ECON 101 Practice Test 3

44. Suppose the input costs associated with manufacturing hair replacement treatments decrease over time. This would lead to: A) an increase in the supply of such treatments, lower prices, and an increase in the equilibrium quantity. B) a decrease in quantity supplied and lower prices. C) an increase in demand and higher prices. D) a decrease in the supply of such treatments, higher prices, and a decrease in the equilibrium quantity

A) an increase in the supply of such treatments, lower prices, and an increase in the equilibrium quantity.

23. (Figure: Demand and Supply of Gasoline) Look at the figure Demand and Supply of Gasoline. Given the equilibrium after a change in supply from S1 to S2: A) at the old price of $2.50, there will be pressure for the price to fall. B) the new price will be $2.00. C) the new quantity will be 600. D) the price will remain constant

A) at the old price of $2.50, there will be pressure for the price to fall.

36. The market equilibrium is found at the: A) price where quantity demanded exceeds quantity supplied. B) price where quantity demanded equals quantity supplied. C) price where quantity supplied exceeds quantity demanded. D) highest price the market will bear.

B) price where quantity demanded equals quantity supplied.

9. If steak and potatoes are complements, when the price of steak goes up, the demand curve for potatoes: A) shifts to the right. B) shifts to the left. C) stays the same. D) shifts to the right and then moves back.

B) shifts to the left.

32. (Figure: The Demand and Supply of Wheat) Look at the figure The Demand and Supply of Wheat. A temporary price of $2 in this market would result in a _____ of _____ bushels. A) surplus; 4,000 B) shortage; 8,000 C) shortage; 10,000 D) surplus; 10,000

B) shortage; 8,000

21. In the market for wheat, if the price of ethanol (which is made from corn, a substitute in production) increased dramatically, the _____ wheat would _____. A) supply of; increase B) supply of; decrease C) demand for; increase D) demand for; decrease

B) supply of; decrease

50. It is certain that the equilibrium price will fall when: A) the supply curve and the demand curve both shift to the right. B) the supply curve shifts to the right and the demand curve shifts to the left. C) supply and demand both increase. D) supply decreases and demand stays the same.

B) the supply curve shifts to the right and the demand curve shifts to the left.

1. The market for corn in Kansas is considered to be competitive. This means there are _____ buyers and _____ sellers of corn in Kansas. A) many; few B) few; many C) many; many D) few; few

C) many; many

30. (Figure: The Demand and Supply of Wheat) Look at the figure The Demand and Supply of Wheat. What is the equilibrium price in this wheat market? A) $6 B) $4 C) $2 D) $8

A) $6

29. What is the difference between a shortage and scarcity? A) Scarcity will almost always exist, but a shortage will exist only if the price is kept below the equilibrium level. B) Scarcity is a result of two or more alternative uses, and quantities of supply and demand adjusting to flexible prices will create shortages. C) A shortage will exist when a good is scarce. D) There is no distinction between the two. They are the same thing.

A) Scarcity will almost always exist, but a shortage will exist only if the price is kept below the equilibrium level.

17. The primary difference between a change in supply and a change in the quantity supplied is that: A) a change in quantity supplied is a movement along the supply curve, while a change in supply is a shift in the supply curve. B) both a change in quantity supplied and a change in supply are movements along the supply curve, only in different directions. C) a change in supply is related to the supply curve, while a change in quantity supplied is related to shifts in the demand curve that elicit a change in supply. D) a change in supply is a movement along the supply curve, while a change in quantity supplied is a shift in the supply curve.

A) a change in quantity supplied is a movement along the supply curve, while a change in supply is a shift in the supply curve.

40. For consumers, pizza and hamburgers are substitutes. A rise in the price of a pizza causes _____ in the equilibrium price of a hamburger and _____ in the equilibrium quantity of hamburgers. A) a rise; an increase B) a rise; a decrease C) a fall; an increase D) a fall; a decrease

A) a rise; an increase

16. A decrease in supply means: A) a shift to the left of the entire supply curve. B) a movement down the supply curve as prices go down. C) that less will be demanded at every price. D) that more will be supplied at every price.

