Econ Modules 5 and 4 Practice Exams
If the supply curve is vertical, then supply is
perfectly inelastic.
In the figure above, which movement could be the result of an increase in the wages paid to oil workers?
point a to point d
In the above figure, a change in quantity demanded with unchanged demand is represented by a movement from
point a to point e.
In the above figure, a change in quantity supplied with unchanged supply is represented by a movement from
point b to point a.
The figure above shows supply curves for soft drinks. Suppose the economy is at point a. An increase in the price of a soft drink is shown as a movement from point a to
point d.
The quantity of CDs that firms plan to sell this month depends on all the following EXCEPT the
quantity of CDs that people plan to buy.
In mid-2012 Delta increased the price of a New York to LA ticket by 10 percent. As a result of this price hike, there was a ________ shift in the demand curve for a ticket on Continental because the price of a ________ had risen.
rightward; substitute
The demand for corn increases. As a result, the price of corn will ________, and the less elastic the supply of corn, the ________ will be the effect on the price.
rise; greater
You observe that an increase in the price of salsa decreases the demand for tortilla chips and increases the demand for potato chips. You can conclude that
salsa and tortilla chips are complements.
The wage rate paid by Walkman producers falls and at the same time the price of raw materials used in the production of Walkmans rises. You predict that the supply curve of Walkmans will
shift either leftward or rightward.
The above table shows the demand schedule and supply schedule for chocolate chip cookies. If the price is $4.00 per pound, there is a
shortage of 3 pounds of chocolate chip cookies.
In the above figure, a price of $15 per dozen roses would result in a ________ so that the price of roses will ________.
shortage; rise
The figure above shows the market for airline tickets. If airline tickets are a normal good, then the recession in 2008 that caused people's incomes to decrease lead to a shift from
D0 to D1.
People buy more of good 1 when the price of good 2 rises. These goods are
substitutes.
On December 10 the price of a Christmas tree is $50 and 100 trees are purchased. On December 20 the demand for Christmas trees decreases so that the price falls to $30 and 20 trees are purchased. From this set of facts, the
supply of Christmas trees is elastic.
Supply is elastic if
a 1 percent change in price leads to a larger percent change in quantity supplied.
Which of the following pairs of goods are most likely substitutes?
cola and lemon lime soda
Cupcakes and granola bars are substitutes in consumption. The price of a granola bar increases so the demand for
cupcakes will increase, that is, the demand curve will shift rightward.
Ham and eggs are complements. If the price of ham rises, the demand for eggs will
decreases and the demand curve for eggs will shift leftward.
If goods A and B are complements, then
the cross elasticity of demand between A and B is negative.
There are 72,922 seats in Lambeau Field where the Green Bay Packers play football. The Packers have sold out their season tickets since 1960. There were about 70,000 people on the waiting list to buy season tickets in 2010. Packers tickets are a normal good. As a result of the economic recession in 2010 during which people's incomes decreased, the
demand for Packers tickets decreased.
A shift of the supply curve of oil raises the price from $60 a barrel to $75 a barrel and reduces the quantity demanded from 40 million to 20 million barrels a day. You can conclude that the
demand for oil is elastic.
When there is a shortage in the market, the quantity sold is
equal to the quantity supplied.
If the price of a movie download falls, the rental rate of DVDs ________ and the equilibrium quantity of DVDs rented ________.
falls; decreases
In 2006, the base price of a Hummer SUV was about $30,000. By 2008 as gasoline prices increased,
the demand curve for Hummers shifted leftward and Hummer prices decreased.
The price elasticity of supply of laptop computers equals 1.5 if
for every 1 percent that laptop-prices increase, computer makers produce another 1.5 percent laptops.
The figure above shows the demand for fruit snacks. Which movement reflects a decrease in population?
from point a to point c
In the above figure, if the price is $8 then there is a
surplus of 200.
A supply curve shows the relation between the quantity supplied and
the price of the good. Usually a supply curve has a positive slope.
At a local ice cream parlor, when the price of half-gallons of chocolate ice cream was lowered by fifty cents per half-gallon, total revenue from the sale of chocolate ice cream decreased. This result indicates that
the demand for chocolate ice cream is inelastic.
For consumers, goods A and B are complementary goods. The cost of a resource used in the production of A decreases. As a result
the equilibrium price of B will rise and the equilibrium price of A will fall.
