ECON 1101 Week 2 Questions

In the market for bicycles. What would happen to the demand curve when there is a physical fitness craze so that everyone wants to exercise?

A RIGHTward shift of the demand curve.

12. The price of a bag of corn chips is $3, and the price of a bottle of soda is $1. What is the relative price of a bag of corn chips? A) 3 bottles of soda per bag of corn chips B) 1/3 bottle of soda per bag of corn chips C) $3 D) 33¢

A) 3 bottles of soda per bag of corn chips

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. B) the law of demand. C) a change in supply. D) the nature of an inferior good.

A) Law of Supply

2. An inferior good is a good for which demand _________. A) decreases when income increases. B) increases when income increases. C) decreases when population increases. D) increases when population increases.

A) decreases when income increases.

26. Which of the following shifts the supply curve for oranges? A) disastrous weather that destroys about half of this year's orange crop. B) a newly discovered increase in the nutritional value of oranges. C) an increase in the price of bananas, a substitute in consumption for oranges. D) an increase in income for all orange consumers.

A) disastrous weather that destroys about half of this year's orange crop

When the demand for a good decreases, its equilibrium price ________ and equilibrium quantity ________. A) falls; decreases B) falls; increases C) rises; decreases D) rises; increases

A) falls; decreases

An increase the expected future price of a good _______. A) increases its demand. B) decreases its demand. C) increases its supply. D) has no effect on either its demand or its supply.

A) increases its demand.

When the price is below the equilibrium price, the quantity demanded _______________. A) is less than the equilibrium quantity and the quantity supplied also is less than the equilibrium quantity. B) is less than the equilibrium quantity but the quantity supplied exceeds the equilibrium quantity. C) exceeds the equilibrium quantity and the quantity supplied also exceeds the equilibrium quantity. D) exceeds the equilibrium quantity but the quantity supplied is less than the equilibrium quantity.

A) is less than the equilibrium quantity and the quantity supplied also is less than the equilibrium quantity.

17. As the relative price of a good falls, the substitution effect implies that people buy A) less of that good and more of its substitutes. B) more of that good and less of its substitutes. C) less of that good and less of its substitutes. D) more of that good and more of its substitutes.

A) less of that good and more of its substitutes.

In a supply and demand figure, the equilibrium price and quantity are found at the _______. A) point where quantity supplied equals quantity demanded. B) horizontal intercept of the demand curve. C) vertical intercept of the supply curve. D) horizontal intercept of the supply and the demand curves.

A) point where quantity supplied equals quantity demanded.

11. If the price of a candy bar is $1 and the price of a fast food meal is $5, then the A) relative price of a candy bar is 5 fast food meals per candy bar. B) money price of a candy bar is 1/5 of a fast food meal per candy bar. C) relative price of a fast food meal is 5 candy bars per fast food meal. D) money price of a fast food meal is 1/5 of a candy bar per fast food meal.

A) relative price of a candy bar is 5 fast food meals per candy bar.

13. The price of a bag of corn chips is $3, and the price of a bottle of soda is $1. What is the relative price of a bottle of soda? A) 3 bags of corn chips per bottle of soda B) 1/3 bag of corn chips per bottle of soda C) $3 D) 33¢

B) 1/3 bag of corn chips per bottle of soda

22. If the price of product X falls and this change increases the demand for product Y, then __________. A) X and Y are complements. B) X and Y are substitutes. C) X is an inferior good. D) Y is an inferior good.

B) X and Y are substitutes.

Blank DVDs and prerecorded DVDs are substitutes in production. An increase in the price of a blank DVD will lead to _______. A) an increase in the supply of prerecorded DVDs. B) a decrease in the supply of prerecorded DVDs. C) an increase in the quantity supplied of prerecorded DVDs but not in the supply of prerecorded DVDs. D) a decrease in the quantity supplied of prerecorded DVDs but not in the supply of prerecorded DVDs.

B) a decrease in the supply of prerecorded DVDs.

7. The principle of increasing opportunity cost leads to A) a production possibilities frontier (PPF) that is bowed inward from the origin. B) a production possibilities frontier (PPF) that is bowed outward from the origin. C) an inward shift of the production possibilities frontier (PPF). D) an outward shift of the production possibilities frontier (PPF).

B) a production possibilities frontier (PPF) that is bowed outward from the origin.

If the quantity demanded exceeds the quantity supplied, then there is __________. A) a shortage and the price is below the equilibrium price. B) a shortage and the price is above the equilibrium price. C) a surplus and the price is below the equilibrium price. D) a surplus and the price is above the equilibrium price.

B) a shortage and the price is above the equilibrium price.

A person has a comparative advantage in producing a particular good if that person A) has higher productivity in producing it than anyone else has. B) can produce it at lower opportunity cost than anyone else can. C) has less desire to consume that good than anyone else has. D) has more human capital related to that good than anyone else has.

B) can produce it at lower opportunity cost than anyone else can.