A) a shift to the left of the entire supply curve.

15. Which of the following will NOT cause an increase in the supply of cornflakes? A) an increase in the price of cornflakes B) a cost-saving improvement in the technology of corn production C) a reduction in the price of corn D) the expectation by producers that the price of cornflakes will fall in the future

A) an increase in the price of cornflakes

18. Which of the following influences does NOT shift the supply curve? A) people deciding that they want to buy more of the product B) a decrease in the price firms expect to receive in the future C) a rise in the wages paid to workers D) the development of a new production technology

A) people deciding that they want to buy more of the product

41. If the economy booms and peoples' incomes rise, then the demand curve for a normal good like new houses will _____ and the equilibrium quantity of new houses produced will _____. A) shift to the right; increase B) not shift; not change C) not shift; increase D) shift to the left; decrease

A) shift to the right; increase

27. (Table: The Market for Chocolate-Covered Peanuts) Look at the table The Market for Chocolate-Covered Peanuts. If the price of chocolate-covered peanuts is $0.80, there is a monthly: A) surplus of 140 bags. B) shortage of 140 bags. C) surplus of 70 bags. D) shortage of 70 bags

A) surplus of 140 bags.

14. The demand for meals at a local Applebee's will shift to the left if: A) the Olive Garden offers a 10 percent discount coupon in the local newspaper. B) the price of a meal at Applebee's rises. C) local incomes increase and Applebee's is a normal good. D) the price of gasoline falls in the area

A) the Olive Garden offers a 10 percent discount coupon in the local newspaper.

37. Excess supply occurs when: A) the price is above the equilibrium price. B) the quantity demanded exceeds the quantity supplied. C) the price is below the equilibrium price. D) the quantity demanded exceeds the quantity supplied and the price is below the equilibrium price.

A) the price is above the equilibrium price.

47. In the local market for coffee, a normal good, the price will _____ and the quantity will _____ if new coffee shops open and consumers' incomes decrease because of a recession. A) increase; be indeterminate B) decrease; be indeterminate C) be indeterminate; increase D) be indeterminate; decrease

B) decrease; be indeterminate

25. (Figure: Demand and Supply of Gasoline) Look at the figure Demand and Supply of Gasoline. When the supply curve shifted from the initial equilibrium, the new intersection of supply and demand has a price of _____ and quantity of 400. This supply shift could have resulted from _____. A) $1.50; an increase in consumers' income B) $1.50; an improvement in refining technology C) $2.00; an increase in the number of buyers D) $2.00; an increase in consumers' income

B) $1.50; an improvement in refining technology

24. (Figure: Demand and Supply of Gasoline) Look at the figure Demand and Supply of Gasoline. Given the initial equilibrium of S1 and D, any price lower than _____ will exert pressure for the price to _____. A) $2.00; fall B) $2.50; rise C) $3.00; rise D) $2.50; fall

B) $2.50; rise

31. (Figure: The Demand and Supply of Wheat) Look at the figure The Demand and Supply of Wheat. If there is a decrease in supply of 2,000 bushels at each price, the equilibrium price and quantity will be _____ and _____ bushels, respectively. A) $5; 5,000 B) $7; 5,000 C) $6; 4,000 D) $8; 6,000

B) $7; 5,000

26. (Table: The Market for Chocolate-Covered Peanuts) Look at the table The Market for Chocolate-Covered Peanuts. The equilibrium quantity and the equilibrium price are _____ bags and _____. A) 140; $0.40 B) 175; $0.60 C) 175; $0.80 D) 210; $0.50

B) 175; $0.60

3. Which of the following illustrates the law of demand? A) An increase in tuition encourages more students to enroll in college because the quality of education has risen. B) Consumers buy more personal computers because prices have fallen. C) Oil companies drill for new sources because prices are higher. D) Fewer people play golf because incomes are lower.

B) Consumers buy more personal computers because prices have fallen.

