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Name: ______________________________________
Date: _________
ID: A
AP Economics Unit 2
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____
1. Suppose oranges and clementines are considered to be substitutes. Holding everything else constant, if the
price of oranges increases, then the:
a. demand for clementines will increase.
b. demand for clementines will decrease.
c. demand for oranges will increase.
d. demand for oranges will decrease.
e. demand for both oranges and clementines will decrease.
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2. Suppose that the average cost of a doctor's visit is $100. If the government imposes a price ceiling of
$50 on the cost of a doctor's visit, there will be:
a. an excess supply of doctor's visits.
b. an excess demand for doctor's visits.
c. an increase in the equilibrium number of doctor's visits.
d. no change in the number of doctor's visits.
e. an increase in the total efficiency of this market.
____
3. When a market is in equilibrium,
a. a person could do better if he or she did something different.
b. government must always intervene to improve equity in the market outcome.
c. government has directed the market in such a way as to achieve this point.
d. markets are not working efficiently.
e. people have exploited all opportunities to make themselves better off.
Price of Lemonade
(per cup)
$ .50
$ .75
$1.00
$1.25
$1.50
$1.75
____
Number of Cups
Number of Cups Supplied
Demanded
(Qs)
(Qd.)
250
25
200
50
150
75
100
100
50
125
20
150
Table 7-3: The Lemonade Market
4. (Table 7-3: The Lemonade Market) If the price of a cup of lemonade is $1.00, what will exist in the
market?
a. equilibrium
b. a shortage of 150 cups
c. a shortage of 75 cups
d. a surplus of 75 cups
e. a shortage of 225 cups
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ID: A
____
5. Consider a Kwik Trip gas station. If it introduces a new technology where customers pay at the pump,
thus decreasing production costs, there will be:
a. a shift to the right in the station's supply curve and lower gas prices.
b. a shift to the left in the station's supply curve and higher gas prices.
c. a shift to the right in the customers' demand curve and higher gas prices.
d. a shift to the left in the customers' demand curve and lower gas prices.
e. a shift to the right in the station's supply curve and higher gas prices.
____
6. When the demand for gadgets rises and the supply of gadgets rises, we predict that
a. gadget prices will be lower, with an ambiguous change in the quantity of gadgets.
b. gadget prices will be higher, with an ambiguous change in the quantity of gadgets.
c. there is an ambiguous change in gadget prices, and the quantity of gadgets falls.
d. gadget prices will be lower, and the quantity of gadgets will be higher.
e. there is an ambiguous change in gadget prices, and the quantity of gadgets rises.
____
7. When the economy suffers a downturn, vacationers are more likely to take car trips than to fly. Which
of the following provides the most reasonable explanation for this phenomenon?
a. Air travel and vacation travel by car are complementary goods.
b. Air travel and vacation travel by car are both normal goods.
c. Air travel is a normal good and vacation travel by car is an inferior good.
d. Air travel is an inferior good and vacation travel by car is a normal good.
e. Air travel and vacation travel by car are both inferior goods.
____
8. Equilibrium in the market occurs at:
a. the only price where every consumer purchases the same number of units.
b. the only quantity where the highest price consumers are willing to pay is the same as
the lowest price sellers are willing to accept.
c. at the only price where quantity demanded is equal to zero.
d. at prices where there is excess demand.
e. at the only price where the quantity supplied is equal to zero.
____
9. The
a.
b.
c.
d.
e.
____ 10. An
a.
b.
c.
d.
e.
law of demand states that, other things equal:
as the price increases, the quantity demanded will increase.
as the price decreases, the demand curve will shift to the right.
as the price increases, the demand will decrease.
as the price increases, the quantity demanded will decrease.
as the price decreases, the demand curve will shift to the left.
announcement that smoking will harm your ability to think clearly will most likely result in:
an increase in the quantity of cigarettes demanded.
a decrease in the demand for cigarettes.
no change in smoking habits.
an increase in the price of cigarettes.
an increase in the quantity of cigarettes supplied.
