AP Econ unit 2 grade 12

Assume that demand for bottled water is relatively price elastic. An increase in supply of bottled water will result in which of the following? ------ A A decrease in price, leading to an increase in total revenue B A decrease in price, leading to a decrease in total revenue C An excess supply of bottled water D An excess demand for bottled water E A relatively small decrease in price and no change in equilibrium quantity

A A decrease in price, leading to an increase in total revenue

Assume that good X is a normal good. Which of the following helps to explain why a decrease in the price of good X increases the quantity demanded of good X? ---- A Good X becomes relatively less expensive than its substitutes, so consumers buy more of good X and fewer of the substitutes B The marginal utility of consuming good X increases as more of good X is consumed. C The lower price of good X decreases the marginal utility per dollar; therefore, consumers buy more of good X. D The demand curve for good X shifts to the left. E The supply curve for good X shifts to the right.

A Good X becomes relatively less expensive than its substitutes, so consumers buy more of good X and fewer of the substitutes

A change in which of the following will cause a change in the supply of personal computers (PC's) in the short run? A Technology B Demand for PC's C Price of disks, which are a complement to PC's D Price of PC's E Consumers' incomes

A Technology

All of the following cause a rightward shift in the demand schedule for a normal good EXCEPT ----- A a decrease in the price of the good B a decrease in the price of a complementary good C an increase in the price of a substitute good D an increase in consumers' income E an increase in consumers' preference for the good

A a decrease in the price of the good

Which of the following will cause the demand for a normal good to increase? ----- A A decrease in consumers' income B A decrease in the price of a complementary good C A decrease in the price of a substitute good D A decrease in the price of the good E A decrease in the number of consumers

B A decrease in the price of a complementary good

Carmen consumes both entertainment and medical care. For Carmen, entertainment is a normal good, and the income elasticity of her demand for medical care is zero. If Carmen's income increases, which of the following will be the immediate impact on her consumption? ----- A Entertainment Medical care Increase Increase B Entertainment Medical care Increase No change C Entertainment Medical care No change Increase D Entertainment Medical care Increase Decrease E Entertainment Medical care Decrease Increase

B Entertainment Medical care Increase No change

Assume that ice cream is a normal good. If the price of ice cream decreases, the substitution effect and the income effect will lead to which of the following changes in ice cream consumption? ---- A Substitution Effect Income Effect Increase Decrease B Substitution Effect Income Effect Increase Increase C Substitution Effect Income Effect Increase No change D Substitution Effect Income Effect Decrease Increase E Substitution Effect Income Effect Decrease No change

B Substitution Effect Income Effect Increase Increase

An increase in the supply of coffee could be caused by ----- A a decrease in the price of cream, which is a complement to coffee B a decrease in the cost of labor used to produce coffee C an increase in consumer income D an increase in the demand for coffee E an increase in the price of coffee

B a decrease in the cost of labor used to produce coffee

A leftward shift in the supply curve of watches could be caused by --- A an increase in the price of watches B an increase in wages paid to workers who produce watches C an improvement in the technology associated with watchmaking D a decrease in the price of parts used in the production of watches E an increase in population

B an increase in wages paid to workers who produce watches

Assume that the price of good X decreases from $10 to $9 per unit and that the quantity demanded of good X increases from 25 to 30 units. In this price range, the demand for good X is ------ A inelastic B elastic C unit elastic D perfectly inelastic E perfectly elastic

B elastic

Assume that consumers consider popcorn and pretzels to be substitutes. A significant decrease in the supply of popcorn will affect the pretzel market by ----- A increasing the demand for pretzels and therefore the supply of pretzels B increasing the demand for pretzels and therefore the price of pretzels C decreasing the demand for pretzels and therefore the price of pretzels D increasing the supply of pretzels and therefore the price of pretzels E decreasing the supply of pretzels and therefore the price of pretzels

B increasing the demand for pretzels and therefore the price of pretzels

Assume that apple juice and grape juice are substitutes. Which of the following will cause an increase in the quantity of apple juice supplied? ----- A A decrease in subsidies to apple juice producers B A decrease in the price of grape juice C An increase in the price of apple juice D An increase in the price of insecticides used on apple trees E The imposition of a price ceiling in the market for apple juice

C An increase in the price of apple juice

Which of the following statements about the price elasticity of demand is true? ---- A When demand is price inelastic, total revenue will decrease as price increases. B When demand is price elastic, an increase in price will increase total revenue. C Demand tends to be more elastic in the short run compared to the long run. D As more close substitutes become available, demand tends to be more price elastic. E As a good becomes viewed as a necessity, demand becomes more price elastic.

D As more close substitutes become available, demand tends to be more price elastic.

A monopolist produces two unrelated goods, X and Y. The demand for X is currently price elastic and the demand for Y is currently price inelastic. To increase its total revenue, the firm should change the price of X and Y in which of the following ways? ---- A Increase No change B Increase Decrease C Increase Increase D Decrease Increase E Decrease Decrease

D Decrease Increase

Assume that the price of orange juice increases by 40 percent following a crop failure. If the quantity demanded falls by 10 percent, which of the following is true? ---- A The demand for orange juice is elastic. B The price of grapefruit juice, a substitute good, will fall. C The absolute value of the price elasticity of demand for orange juice is 4. D The absolute value of the price elasticity of demand for orange juice is 0.25. E The absolute value of the price elasticity of demand for orange juice is 10.

D The absolute value of the price elasticity of demand for orange juice is 0.25.

The price elasticity of demand for a product is 0.5. If the price of the product increases by 20 percent, which of the following will occur? ----- A The quantity demanded of the good will increase by 10%. B The quantity demanded of the good will increase by 20%. C The quantity demanded of the good will increase by 40%. D The quantity demanded of the good will decrease by 10%. E The quantity demanded of the good will decrease by 40%.

D The quantity demanded of the good will decrease by 10%.

According to the law of demand, an increase in the price of grape juice will result in --- A a rightward shift in the demand curve for grape juice B a leftward shift in the demand curve for grape juice C a decrease in the demand for orange juice, a substitute D a decrease in the quantity of grape juice demanded E an increase in the quantity of grape juice supplied

D a decrease in the quantity of grape juice demanded

Assume that people like onions on their hamburgers. If the supply of hamburgers decreases, the demand for onions will most likely ----- A remain unchanged because hamburgers and onions are different goods B increase because hamburgers and onions are substitutes C increase because hamburgers and onions are complements D decrease because hamburgers and onions are complements E decrease because hamburgers and onions are substitutes

D decrease because hamburgers and onions are complements

A city transit authority increases the price of sub- way and bus tickets from $1.25 to $1.50. If the demand for these tickets is price inelastic, the number of people riding buses and subways and the city's revenues will most likely change in which of the following ways? --- Increase; Increase Decreases; Increase Decrease; Decrease decrease; remain constant Remain constant; decrease

Decreases; Increase

Assume a consumer finds that his total expenditure on compact discs stays the same after the price of compact discs declines. Which of the following is true for this price change? ---- A Compact discs are inferior goods to this consumer. B The consumer's demand for compact discs increased in response to the price change. C The consumer's demand for compact discs is perfectly price elastic. D The consumer's demand for compact discs is perfectly price inelastic. E The consumer's demand for compact discs is unit price elastic.

E The consumer's demand for compact discs is unit price elastic.