Economics Test 1

47) Suppose a rise in the price of peaches from $5.50 to $6.50 per bushel decreases the quantity demanded from 12,500 to 11,500 bushels. The price elasticity of demand is

A) 0.5.

63) Suppose the price of a DVD rose from $15 to $17 and the quantity demanded decreased from 1,000 per month to 900 per month. The ________ percent change in price lead to a ________ percent change in the quantity demanded.

A) 12.5; 10.5

21) Which of the following decreases the supply of restaurant meals?

A) Waiters get a pay raise.

10) The demand curve for a normal good shifts leftward if income ________ or the expected future price ________.

A) decreases; falls

41) If technological advances lower the cost of computer chips, in the market for computers the equilibrium price will ________ and the equilibrium quantity will ________.

A) fall; increase

36) When the demand for a good decreases, its equilibrium price ________ and equilibrium quantity ________.

A) falls; decreases

60) Which goods have more elastic demands?

A) goods with many substitutes

40) As a result of an increase in the supply of a good, the equilibrium quantity ________ and the equilibrium price ________.

A) increases; falls

29) In a supply and demand figure, the equilibrium price and quantity are found at the

A) point where quantity supplied equals quantity demanded.

42) If the demand curve for bottled water shifts rightward and the supply curve of bottled water shifts leftward, the equilibrium

A) price of bottled water definitely increases.

38) If good A is a normal good and income increases, the equilibrium price of A ________ and the equilibrium quantity of A ________.

A) rises; increases

4) The law of demand implies that demand curves

A) slope down.

35) If the price is above the equilibrium price, then there is a

A) surplus, and market forces will operate to lower price.

8) If the price of an Xbox player falls, then in the market for Xbox games,

A) the demand curve for Xbox games shifts rightward.

20) A fall in the price of a good causes producers to reduce the quantity of the good they are willing to produce. This fact illustrates

A) the law of supply.

28) A rise in the price of a good causes producers to supply more of the good. This statement illustrates

A) the law of supply.

43) Suppose the price of burgers increases from $2 to $3 each. The degree to which quantity demanded responds to this price increase depends on the

A) the price elasticity of demand.

46) A 20 percent increase in the quantity of pizza demanded results from a 10 percent decline in its price. The price elasticity of demand for pizza is

B) 2.0.

33) A price below the equilibrium price results in

B) a shortage.

55) If demand is inelastic, an increase in the price will

B) increase total revenue.

49) If the price elasticity is between 0 and 1, demand is

B) inelastic.

50) If a 20 percent increase in the price of a used car results in a 10 percent decrease in the quantity of used cars demanded, then the demand for used cars is

B) inelastic.

57) A local transit authority charges $1 for a bus ride. An economics study suggests that in the price range from $0.50 to $1.50, the elasticity of demand for bus trips is 1.1. To increase its revenue, the transit authority should

B) lower the fare.

64) If the demand for a good is elastic, then

B) people substantially decrease the quantity of the good they buy if its price increases by a small percentage

45) The price elasticity of demand for furniture is estimated at 1.3. This value means a one percent increase in the

B) price of furniture will decrease the quantity of furniture demanded by 1.3 percent.

24) An increase in the number of suppliers in a market results in a

B) rightward shift in the supply curve.

39) Suppose that people find out that eating more fish improves their health, leading them to increase their demand for fish. As a result, the equilibrium price of fish ________ and the equilibrium quantity ________.

B) rises; increases

5) People buy more of good 1 when the price of good 2 rises. These goods are

B) substitutes.

9) Consumers expect that the price of a gallon of gasoline will rise next week. As a result,

B) today's demand for gasoline increases.

3) The "law of demand" predicts that, other things being equal,

C) an increase in the price of pizza decreases the quantity of pizza demanded.

11) Normal goods are those for which demand decreases as

C) income decreases.

52) A straight-line demand curve along which the price elasticity of demand equals 0 is one that A) forms a 45 degree angle with the vertical axis.

C) is vertical.

44) The price elasticity of demand is defined as the magnitude of the

C) percentage change in quantity demanded divided by the percentage change in price.

66) The price elasticity of supply is calculated as the

C) percentage change in quantity supplied divided by the percentage change in price.

65) The elasticity of supply measures the sensitivity of

C) quantity supplied to a change in price.

37) When demand increases, the equilibrium price ________ and the equilibrium quantity ________.

C) rises; increases

2) The law of demand states that, other things remaining the same, the higher the price of a good, the

C) smaller is the quantity of the good demanded.

23) Good A and good B are substitutes in production. The demand for good A increases so that the price of good A rises. The increase in the price of good A shifts the

C) supply curve of good B leftward.

61) For many goods, the price elasticity of demand increases over time after a price hike because

C) the ability to find good substitutes for the product whose price rose increases over time.

1) The quantity demanded is

C) the amount of a good that consumers plan to purchase at a particular price.

56) Producers' total revenue will increase if

C) the price rises and demand is inelastic.

59) The above table gives the demand schedule for Billy Bob's BBQ ribs. If the price of a pound of ribs falls from $3 per pound to $1 per pound, what is the change in Billy Bob's total revenue?

D) -$24

22) Which of the following shifts the supply curve rightward?

D) a decrease in the price of a factor of production used to produce the good

34) If the quantity supplied exceeds the quantity demanded, then there is

D) a surplus and the price is above the equilibrium price.

6) Ham and eggs are complements. If the price of ham rises, the demand for eggs will

D) decrease and the demand curve for eggs will shift leftward.

48) Dan sells newspapers. Dan says that a 4 percent increase in the price of a newspaper will decrease the quantity of newspapers demanded by 8 percent. According to Dan, the demand for newspapers is ________.

D) elastic

62) Because there are numerous choices for fast food purchases, the price elasticity of demand for Taco Bell food is likely

D) elastic.

32) When the price is below the equilibrium price, the quantity demanded

D) exceeds the equilibrium quantity but the quantity supplied is less than the equilibrium quantity.

13) The figure above shows the demand for fruit snacks. Which movement reflects an increase in demand?

D) from point a to point d

58) If OPEC, a group of oil producing nations, cuts oil production to increase the total revenue, OPEC presumes that the demand for oil is

D) inelastic.

54) If the demand for a good is perfectly elastic, the price elasticity of demand is ________ and the demand curve is ________.

D) infinite; horizontal

31) If the price of a CD is equal to the equilibrium price, there will be ________ of CDs and the price will ________.

D) neither a shortage nor surplus; not change

51) Marvin loves chocolate truffles. As the price of a chocolate truffle increases from $1 to $2 to $3, Marvin continues to buy a dozen chocolate truffles every week. Marvin's demand for chocolate truffles is ________.

D) perfectly inelastic

53) If the demand for a good is elastic, when the price increases, the

D) quantity demanded will decrease by a greater percentage than the price increased.

7) Sweatshirts and tee-shirts are complements in consumption and the price of a sweatshirt increases. As a result, the demand for

D) tee-shirts will decrease, that is, the demand curve will shift leftward.

12) A change in which of the following shifts the demand curve?

D) the tastes and preferences of consumers