Economics Test Questions

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1 CORRECT| |
When an economist says that the demand for a product has increased, this means that:| | | A)| quantity demanded is greater at each possible price.| | | B)| firms make less of the product available for sale.| | | C)| consumers respond to a lower price by buying more.| | | D)| the demand curve becomes steeper.|

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2 INCORRECT| |
When movie ticket prices increase, families tend to spend less time watching movies and more time at home watching videos instead. This best reflects:| | | A)| diminishing marginal utility.|

| | B) | the income effect.|
| | C)| the rationing function of markets.|
| | D)| the substitution effect.|
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3 INCORRECT| |
If consumer incomes increase, the demand for product Y:|
| | A)| will necessarily remain unchanged.|
| | B)| will shift to the right if Y is a complementary good.| | | C)| will shift to the right if Y is a normal good.| | | D)| will shift to the right if Y is an inferior good.| | | | | |

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4 INCORRECT| |
When drawing demand and supply curves, economists are assuming that the primary influence on production and purchasing decisions is:| | | A)| price.|
| | B)| the cost of production.|
| | C)| the overall state of the economy.|
| | D)| consumer incomes.|
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5 INCORRECT| |
Refer to the following diagrams:

Which one of the above diagrams best illustrates the effect of an increase in crude oil prices on the market for gasoline?| | | A)| A|
| | B)| B|
| | C)| C|
| | D)| D|
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6 INCORRECT| |
A decrease in the price of a product will increase the amount of it demanded because:| | | A)| supply curves are upsloping.|
| | B)| the lower price will decrease real incomes.|
| | C)| the lower price induces consumers to use this product instead of other products.| | | D)| firms produce more at lower prices.|
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7 INCORRECT| |
"Because of unusually good growing conditions, the supply of strawberries has substantially increased." This statement indicates that:| | | A)| the demand for strawberries will necessarily rise.| | | B)| the equilibrium quantity of strawberries will fall.| | | C)| the amount of strawberries that will be available at various prices has increased.| | | D)| the price of strawberries will rise.|

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Feedback: An increase in supply occurs when more is made available at each price. All else equal, the equilibrium price of strawberries will fall.| |
8 CORRECT| |
Goods X and Y are complements while goods X and Z are substitutes. If the supply of good X increases:| | | A)| the demand for both Y and Z will increase.|
| | B)| the demand for Y will increase while the demand for Z will decrease.| | | C)| the demand for Y will decrease while the demand for Z will increase.| | | D)| the demand for both Y and Z will decrease.|

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Feedback: The increased supply of X will decrease its equilibrium price. This lower price increases the demand for complementary good Y and decreases the demand for substitute good Z.| |
9 CORRECT| |
The following data show the supply and demand schedule for a competitively produced good.

Refer to the above data. At the equilibrium price, the quantity exchanged in this market will be:| | | A)| 190.|
| | B)| 220.|
| | C)| 245.|
| | D)| 250.|
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Feedback: At the price of $13, the quantity supplied and the quantity demanded are both 220.| |
10 INCORRECT| |
An improvement in production technology for a specific good will cause a(n):| | | A)| increase in demand and an increase in price.|
| | B)| increase in demand and a drop in...
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