Unit 2 Test

Which of the following statements about price control is true?

E. Price ceilings and price floors result in a misallocation of resources.

Which of the following situations best illustrates the law of demand?

In the past several months, as the price of compact disc players has decreased, the quantity of compact disc players sold has increased.

Which of the following events will cause the demand curve for hamburgers to shift to the right?

A. An increase in the price of pizza, a substitute for hamburgers.

A country can consume beyond its present production possibilities curve when it?

A. Trades with other countries, thus taking advantage of different opportunity costs.

The supply curve for automobiles will shift to the left in response to?

An increase in wages in the automobile industry.

During the 1990s, the price of VCRs fell by about 30 percent, and quantity sold decreased by the same amount. The demand for VCRs must

E. Have shifted to the left.

Assume that the demand for apples is down ward sloping. If the price of apples falls from $.80 per pound to $.65 per pound, which of the following will occur?

B. A larger quantity of apples will be demanded.

If there is an increase in demand for a good, what will most likely happen to the price and quantity of the good exchanged?

B. Price: Increase Quantity: Increase

The substitution effect causes a consumer to buy less of a product when the price increases because the?

B. Product is now more expensive compared to similar products.

Which of the following will NOT change the demand for oranges?

C. A change in the price of oranges.

Which is true of the following in the elastic range of a firm's demand curve?

C. Decrease in price will likely lead to an increase in total revenue.

If the cost of producing automobiles increases, the price, equilibrium quantity and consumer surplus will most likely change in which of the following ways?

C. Price: Increase Quantity: Decrease Consumer Surplus: Decrease

An increase in the price of gasoline will cause the demand curve for tires to shift in which direction?

C. To the left, because gasoline and tires are complements.

If hot dogs are an inferior good, an increase in income will result in?

D. A decrease in the demand for hot dogs.

Producer surplus is the

D. Amount sellers are paid less the amount they were willing to accept.

During a football game, it starts to rain and the temperature drops. The senior class, which runs the concession stand and is studying economics, raises the price of coffee from 50 cents to 75 cents a cup. They sell more quantity than ever before. Which answer explains this?

D. The demand for coffee increased.

Which of the following will occur if a legal price floor is placed on a good below its free market equilibrium?

D. The equilibrium price will ration the good.

In a perfectly competitive market, which of the following shifts in the supply and demand curves will definitely cause both the equilibrium price and quantity to decrease?

E. Supply: No shift Demand: Shifts to the left

The demand curve for a normal good slopes down for which of the following reasons? i. An increase in the price of the good induces consumers to purchase substitute products. ii. An increase in the price of the good reduces consumer' purchasing power. iii.An increase in the price of the good increases consumers' utility from consuming that good.

i. An increase in the price of the good induces consumers to purchase substitute products. ii. An increase in the price of the good reduces consumer' purchasing power.