39. Suppose you manage a corner grocery store. If peanut butter is an inferior good, what do you suppose would happen to the price and quantity sold of peanut butter as incomes fell during a recession? A) The price would increase and the quantity would decrease. B) The price and quantity would both increase. C) The price and quantity would both decrease. D) The price would decrease and the quantity would increase.

B) The price and quantity would both increase.

48. Suppose that supply increases and demand decreases. What is the most likely effect on price and quantity? A) The price will increase, but quantity may increase, decrease, or stay the same. B) The price will decrease, but quantity may increase, decrease, or stay the same. C) The price will decrease and quantity will decrease. D) The price will increase and quantity will increase.

B) The price will decrease, but quantity may increase, decrease, or stay the same.

10. If chicken and beef are substitutes, then a fall in the price of chicken will bring about: A) an increase in the demand for beef. B) a decrease in the demand for beef. C) a decrease in the quantity demanded of beef. D) no change in the demand for beef.

B) a decrease in the demand for beef.

38. Which of the following will raise the price of milk? A) a shift to the right of the supply curve for milk B) a shift to the right of the demand curve for milk C) an increase in the number of milk suppliers D) a decrease in the number of milk buyers

B) a shift to the right of the demand curve for milk

6. Raclette is a popular wintertime dish in Switzerland. It is essentially melted Raclette cheese over boiled new potatoes. If the price of Raclette cheese decreased, we would expect to see: A) an increase in demand for Raclette cheese. B) an increase in demand for new potatoes. C) no effect on the demand for either of the Raclette ingredients, since this is a traditional dish and its consumption does not depend on the prices of the ingredients. D) an increase in demand for Raclette cheese and for new potatoes.

B) an increase in demand for new potatoes.

20. If the price of mozzarella cheese (an ingredient in pizza) declines, there will be: A) a decrease in the supply of pizza. B) an increase in the supply of pizza. C) a decrease in the quantity of pizza supplied. D) no change in the supply of pizza.

B) an increase in the supply of pizza.

12. An increase in the demand for gasoline today caused by concerns that gasoline prices will be higher tomorrow is most likely attributable to a change in: A) income. B) consumer expectations. C) consumer preferences. D) prices of other goods.

B) consumer expectations.

19. A technological advance in the production of automobiles will _____ the _____ automobiles. A) decrease; demand for B) increase; supply of C) decrease; demand D) decrease; supply of

B) increase; supply of

43. The market for corn is in equilibrium. Which of the following is most likely to INCREASE the equilibrium price of corn? A) a bountiful harvest B) increasing production of corn-based ethanol C) decreasing household incomes, with corn being a normal good D) a decrease in the price of wheat, a substitute in consumption

B) increasing production of corn-based ethanol

7. When the economy turns down and the incomes of many people decrease, vacationers are more likely to take car trips than to fly. Which of the following provides one possible explanation for this phenomenon? A) Air travel and travel by car are complementary goods. B) Air travel and travel by car are both normal goods. C) Air travel is a normal good and travel by car is an inferior good. D) Air travel is an inferior good and travel by car is a normal good.

C) Air travel is a normal good and travel by car is an inferior good.

45. Consider the market for iPods. What happens if a fantastic new alternative MP3 player is developed and at the same time a boat carrying a large shipment of iPods is attacked by pirates and sunk? A) Price decreases and quantity increases. B) Price increases and quantity increases. C) The change in price is indeterminate and quantity decreases. D) Price increases and the change in quantity is indeterminate.

C) The change in price is indeterminate and quantity decreases.

46. Consider the market for corn. What happens if there is an increased demand for corn tortillas and at the same time a new corn seed becomes available that dramatically increases the yield per acre? A) Price and quantity decrease. B) The change in price is indeterminate; quantity decreases. C) The change in price is indeterminate; quantity increases. D) Price increases; the change in quantity is indeterminate.

C) The change in price is indeterminate; quantity increases.

