) leftward shift of a demandcurve.

A

An increase in supply is shown as a: A) rightward shift of a supply curve. B) leftward shift of a supply curve. C) movement from a higher point to a lower point on an existing supply curve. D) movement from a lower point to a higher point on an existing supply curve.

C

An increase in the price of product A will: A) reduce the demand for resources used in the production of A. B) increase the demand for complementary product C. C) increase the demand for substitute product B. D) reduce the demand for substitute product B.

A

Assume the demand curve for product X shifts to the right. This might be caused by: A) a decline in income if X is an inferior good. B) a decline in the price of Z if X and Z are substitute goods. C) a change in consumer tastes that is unfavorable to X. D) an increase in the price of Y if X and Y are complementary goods.

B

Cameras and film are: A) substitute goods. B) complementary goods. C) independent goods. D) inferior good

B

Creative destruction is: A) the process by which large firms buy up small firms. B) the process by which new firms and new products replace existing dominant firms and products. C) a term coined many years ago by Adam Smith. D) is applicable to planned economies, but not to market economies.

A

DVD players and DVDs are: A) complementary goods. B) substitute goods. C) independent goods. D) inferior goods.

C

If L and M are complementary goods, an increase in the price of L will result in: A) an increase in the sales of L. B) no change in either the price or sales of M. C) a decrease in the sales of M. D) an increase in the sales of M.

C

If two goods are complements: A) they are consumed independently. B) an increase in the price of one will increase the demand for the other. C) a decrease in the price of one will increase the demand for the other. D) they are necessarily inferior goods.

B

Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. Given D0, if the supply curve moved from S0 to S1 , then: A) supply has increased and equilibrium quantity has decreased. B) supply has decreased and equilibrium quantity has decreased. C) there has been an increase in the quantity supplied. D) supply has increased and price has risen to 0G.

D

Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. If supply is S1 and demand D0, then A) at any price above 0G a shortage would occur. B) 0F represents a price that would result in a surplus of AC. C) a surplus of GH would occur. D) 0F represents a price that would result in a shortage of AC.

A

Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. If the initial demand and supply curves are D0 and S0, equilibrium price and quantity will be: A) 0F and 0C respectively. B) 0G and 0B respectively. C) 0F and 0A respectively. D) 0E and 0B respectively.

B

The invisible hand refers to the: A) fact that the U.S. tax system redistributes income from rich to poor. B) notion that, under competition, decisions motivated by self-interest promote the social interest. C) tendency of monopolistic sellers to raise prices above competitive levels. D) fact that government controls the functioning of the market system.

A

The law of supply indicates that: A) producers will offer more of a product at high prices than they will at low prices. B) the product supply curve is downsloping. C) consumers will purchase less of a good at high prices than they will at low prices. D) producers will offer more of a product at low prices than they will at high prices.

A

The relationship between quantity supplied and price is _____ and the relationship between quantity demanded and price is _____. A) direct, inverse B) inverse, direct C) inverse, inverse D) direct, direct

B

The upward slope of the supply curve reflects the: A) principle of specialization in production. B) law of supply. C) fact that price and quantity supplied are inversely related. D) law of diminishing marginal utility.

D

The use of money contributes to economic efficiency because: A) governmental direction of the production and distribution of output can be avoided by using money. B) roundabout production could not occur without the availability of money. C) it is necessary for the creation of capital goods. D) it promotes specialization by overcoming the problems with barter.

C

Which of the above diagrams illustrate(s) the effect of a governmental subsidy on the market for AIDS research? A) A only B) B only C) C only D) D only

D

Which of the above diagrams illustrate(s) the effect of an increase in automobile worker wages on the market for automobiles? A) A only B) B only C) C only D) D only

B

Which of the above diagrams illustrate(s) the effect of an increase in the price of Budweiser beer on the market for Coors beer? A) A and C B) A only C) B only D) C only

C

Which of the following is most likely to be an inferior good? A) fur coats B) ocean cruises C) used clothing D) steak

A

Which of the following statements is correct? A) An increase in the price of C will decrease the demand for complementary product D. B) A decrease in income will decrease the demand for an inferior good. C) An increase in income will reduce the demand for a normal good. D) A decline in the price of X will increase the demand for substitute product Y.

D

Which of the following will cause the demand curve for product A to shift to the left? A) population growth that causes an expansion in the number of persons consuming A B) an increase in money income if A is a normal good C) a decrease in the price of complementary product C D) an increase in money income if A is an inferior good

D

An inferior good is: A) one whose demand curve will shift rightward as incomes rise. B) one whose price and quantity demanded vary directly. C) one which has not been approved by the Federal Food and Drug Administration. D) not accurately defined by any of the above statements.

D

If X is a normal good, a rise in money income will shift the: A) supply curve for X to the left. B) supply curve for X to the right. C) demand curve for X to the left. D) demand curve for X to the right.