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ID: A
Figure 6-1: Supply of Coconuts
____ 11. (Figure 6-1: Supply of Coconuts) If the prices of inputs (e.g., labor, fertilizer, and fuel) used to
produce and transport coconuts are increasing, then the movement in the model could be:
a. A to B.
b. B to A.
c. C to A.
d. E to B.
e. B to C
____ 12. (Figure 6-1: Supply of Coconuts) If there is an expectation on the part of coconut suppliers that the
price of coconuts will be significantly higher in the very near future, then the movement in the model to
reflect today's market behavior would be:
a. A to B.
b. B to A.
c. A to C.
d. B to E.
e. E to B
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ID: A
Figure 7-8: Demand and Supply of Wheat II
____ 13. (Figure 7-8: Demand and Supply of Wheat II) A temporary price of $4 in this market would result
in:
a. a surplus of 4,000 bushels.
b. a shortage of 2,000 bushels.
c. a shortage of 4,000 bushels.
d. a surplus of 2,000 bushels.
e. a shortage of 6,000 bushels.
Price
0
5
10
15
20
Quantity Demanded
Quantity Supplied
50
0
40
15
30
30
20
45
10
60
Table 7-1: Competitive Market for Good Z
____ 14. (Table 7-1: Competitive Market for Good Z) The equilibrium price and quantity in this market are,
respectively:
a. $5 and 40 units.
b. $20 and 60 units.
c. $10 and 30 units.
d. $15 and 20 units.
e. $10 and 60 units.
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ID: A
____ 15. Which of the following best describes the law of demand?
a. When the price of peanut butter cups rises, Elaine buys more chocolate bars each
month.
b. When the price of chocolate bars rises, Elaine buys fewer chocolate bars each month.
c. When Elaine’s income rises, she buys fewer chocolate bars each month.
d. When the price of strawberries falls, Elaine buys more chocolate bars each month.
e. When scientists warn that chocolate can give a person stomach ulcers, Elaine buys
fewer chocolate bars each month.
____ 16. Markets that are characterized by many buyers and many sellers are referred to as:
a. inefficient.
b. competitive.
c. foreign.
d. monopolies.
e. corrupt.
Price per Treatment
$50
$100
$150
$200
$250
Quantity
Quantity
Treatments
Treatments
Demanded
Supplied (monthly)
(monthly)
100
20
80
40
60
60
40
80
20
100
Table 9-2 The Market for Acupuncture
____ 17. (Table 9-2 The Market for Acupuncture) A small town has a thriving market for acupuncture
treatments. In an effort to regulate this market, the town requires each acupuncture therapist to purchase
a license. Initially, the government issues only enough licenses to provide for 20 treatments per month.
This quota creates a quota rent equal to:
a. $50.
b. $100.
c. $150.
d. $250
e. $200.
____ 18. Which of the following statements is true?
a. The concept of equilibrium requires that all individuals have an equal amount of
income.
b. If equilibrium in a market exists, then the price in that market will not fluctuate by
more than 5%.
c. If equilibrium in a market exists, then there will be no remaining opportunities for
individuals to make themselves better off.
d. Equilibrium in a market will exist when the number of buyers is equal to the number of
sellers.
e. If equilibrium in a market exists, it is both an efficient and an equitable outcome.
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ID: A
____ 19. A decrease in the price of a good will result in:
a. an increase in demand.
b. an increase in supply.
c. an increase in the quantity demanded.
d. more being supplied.
e. a rightward shift of the demand curve.
Price (unit)
$1.10
$1.20
$1.30
$1.40
$1.50
Quantity
Quantity Supplied
Demanded (units) (units)
9,000
3,000
8,000
5,000
7,000
7,000
6,000
9,000
5,000
1,100
Table 9-1 Market for Fried Twinkies
____ 20. (Table 9-1 Market for Fried Twinkies) Suppose the government decides to reduce fried Twinkie
consumption as part of a “War on Obesity.” After careful study, the government decides to limit
production (i.e., the government imposes a quota on production) of fried Twinkies to 5,000 for the
current calendar year. Using the table, what price will producers charge, if they obey the quota law?
a. $1.20
b. $1.30
c. $1.50
d. $1.10
e. $1.40
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ID: A
Figure 8-12: Market for Milk
____ 21. (Figure 8-12: Market for Milk) If there is a binding price floor in the market for milk, the price would
be equal to ________, consumers would demand ________, and producers would supply ________.
