Economics Unit 2

Which of the following will NOT shift the supply curve of good X? a. A change in the cost of inputs used to produce good X. b. A change in the price of good X. c. A change in the technology used to produce X. d. A change number of sellers of good X.

b. A change in the price of good X

Which of the following events will increase the supply of sweaters? a. a rise in the price of a sweater b. a rise in the expected future price of a sweater c. an increase in income if sweaters are a normal good d. a rise in the wage rate paid to the workers who make sweaters e. an increase in the number of sellers of sweaters

e. an increase in the number of sellers of sweaters

Which of the following will NOT shift the supply curve of good X? a. A change number of sellers of good X. b. A change in the technology used to produce X. c. the government granting a subsidy on the production on good X. d. A change in the cost of inputs used to produce good X. e. A change in the price of good X.

e. A change in the price of good X.

The supply side of the market for peanuts represents a. observers. b. consumers. c. the government. d. buyers. e. producers.

e. producers

A price ceiling is a. a maximum legal price. b. a minimum legal price. c. an equilibrium price. d. a market-determined price. e. the highest price at which the quantity demanded equals the quantity supplied.

a maximum legal price.

Which of the following events will increase the quantity supplied of sweaters? a. a rise in the price of a sweater b. a rise in the expected future price of a sweater c. an increase in the number of sellers of sweaters d. a decrease in the number of sweater buyers e. a rise in the wage rate paid to the workers who make sweaters

a. a rise in the price of a sweater

Assume consumers view hamburgers and pizzas as substitutes. Suppose the government subsidizes hamburger companies, which will affect the pizza market by a. decreasing the demand for pizza therefore lowering the price of pizza b. increasing the demand for pizza therefore raising the price of pizza c. increasing the supply of pizza therefore lowering the price of pizza d. decreasing the supply of pizza therefore raising the price of pizza e. increasing the demand for pizza and increasing the supply of pizzas

a. decreasing the demand for pizza therefore lowering the price of pizza

A university decides to raise tuition fees to increase the total revenue it receives from students. This strategy will work if the demand for education at that university is a. inelastic b. unit elastic c. elastic d. perfectly elastic

a. inelastic

A price floor a.is the lowest legal price a good may sell for. b.makes all prices above it illegal. c.creates a shortage of the good if it is set above the equilibrium price. d. Both answers A and C are correct. e. Both answers B and C are correct.

a. is the lowest legal price a good may sell for.

The law of demand implies that, ceteris paribus, a. as the price of a cheeseburger rises, the quantity of cheeseburgers demanded increases. b. as the price of a cheeseburger rises, the quantity of cheeseburgers demanded decreases. c. as income increases, the quantity of cheeseburgers demanded increases. d. as the demand for cheeseburgers increases, the price of a cheeseburger falls. e. as more people demand cheeseburgers, the quantity demanded increases.

b. as the price of a cheeseburger rises, the quantity of cheeseburgers demanded decreases.

The price elasticity of demand is a measure of how consumers respond to a.changes in a substitute or complement b. changes in the price of a good or service c. to changes in income

b. changes in the price of a good or service

Assume soda and peanuts are complements. Ceteris paribus, a rise in the price of soda a. increases the demand for peanuts. b.decreases the demand for peanuts. c. decreases the demand for soda. d. increases the demand for soda. e. has no effect on the demand for peanuts, though it does change the quantity demanded of peanuts.

b. decreases the demand for peanuts.

Peanuts are a normal good because the... a. demand curve for peanuts slopes downward. b. demand for peanuts increases when income increases. c. demand for peanuts increases when the price of one of its substitutes rises. d. peanuts have both substitutes and complements. e. demand curve shows that if the price of peanuts rises, there is a movement along the demand curve to a higher quantity demanded.

b. demand for peanuts increases when income increases.

If demand is ____ then price cuts will ____ consumer spending. a. inelastic; increase b. elastic; increase c. elastic; decrease d. none of these answers are correct

b. elastic; increase

Other things remaining the same, the quantity demanded of a good or service will increase if the price of the good or service a. rises. b. falls. c. does not change. d. rises or does not change. e. rises or falls.

b. falls

A government that is seeking to raise revenue should increase taxes on products with relatively elastic demands. a. true b. false

b. false

Assume that consumers consider nachos and salsa to be complementary goods. A significant increase in the supply of nachos will affect the salsa market by a. decreasing the demand for salsa and therefore lowering the price of salsa b. increasing the demand for salsa and therefore raising the price of salsa c. increasing the supply of salsa and therefore raising the price of salsa d. decreasing the supply of salsa therefore lowering the price of salsa e. increasing the demand of salsa and therefore increasing the supply of salsa

b. increasing the demand for salsa and therefore raising the price of salsa

If a freeze destroys oranges before they are harvested, the equilibrium price of an orange ____ and the equilibrium quantity ____. a. rises; increases b. rises; decreases c. falls; increases d. falls; decreases e. does not change; decreases

b. rises; decreases

Demand is inelastic when a. the % change in quantity demanded is greater than the % change in price b. the % change in price is greater than the % change in quantity demanded c. a relatively small change in price leads to a much larger change in quantity demanded