In the above figure, if the demand curve is D2, then
the equilibrium price will be P1 and the equilibrium quantity will be Q2.
Using the above figure, suppose that roses are a normal good. If there is an increase in income
the equilibrium price will rise above $25 per dozen roses.
If a 5 percent increase in the price of good A leads to a 4 percent decrease in the demand for good B, then ________.
the goods are complements
Each point on the demand curve reflects
the highest price consumers are willing and able to pay for that particular unit of a good.
Each point on a supply curve represents
the lowest price for which a supplier can profitably sell another unit.
If the price of milk increased by 5 percent because of an increase in the demand for milk, and the quantity of milk supplied increased by 7 percent
the price elasticity of supply of milk is greater than one.
Last year in the United States, the price of snowboards rose by 5 percent and the price rise resulted in a 15 percent increase in the quantity supplied. This outcome is an indication that
the supply of snowboards is price elastic.
Farmers can use their land to grow soy beans or corn. If the price of corn rises,
the supply of soybeans decreases and the soybean supply curve shifts leftward.
Suppose the equilibrium price for soft drinks is $1.00. If the current price in the soft drink market is $1.25 each
there will be a surplus of soft drinks.
The increase in the demand for widgets, shown in the figure above, is the result of an increase in the price of McBoover devices. Therefore
widgets and McBoover devices are substitutes.
In the above figure, what is the minimum supply price for the fourth gallon of ice cream?
$5.00
The equilibrium price in the above figure is
$6.
A fall in the price of X from $12 to $8 causes an increase in the quantity of Y demanded from 900 to 1,100 units. What is the cross elasticity of demand between X and Y?
-0.5
Florida State University has just lowered the price of its season football tickets from $350.00 to $300.00. As a result, there was an increase in the number of season tickets purchased from 43,000 to 47,000. The price elasticity of demand for season tickets equals
-0.58.
Fred's income has just risen from $940 per week to $1,060 per week. As a result, he decides to purchase 9 percent more steak per week. The income elasticity of Fred's demand for steak is
0.75.
A rise in the price of cabbage from $14 to $18 per bushel increases the quantity supplied from 4,000 to 6,000 bushels. The elasticity of supply is
1.6.
The income elasticity of demand for vacations is 5. If incomes increase by 3 percent next year, the quantity of vacations demanded at today's price will increase by ________ percent.
15
The increase in the demand for widgets, shown in the figure above, is the result of an increase in the price of McBoover devices from $9 to $11. Therefore, the cross-price elasticity for these two products is
2.0.
When the price of perfume changes from $24 to $26, the quantity supplied increases from 100 jars to 150 jars. What is the elasticity of supply of perfume?
5.0
The Miami Dolphins play football in Joe Robbie Stadium which holds 76,500 seats. In 2009, attendance averaged about 70,000 fans per game. This means that the quantity supplied of seats is
76,500.
Which of the following is consistent with the law of demand?
An increase in the price of soda causes a decrease in the quantity of soda demanded.
The income elasticity of demand for restaurant meals is 1.61. So
Both answers if income increases by 10 percent, the quantity demanded of restaurant meals will increase by 16.1 percent and restaurant meals are an income elastic normal good are correct.
The above figures show the market for hamburger meat. Which figure(s) shows the effect of a new report by the U.S. Surgeon General that beef consumption is healthier than previously believed?
Figure A
What will happen to the equilibrium price and equilibrium quantity of ice cream cones when consumers' incomes decrease?
If ice cream cones are a normal good, then the equilibrium price and quantity of ice cream cones will decrease.
The figure above shows the market for airline tickets. In early 2008 the price of jet fuel rose. This change is shown in the figure as a shift from
S0 to S1
The figure above shows the market for airline tickets. In early 2008 firms negotiated lower wages with their workers. This change is shown in the figure as a shift from
S1 to S0.
The price elasticity of demand for purses is measured in what units?
The price elasticity of demand is a unitless measure.