A severe drought has damaged this year's lettuce crop. The initial effect on the lettuce market is a _________. A) decrease in the demand for lettuce. B) decrease in the supply of lettuce. C) decrease in both the demand and supply of lettuce. D) rightward movement along the demand curve for lettuce.

B) decrease in the supply of lettuce.

14. The price of a DVD rental is $1.50 and the price of a downloaded movie is $1.00. If the price of a DVD rental increases by $0.50, the relative price a downloaded movie A) rises. B) falls. C) does not change. D) might change but more information is needed.

B) falls.

When the price is below the equilibrium price, the quantity demanded _____________. A) is less than the equilibrium quantity and the quantity supplied also is less than the equilibrium quantity. B) is less than the equilibrium quantity but the quantity supplied exceeds the equilibrium quantity. C) exceeds the equilibrium quantity and the quantity supplied also exceeds the equilibrium quantity. D) exceeds the equilibrium quantity but the quantity supplied is less than the equilibrium quantity.

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

The figure above shows supply curves for soft drinks. Suppose the economy is at point a. An increase in the number of suppliers would be shown as a movement from point a to a point such as _____. A) none of the points that are illustrated. B) point b. C) point c. D) point d.

B) point b.

If the price of a video rental is below its equilibrium price, there will be a ________ of video rentals and the price will ________. A) shortage; rise B) shortage; fall C) surplus; rise D) surplus; fall

B) shortage; fall

If a producer can use resources to produce either good A or good B, then A and B are ____. A) complements in production. B) substitutes in production. C) substitutes in consumption. D) complements in consumption.

B) substitutes in production.

19. Suppose people buy more of good 1 when the price of good 2 falls. These goods are A) complements. B) substitutes. C) normal. D) inferior.

B) substitutes.

25. If income decreases or the price of a complement rises, ____. A) the demand curve for a normal good shifts leftward. B) the demand curve for a normal good shifts rightward. C) there is an upward movement along the demand curve for the good. D) there is a downward movement along the demand curve for the good.

B) the demand curve for a normal good shifts rightward.

A bakery can produce either cakes or cookies. If the price of cookies rises, then _________. A) the supply curve of cake shifts leftward. B) the supply curve of cake shifts rightward. C) there is a movement downward along the supply curve of cakes. D) there is a movement upward along the supply curve of cakes.

B) the supply curve of cake shifts rightward.

18. In the market for magazines, the "income effect" means that A) magazines are usually purchased by people with higher than average incomes. B) a decrease in the price of a substitute product like books will make magazine readers feel a little poorer than they were before. C) an increase in the price of magazines will reduce the total purchasing power of magazine readers, making them able to afford fewer magazines. D) an increase in the price of magazines will raise the relative price of magazines to books, causing magazine readers to read more books and fewer magazines.

C) an increase in the price of magazines will reduce the total purchasing power of magazine readers, making them able to afford fewer magazines.

The figure above shows supply curves for soft drinks. Suppose the economy is at point a. A movement to point d would be the result of ____________. A) an increase in technology. B) a decrease in the relative price of a soft drink. C) an increase in the relative price of a soft drink. D) an increase in the number of soft drink suppliers.

C) an increase in the relative price of a soft drink.

An increase in technology for producing personal computers leads to ___. A) an increase in the demand for personal computers. B) a decrease in the demand for personal computers. C) an increase in the supply of personal computers. D) a decrease in the supply of personal computers

C) an increase in the supply of personal computers.

9. Consider a PPF for tapes and soda. If the opportunity cost of a tape increases as the quantity of tapes produced increases and also the opportunity cost of a soda increases as the quantity of soda produced increases, then the PPF between the two goods will be__. A) a straight, downward-sloping line. B) a straight, upward-sloping line. C) bowed outward. D) All of the above are possible and more information is needed to determine which answer is correct.

C) bowed outward.

15. The quantity demanded of a good or service is the amount that A) a consumer would like to buy but might not be able to afford. B) is actually bought during a given time period at a given price. C) consumers plan to buy during a given time period at a given price. D) firms are willing to sell during a given time period at a given price.

C) consumers plan to buy during a given time period at a given price.

24. If consumers but not producers expect that the price of soda will rise in November, the __________. A) supply of soda in October will increase. B) demand for soda in October will decrease. C) demand for soda in October will increase. D) supply of soda in October will decrease.

C) demand for soda in October will increase.

Normal goods are those for which demand decreases as _____. A) the price of a complement falls. B) the price of a substitute falls. C) income decreases. D) the good's own price rises.

C) income decreases.

3. Decrease in quantity demanded because of an increase in price is represented by a ______. A) rightward shift of the demand curve. B) leftward shift of the demand curve. C) movement up and to the left along the demand curve. D) movement down and to the right along the demand curve.

C) movement up and to the left along the demand curve.

10. The opportunity cost of good A in terms of good B is equal to the A) money price of good A minus the money price of good B. B) money price of good B minus the money price of good A. C) ratio of the money price of good A to the money price of good B. D) ratio of the money price of good B to the money price of good A.