b. the % change in price is greater than the % change in quantity demanded

Katie advertises to sell cookies for $4 a dozen. She sells 50 dozen at this price and decides that she can charge more. She raises the price to $6 a dozen and ends up selling 40 dozen. Use the total revenue test to determine the price elasticity of demand for the cookies. a. the price elasticity of demand for the cookies is perfectly inelastic b. the price elasticity of demand for the cookies is inelastic c. the price elasticity of demand for the cookies is elastic

b. the price elasticity of demand for the cookies is inelastic

People come to expect that the price of a gallon of gasoline will rise next week. As a result, a. today's supply of gasoline increases. b. today's demand for gasoline increases. c. the price of a gallon of gasoline falls today. d. next week's supply of gasoline decreases. e. today's demand for gasoline and today's supply of gasoline do not change.

b. today's demand for gasoline increases.

A price elasticity of demand of 2, means that a 10% increase in price will result in a a. 2% decrease in quantity demanded b. 5% increase in quantity demanded c. 20% decrease in quantity demanded

c. 20% decrease in quantity demanded

A decrease in supply is, graphically, represented by: a. A rightward shift in the supply curve. b. A movement up and to the right along a supply curve. c. A leftward shift in the supply curve. d. A movement down and to the left along a supply curve.

c. A leftward shift in the supply curve.

What is the difference between a demand schedule and a demand curve? a. Demand schedules show changes in demanded; demand curves show changes in quantity demanded. b. Demand schedules reflect the law of demand; demand curves do not. c. Demand schedules provide a list and demand curves provide a graph of the same data. d. Demand schedules show a downward sloping relationship between price and quantity demanded; demand curves show an upward sloping relationship between price and quantity demanded. e. Demand schedules show changes in what companies are willing to produce; demand curves show changes in what consumers are willing to buy.

c. Demand schedules provide a list and demand curves provide a graph of the same data.

Who loses and who gains from the minimum wage? a. Losers are all workers and gainers are all firms. b. Losers are all firms and gainers are all workers. c. Losers are all firms and some workers ,while gainers are other workers. d. Gainers are some firms and all workers, while losers are some firms. e. Gainers are some firms and some workers, while losers are other firms and other workers.

c. Losers are all firms and some workers ,while gainers are other workers.

Which of the following is likely to have the most elastic demand? a. Electricity b. Heart medication c. Pepsi

c. Pepsi

When the demand in the market increases, the new equilibrium shows a. a lower equilibrium price and a lower equilibrium quantity. b. a higher equilibrium price and a lower equilibrium quantity. c. a higher equilibrium price and a higher equilibrium quantity. d. a lower equilibrium price and a higher equilibrium quantity. e. the same equilibrium price and quantity as before.

c. a higher equilibrium price and a higher equilibrium quantity.

Which of the following is an example of a price floor? a. a law passed in a city to lower apartment rents by setting the maximum price that can be charged for rent b. an equilibrium price c. a minimum wage law d. a law setting the highest price that can legally be charged for a gallon of gasoline e. None of the above answers give examples of a price floor.

c. a minimum wage law

An increase in the number of pineapple growers results in a. an increase in the supply of pineapples and a leftward shift in the supply curve of pineapples. b. None of the above answers is correct. c. an increase in the supply of pineapples and a rightward shift in the supply curve of pineapples. d. no change in the supply of pineapples and a movement along the supply curve of pineapples. e. an increase in the quantity of pineapples supplied and no shift in the supply curve of pineapples.

c. an increase in the supply of pineapples and a rightward shift in the supply curve of pineapples.

A 10% increase in the price of a movie ticket at the Linway Cinema leads to a 15% decrease in the number of tickets sold. This indicates that the demand for movie tickets at Linway Cinema are a. unit elastic b. inelastic c. elastic d. more information is needed to determine the elasticity of demand

c. elastic

In a pure market economy, the price of a good or service is determined by a. the quantities that producers are willing and able to provide b. the quantities that consumers are willing and able to buy c. the compromise between buyers and sellers d. the government's implementation of a price ceiling e. the government's implementation of a price floor

c. the compromise between buyers and sellers

How does an increase in supply affect a service's equilibrium price and quantity? a. The price rises and the quantity increases. b. The price falls and the quantity decreases. c. The price rises and the quantity decreases. d. The price falls and the quantity increases. e. The price does not change and the quantity increases.

d. The price falls and the quantity increases.

Which of the following events will increase the quantity demanded of bottled water? a. a fall in the price of soda b. a rise in the price of a fitness club membership c. an increase in the number of buyers of bottled water d. a fall in the price of bottled water e. a rise in the price of bottled water

d. a fall in the price of bottled water

Which of the following is FALSE regarding a price floor? a. to be effective, price floors must be placed above the equilibrium b. price floors are designed to help producers of goods and services c. price floors cause prices below them to be illegal d. price floors are designed to help consumers of the good or service e. price floors create surpluses in the market

d. price floors are designed to help consumers of the good or service

Supply curves are a. vertical. b. horizontal. c. U-shaped. d. upward sloping. e. downward sloping.

d. upward sloping.