D

If Z is an inferior good, a decrease in money income will shift the: A) supply curve for Z to the left. B) supply curve for Z to the right. C) demand curve for Z to the left. D) demand curve for Z to the right.

c

If products A and B are complements and the price of B decreases the: A) demand curves for both A and B will shift to the left. B) amount of B purchased will increase, but the demand curve for A will not shift. C) demand for A will increase and the amount of B demanded will increase. D) demand for A will decline and the demand for B will increase.

c

If products C and D are close substitutes, an increase in the price of C will: A) tend to cause the price of D to fall. B) shift the demand curve of C to the left and the demand curve of D to the right. C) shift the demand curve of D to the right. D) shift the demand curves of both products to the right.

D

If the demand curve for product B shifts to the right as the price of product A declines, then: A) both A and B are inferior goods. B) A is a superior good and B is an inferior good. C) A is an inferior good and B is a superior good. D) A and B are complementary goods.

A

If the demand for a normal good (for example, steak) shifts to the left, the most likely reason is that: A) consumer incomes have fallen. B) cattle production has declined. C) the price of steak has risen. D) the price of cattle feed has gone up.

C

If the price of K declines, the demand curve for the complementary product J will: A) shift to the left. B) decrease. C) shift to the right. D) remain unchanged.

C

If the price of product L increases, the demand curve for close-substitute product J will: A) shift downward toward the horizontal axis. B) shift to the left. C) shift to the right. D) remain unchanged.

B

If two goods are substitutes: A) they are consumed independently. B) an increase in the price of one will increase the demand for the other. C) a decrease in the price of one will increase the demand for the other. D) they are necessarily inferior goods.

B

In 2003 the price of oil increased, which in turn caused the price of natural gas to rise. This can best be explained by saying that oil and natural gas are: A) complementary goods and the higher price for oil increased the demand for natural gas. B) substitute goods and the higher price for oil increased the demand for natural gas. C) complementary goods and the higher price for oil decreased the supply of natural gas. D) substitute goods and the higher price for oil decreased the supply of natural gas.

C

The demand curve shows the relationship between: A) money income and quantity demanded. B) price and production costs. C) price and quantity demanded. D) consumer tastes and the quantity demanded.

D

The demand for most products varies directly with changes in consumer incomes. Such products are known as: A) complementary goods. B) competitive goods. C) inferior goods. D) normal goods.

A

The law of demand states that: A) price and quantity demanded are inversely related. B) the larger the number of buyers in a market, the lower will be product price. C) price and quantity demanded are directly related. D) consumers will buy more of a product at high prices than at low prices.

A

The law of supply: A) reflects the amounts that producers will want to offer at each price in a series of prices. B) is reflected in a downsloping supply curve. C) shows that the relationship between producer revenue and quantity supplied is negative. D) reflects the income and substitution effects of a price change.

B

Which of the above diagrams illustrate(s) the effect of a decline in the price of irrigation equipment on the market for corn? A) Bonly B) Conly C) BandC D) Donly

A

Which of the above diagrams illustrate(s) the effect of a decline in the price of personal computers on the market for software? A) A only B) A and D C) B only D) D only

B

Which of the above diagrams illustrate(s) the effect of a decrease in incomes on the market for secondhand clothing? A) A and C B) A only C) B only D) C only

B

The claim that innovations in information technology, together with global capitalism, are leading to a long-term increase in U.S. productivity growth is known as the: A) rational expectations theory. B) theory of creative destruction. C) new-Keynesian perspective. D) New Economy view.

B

Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. A shift in the demand curve from D0 to D1 might be caused by a(n): A) decrease in income if X is an inferior good. B) increase in the price of complementary good Y. C) increase in money incomes if X is a normal good. D) increase in the price of substitute product Y.

A

Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. Other things equal, a shift of the supply curve from S0 to S1 might be caused by a(n): A) increase in the wage rates paid to laborers employed in the production of X. B) government subsidy per unit of output paid to firms producing X. C) decline in the price of the basic raw material used in producing X. D) increase in the number of firms producing X.

D

Refer to the above diagram. A shortage of 160 units would be encountered if price was: A) $1.10, that is, $1.60 minus $.50. B) $1.60. C) $1.00. D) $.50.

B

Refer to the above diagram. A surplus of 160 units would be encountered if price was: A) $1.10, that is, $1.60 minus $.50. B) $1.60. C) $1.00. D) $.50.

A

Refer to the above diagram. The equilibrium price and quantity in this market will be: A) $1.00 and 200. B) $1.60 and 130. C) $.50 and 130. D) $1.60 and 290.

A

The advent of DVDs threatens to eventually demolish the market for videocassettes. This is an example of: A) creative destruction. B) derived demand. C) capital accumulation. D) the difference between normal and economic profits.