8. Which of the following will NOT cause an increase in demand for good X? A) a decrease in income if good X is an inferior good B) an increase in income if good X is a normal good C) a decrease in the price of good X D) an increase in consumers' taste for good X

C) a decrease in the price of good X

42. Consider two competing motorcycle manufacturers, Harley-Davidson and Honda. If Harley-Davidson raises the price of its motorcycles, we can expect: A) a shift to the right in the supply curve of Hondas and lower prices for Hondas. B) a shift to the left in the supply curve of Hondas and higher prices for Hondas. C) a shift to the right in the demand curve for Hondas and higher prices for Hondas. D) a shift to the left in the demand curve for Hondas and lower prices for Hondas.

C) a shift to the right in the demand curve for Hondas and higher prices for Hondas.

33. (Table: The Lemonade Market) Look at the table The Lemonade Market. If the price of a cup of lemonade is $1, there will be _____ in the market. A) equilibrium B) a shortage of 150 cups C) a shortage of 75 cups D) a surplus of 75 cups

C) a shortage of 75 cups

13. Which of the following would shift the demand curve for new textbooks to the right? A) a decrease in the price of paper B) a fall in the price of used textbooks C) an increase in college enrollment D) a fall in the price of new textbooks

C) an increase in college enrollment

49. The cost of sensors used in making digital cameras falls, while a successful ad campaign makes digital cameras more fashionable. As a result, the equilibrium price of digital cameras _____ and the equilibrium quantity _____. A) increases; increases B) increases; may increase, decrease, or stay the same C) may increase, decrease, or stay the same; increases D) decreases; increases

C) may increase, decrease, or stay the same; increases

28. (Table: The Market for Chocolate-Covered Peanuts) Look at the table The Market for Chocolate-Covered Peanuts. A shortage of 210 bags of chocolate-covered peanuts exists if the price is _____ per bag. A) $0.80 B) $0.60 C) $0.40 D) $0.30

D) $0.30

22. (Figure: Demand and Supply of Gasoline) Look at the figure Demand and Supply of Gasoline. The initial equilibrium price and quantity (at intersection of S1 and D) of gasoline are: A) $2.00 and 450 gallons. B) $1.50 and 400 gallons. C) $2.00 and 200 gallons. D) $2.50 and 300 gallons.

D) $2.50 and 300 gallons.

4. Which of the following statements is CORRECT? A) A change in demand is a movement along the demand curve, and a change in quantity demanded is a shift of the demand curve. B) Both a change in quantity demanded and a change in demand are movements along the demand curve, only in different directions. C) Both a change in quantity demanded and a change in demand are shifts of the demand curve, only in different directions. D) A change in quantity demanded is a movement along the demand curve, and a change in demand is a shift of the demand curve.

D) A change in quantity demanded is a movement along the demand curve, and a change in demand is a shift of the demand curve.

34. (Table: The Lemonade Market) Look at the table The Lemonade Market. If the price of lemonade is $1.25 per cup, we expect to see: A) a rising price to eliminate the shortage. B) a rising price to eliminate the surplus. C) a falling price to eliminate the shortage. D) a market in equilibrium

D) a market in equilibrium

5. In much of the country, homeowners choose to heat their houses with either natural gas or heating oil. Which of the following would cause an increase in the demand for natural gas? A) an increase in the price of natural gas B) a decrease in the price of natural gas C) a decrease in the price of heating oil D) an increase in consumer incomes

D) an increase in consumer incomes

2. The law of demand states that other things equal, as the price: A) increases, the quantity demanded will increase. B) decreases, the demand curve will shift to the right. C) increases, demand will decrease. D) increases, the quantity demanded will decrease

D) increases, the quantity demanded will decrease

11. After graduation from college, you might have an increase in your income from a new job. If as a result you decide that you will purchase more T-bone steak and less hamburger, then for you hamburger is a(n) _____ good. A) normal B) substitute C) complementary D) inferior

D) inferior

35. Market equilibrium occurs when: A) there is no incentive for prices to change in the market. B) quantity demanded equals quantity supplied. C) the market clears. D) there is no incentive for prices to change in the market, quantity demanded equals quantity supplied, and the market clears.

D) there is no incentive for prices to change in the market, quantity demanded equals quantity supplied, and the market clears.