C) ratio of the money price of good A to the money price of good B.

The statement that "demand increases" means that there is a A) movement to the right along a demand curve. B) movement to the left along a demand curve. C) rightward shift of the demand curve. D) leftward shift of the demand curve.

C) rightward shift of the demand curve.

Economic growth A) creates unemployment. B) has no opportunity cost. C) shifts the PPF outward. D) makes it more difficult for a nation to produce on its PPF.

C) shifts the PPF outward.

8. Increasing opportunity cost while moving along a production possibilities frontier is the result of A) taxes. B) firms' needs to produce profits. C) the fact that it is more difficult to use resources efficiently the more society produces. D) the fact that resources are not equally productive in alternative uses.

C) the fact that it is more difficult to use resources efficiently the more society produces.

16. The "law of demand" states that changes in A) demand are related directly to changes in supply. B) the quantity demanded of a good are not related to changes in the quantity supplied. C) the quantity demanded of a good are inversely related to changes in its price. D) demand are inversely related to changes in supply.

C) the quantity demanded of a good are inversely related to changes in its price.

5. Which of the following statements is correct? A) A change in the quantity demanded means a shift in the demand curve. B) A change in demand means a movement along the demand curve. C) A change in demand and change in quantity demanded means the same thing. D) A change in demand means a shift in the demand curve while change in the quantity demanded means a movement along the demand curve.

D) A change in demand means a shift in the demand curve while change in the quantity demanded means a movement along the demand curve.

25. Which of the following will NOT shift the supply curve for pick-up trucks? A) a technological advance. B) an increase in the price of a resource used to produce pick-up trucks. C) a change in the number of firms supplying pick-up trucks. D) a change in the price of pick-up trucks.

D) a change in the price of pick-up trucks.

A country possesses a comparative advantage in the production of a good if A) the opportunity cost in terms of forgone output of alternative goods is lower for this country than it is for its trading partners. B) it possesses an absolute advantage in the production of this good. C) it is able to produce more of this good per hour than can any other country. D) all of the above

D) all of the above

Economic growth A) is free. B) leads to less consumption in the present and increased consumption in the future. C) is the major reason we face scarcity. D) allows us to increase our consumption in the present and in the future.

D) allows us to increase our consumption in the present and in the future.

Oatmeal is a normal good and cold cereal is a substitute for oatmeal. Raisins are a complement for oatmeal. Which of the following increases the demand for oatmeal? A) an increase in the price of raisins B) a decrease in income C) a decrease in population D) an increase in the price of cold cereal

D) an increase in the price of cold cereal

20. Ham and eggs are complements. If the price of ham rises, the demand for eggs will A) increase or decrease but the demand curve for ham will not change. B) decrease and the demand curve for ham will shift rightward. C) not change but there will be a movement along the demand curve for eggs. D) decrease and the demand curve for eggs will shift leftward.

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

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 ___________. A) none of the points that are illustrated. B) point b. C) point c. D) point d.

D) point d.

What kind of movement reflect an increase in income if fruit snacks are an inferior good?

LEFTward shift of the demand curve

What kind of movement reflects a decrease in demand?

LEFTward shift of the demand curve

What kind of movement reflects a decrease in population?

LEFTward shift of the demand curve

What kind of movement reflects an increase in the price of a complement for fruit snack?

LEFTward shift of the demand curve

In the market for candy. People become more concerned that eating candy causes them to gain weight, which they do not like. What would be the result of the demand and supply curve?

LEFTward shift of the demand curve. Supply curve does not shift

What kind of movement would reflect the result of an increase in the wages paid to oil workers?

LEFTward shift of the supply curve

What kind of movement reflects a decrease in QD but NOT a decrease in demand?

Movement UP the demand curve

What kind of movement would reflect an increase in the quantity of oil supplied but NOT an increase in the supply of oil?

Movement UP the supply curve

What kind of movement reflect an increase in income if fruit snacks are an normal good?

RIGHTward shift of the demand curve

What kind of movement reflects an increase in demand?

RIGHTward shift of the demand curve

What kind of movement reflects how consumers would react to an increase in the price of a fruit snack that is expected to occur in the future?

RIGHTward shift of the demand curve

What kind of movement reflects how consumers would react to an increase in the price of a non-fruit snack (a substitute for fruit snack)?

RIGHTward shift of the demand curve

What kind of movement would reflect an increase in the supply of oil?

RIGHTward shift of the supply curve

What kind of movement would reflect the result of the development of a new, more efficient refining technology?

RIGHTward shift of the supply curve

In the market for french fries at fast food joints. If the price of potatoes rises and simultaneously people become concerned that french fries can cause heart attacks, what would happen to the demand and supply curve?

The demand curve would move LEFTward. The supply curve would move LEFTward.

In the market for oil. Because of the development of a new deep sea drilling technology, what would happen to the demand and supply curve?

The demand curve would not shift and the supply curve would shift LEFTward