a. P1 ; Q1 ; Q3
b. P2 ; Q2 ; Q2
c. P1 ; Q3 ; Q1
d. P3 ; Q3 ; Q1
e. P1 ; Q2 ; Q3
Figure 7-1: Demand and Supply of Gasoline
____ 22. Use the “Demand and Supply of Gasoline” Figure 7-1. Given the equilibrium after a change in
supply from S 1 to S 2 :
a. at the old price of $2.50, there will be pressure for the price to fall.
b. the new price will be $2.00.
c. the new quantity will be 600 gallons.
d. the price will remain constant.
e. the new quantity will be 100 gallons.
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ID: A
____ 23. In the market for corn tortilla chips, what would definitely cause a price increase?
a. The medical community issues a strong warning against the consumption of corn
tortilla chips.
b. There is a technological advancement in the corn tortilla chip production process.
c. There is a fungus that kills much of the corn crop in Nebraska.
d. The price of salsa triples.
e. Household income falls and corn tortilla chips are a normal good.
____ 24. A price ceiling is:
a. a maximum price sellers are allowed to charge for a good or service.
b. the difference between the quantity supplied and quantity demanded.
c. a minimum price buyers are required to pay for a good or service.
d. caused by an inefficiently low quantity.
e. a way for the government to assist producers who cannot operate at the equilibrium
market price.
____ 25. A price ceiling on a good often results in:
a. black market or underground transactions of the good.
b. a surplus of the product.
c. greater communications between buyers and sellers about the appropriate price.
d. a more efficient allocation of the good to buyers.
e. a situation where goods are produced at inefficiently high quality.
____ 26. Rent controls set a price ceiling below the equilibrium price and therefore:
a. quantity supplied exceeds the quantity demanded.
b. efficiency in the market is improved.
c. a surplus of rental units will result.
d. poor people will obviously be helped.
e. quantity demanded exceeds the quantity supplied.
____ 27. Raclette is a popular wintertime dish in Switzerland. It is essentially melted Raclette cheese over boiled
new potatoes. If the price of this cheese decreased, we would expect:
a. an increase in demand for the cheese.
b. an increase in demand for new potatoes.
c. there to be no effect on the demand for either the cheese or the new potatoes.
d. an increase in demand both for the cheese and for the new potatoes.
e. a decrease in the demand for new potatoes
____ 28. Suppose you manage a corner grocery store. If peanut butter is an inferior good, what do you suppose
would happen to the price and quantity of peanut butter as incomes fall during an economic recession?
a. The price would increase and the quantity would decrease.
b. The price and quantity would both increase.
c. The price and quantity would both decrease.
d. The price would decrease and the quantity would increase.
e. The price would decrease with no change in the quantity.
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ID: A
____ 29. The market price of airline flights increased recently. Some economists suggest that the price increased
because there has been an increase in the number of business travelers. If the economists are correct, it
must be the case that:
a. supply increased.
b. supply decreased.
c. supply increased while demand also decreased.
d. demand decreased.
e. demand increased.
____ 30. The dictator of a war-torn country dictates that the most anyone can pay for a car is equivalent to
$1,200 (a price below the equilibrium price for cars). If such a policy was put in place, it would be an
example of a:
a. price floor.
b. price ceiling.
c. quota.
d. tariff.
e. excise tax.
____ 31. A market price support policy establishes a price floor, which:
a. decreases the price paid by consumers.
b. does not change the price paid by consumers.
c. increases the price received by farmers.
d. decreases the price received by farmers.
e. reduces government spending in agricultural markets.
____ 32. An increase in the price of wheat, an important ingredient in the production of bread, combined with an
increase in the number of people consuming bread, will result in which of the following changes in the
bread market?
a. Both the equilibrium price and quantity will increase.
b. Equilibrium quantity will decrease, but equilibrium price may decrease, increase, or
stay the same.
c. Both the equilibrium price and quantity will decrease.
d. Equilibrium price will increase, but equilibrium quantity may decrease, increase, or stay
the same.
e. Equilibrium price will increase and quantity will decrease.
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