In 2014, the price of peanuts was rising, which lead peanut butter sellers and peanut butter buyers to expect the price of peanut butter would rise in the future. Consequently, in the current market for peanut butter there was ________ which resulted in a ________ in the price of peanut butter and ________ in the quantity of peanut butter.
a decrease in supply of peanut butter and an increase in demand for peanut butter; rise; an increase, decrease or possibly no change
A changes in which of the following shifts the demand curve for hamburgers?
a fall in the price of french fries, a complement for hamburgers
Which of the following raises the price of a used car and increases the equilibrium quantity sold?
a new 8 percent federal excise tax places on all new car purchases
General Electric (GE) produces wind turbines that generate wind power. Over the past 10 years, the advances in technology used to produce wind turbines has resulted in
a rightward shift in the supply curve for wind-generated power.
If the quantity demanded exceeds the quantity supplied, then there is
a shortage and the price is below the equilibrium price.
Ticket scalpers at the NCAA basketball tournament last year charged prices high above the printed ticket price. This observation is evidence of
a shortage of printed ticket prices.
In the above figure, a price of $15 per dozen for roses would result in
a shortage.
A market research team has come up with the demand and supply schedules for gasoline in Motorville in the table above. Use these data to analyze the situation in the market for gas in Motorville. Suppose the price is 330 cents per gallon. There is
a surplus and the price will decrease to restore equilibrium.
Which of the following shifts the supply curve for good X leftward?
an increase in the cost of the machinery used to produce X
When the price of an inferior good falls, the substitution effect leads to ________ in the quantity purchased and the income effect leads to ________ in the quantity purchased.
an increase; a decrease
Consider the demand curves for soft drinks shown in the figure above. Initially the economy is at point a. If people come to expect that the price of a soft drink will increase in the future, there will be a movement to a point such as
b.
In the above figure, at which point on the demand curve is the price elasticity of demand equal to 1?
c
A decrease in the expected future price of cars
decreases the current demand for cars, that is, there is a leftward shift of the demand curve for cars.
The above figure shows a linear (straight-line) demand curve. Starting at point A and then moving to point B and then point C, the price elasticity of demand
decreases.
The above figure shows the market for oil. Because of the development of a new deep sea drilling technology the
demand curve does not shift, and the supply curve shifts from S1 to S2.
The above figure shows the market for bicycles. When there is a physical fitness craze so that everyone wants to exercise the
demand curve for bicycles from D1 to D2.
Goods and services that can be produced by using commonly available resources that could be allocated to a wide variety of alternative tasks have a supply that is
elastic.
If a 5 percent change in the price of a good leads to a 10 percent change in the quantity supplied, then the supply of the good is ________ and the elasticity of supply is ________.
elastic; 2.0
The figure above shows the demand for fruit snacks. Which movement reflects how consumers would react to an increase in the price of a fruit snack that is expected to occur in the future?
from point a to point d
Pizza Hut pizza has more close substitutes than does food in general. The price elasticity of demand for Pizza Hut pizza is ________ the price elasticity of demand for food in general.
greater than
In the market for magazines, the "income effect" means that
in increase in the price of magazines will reduce the total purchasing power of magazine readers, making them able to afford fewer magazines.
Last year, Jack's income was $15,000 and he bought 50 bags of potato chips. This year his income is $18,000 and he buys 55 bags of potato chips. Therefore, Jack's
income elasticity of demand for potato chips is 0.52.
An increase in the demand for computers and a decrease in the number of sellers of computers will definitely ________.
increase the price of a computer
If the elasticity of supply of TV sets is equal to 3, then a 10 percent increase in the price of a TV will
increase the quantity supplied by 30.0 percent.
In the above figure, at point b on the demand curve, a price cut of one dollar will
increase total revenue.
Suppose Target decided to lower the price on all shirts as part of its Back to School promotion. The cross elasticity of demand between pants and shirts is negative. Lowering the price on shirts will ________ the demand for pants because shirts and pants are ________.
increase; complements
The above figure shows the demand curve for movie rentals from Redbox. If Redbox lowered its price from $4.00 to $3.50, then total revenue would ________ because demand is ________.
increase; elastic
A straight-line demand curve along which the price elasticity of demand equals 0 is one that
is vertical.
If the price of aluminum used to make bicycles increases, the price of a bicycle rises because of a
leftward shift of the supply curve of bicycles.
When the price of a good falls, the income effect for a normal good implies that people buy
more of that good because they can afford to buy more of all the things they previously bought.
Because Product X has a very small, positive income elasticity of demand, it is likely that product X is a
necessity.
In 2012 Nike reduced the price of its running shoes by 20 percent. As a result, the substitution effect caused
people to switch form Adidas shoes and buy more Nikes.
