Economics Quiz 1

EPGP Quiz 1
Time: 1 hour, closed book
Answer all questions. Circle the correct answer. 2 points each.
1.
The law of demand states that, holding all else constant:
A.
as price falls, demand will fall also.

B. as price rises, demand will also rise.

C. price has no effect on quantity demanded.

D. as price falls, quantity demanded rises.

2.
Which of the following would not shift the demand for good A?

A.
Drop in price of good A.

B.
Drop in price of good B.

C.
Consumer income.

D.
Change in the level of advertising of good A.

3.
If good A is an inferior good, an increase in income leads to: A. a decrease in the demand for good B.

B. a decrease in the demand for good A.

C. an increase in the demand for good A.

D. no change in the quantity demanded of good A.

4.
If A and B are complements, an increase in the price of good A would: A. have no effect on the quantity demanded of B.

B. lead to an increase in demand for B.

C. lead to a decrease in demand for B.

D. none of the statements associated with this question are correct.

5.
Suppose the demand for good X is given by Qdx = 10 + axPx + ayPy + aMM. From the law of demand we know that ax will be: A. less than zero.

B. greater than zero.

C. zero. D. none of the statements associated with this question are correct.

6.
For a steel factory, a decrease in the cost of electricity to the plant will cause the supply curve to: A. become flatter.

B. shift to the left.

C. shift to the right.

D. become parallel to the price axis.

7.
If a shortage exists in a market, the natural tendency is for: A. demand to increase.

B. price to increase.

C. quantity supplied to decrease.

D. no change in the market.

8.
Suppose market demand and supply are given by Qd = 100 - 2P and QS = 5 + 3P. The equilibrium price is: A.
$15.

B.
$19.

C.
$17.

D.
$20.

9.
Assume that the price elasticity of demand is -2 for a certain firm's product. If the firm raises price, the