Download Unit 2 Test Review

Unit 2 Test Review
1. A volcano erupts in Hawaii that destroys or damages many
of the orchards that supply the US with pineapples. What will
be the effect on prices and quantity of pineapples sold,
assuming all else is equal?
a.
Price will rise and quantity will also rise.
b.
Price will drop and quantity will also drop
c.
Price will drop but quantity will rise.
d.
Price will rise but quantity will drop
2. What point represents the equilibrium price?
a. W
b. X
c. Y
d. Z
3. What does it mean when the demand for a product is
inelastic?
a. People will not buy any of the product when the price
goes up.
b. A price increase does not have a significant impact on
buying habits.
c. Customers are sensitive to the price of the product.
d. There are very few satisfactory substitutes for the
product.
4. Jane’s income has increased after she received an advanced
degree in her field of work. This advanced degree has increased her
demand for products in the market. What does that do to the
demand curve if it is graphed out?
a.
b.
c.
d.
the demand curve has shifted to the left
the demand curve has shifted to the right
the point on the demand curve has moved down and to the right
the point on the demand curve has moved up and to the left
5. Which of the following is a good that might
be bought instead when prices rise?
a.
b.
c.
d.
complement
inelastic good
substitute
luxury
26. A shift in the demand curve means which of the
following?
a.
b.
c.
d.
a change in demand
a rise in prices
a decrease in both price and quantity demanded
a change in consumer income
27. The price of movie tickets in a town has risen from $7
to $9. What is the most likely effect of the change in
price?
a. The demand curve for movie tickets will move right.
b. The quantity demanded of movie tickets will increase.
c. The demand curve for movie tickets will move left.
d. The quantity demanded of movie tickets will decrease.
8. Jasmine is willing to buy 40 pencils at 25 cents apiece.
When the price is ten cents apiece, she is willing to buy
100 pencils. Which of the following statements could be
true about Jasmine’s demand for pencils? (HINT: think of
a demand schedule and which one will fit on the demand
curve according to the info given)
a.
b.
c.
d.
She will buy 80 pencils at 15 cents apiece.
She will buy 20 pencils at 20 cents apiece.
She will buy 100 pencils at 5 cents apiece.
None of these statements is likely to be true.
9. According to Figure 4.4, at what price will Ashley’s
quantity demanded of pizza be five slices?
a.
$ .50
b.
$1.00
c.
$1.50
d.
$3.00
10. The price of a slice of pizza has just increased by $1.00
from an earlier, low price. Based on Ashley’s demand curve
in Figure 4.4, which of the following statements is true?
a.
Ashley will buy two fewer slices of pizza.
b.
Ashley will buy five slices of pizza.
c.
Ashley’s will buy one fewer slice of pizza
d.
Ashley will not buy any pizza.
11. A new commercial has advertised the pizza place successfully.
Ashley’s demand for pizza has increased and her demand curve has
shifted. Based on Figure 4.4, which combination of price and quantity
demanded would you expect to find on her new demand curve?
a.
$1.50, three slices
b.
$0.50, four slices
c.
$2.00, one slice
d.
$1.00, five slices
12. Which of the following products is MOST LIKELY to have the
lowest level of price elasticity?
a.
b.
c.
d.
the latest model of a sports car
apples
a successful new cancer medication
chocolate chip cookies
13. For most goods, a rise in people’s income means that
there will be
a.
b.
c.
d.
a substitution effect
an increase in demand
a rise in prices
a decrease in demand
14. Which of the following is NOT an example
of complements
a.
c.
b.
d.
calculator and cell phone
row boat and oars
skis and ski boots
razor and razor blades
15. Which of the following is an example of a
good with inelastic demand?
a.
b.
c.
d.
life-saving medicine
computers
television sets
chewing gum
16. An increase in the price of milk causes a
decrease in the demand for cereal. The two are
products are
a. substitutes
b. unrelated
c. complements
d. demand elastic
17. When a customer’s need for a product is not
urgent, demand tends to be
a.
b.
c.
d.
elastic
complementary
inelastic
unit elastic
18. What do sellers do if they expect the price of goods
they have for sale to increase dramatically in the future?
a. sell the goods now and try to invest the money
instead of resupplying
b. sell the goods now but try to get the higher price for
them
c. store the goods until the price rises
d. store the goods indefinitely regardless of when the
price rises
19. When the selling price of a good goes up, what is the
relationship to the quantity supplied?
a.
b.
c.
d.
The cost of production goes down.
The profit made on each item goes down.
To produce more goods to yield a profit.
There is no relationship between the two.
20. Which of these events would indicate a
movement along a supply curve for batteries?
a.
Workers at a major battery factory go on
strike and stop production.
b. A new law requires battery manufacturers
to spend more money on trash disposal.
c. Battery manufacturers raise the price of
eight AA batteries from $3.50 to $3.95 a
set.
d. A new trade agreement enables stores to
import foreign batteries.
21. The supply of a product will normally decrease if
a.
b.
c.
d.
the cost of inputs goes down.
more producers enter the market.
the number of sellers goes up.
taxes on the product increase.
.
22. All of the following can cause an increase in supply
EXCEPT
a.
c.
b.
d.
a decrease in the cost of inputs
an increase in productivity
more sellers in the marketplace
technological breakdown
23. The Law of Supply has what kind of relationship
between price and quantity?
a.
b.
c.
d.
indirect
direct
inverse
opposite
24. According to this supply curve, if the price of movie videos
decreases from $18 to $16, the quantity supplied will
a.
b.
c.
d.
rise from 800 to 1000.
rise from 600 to 800
fall from 1000 to 800.
fall from 800 to 600
25. Which of the following choices could cause the movement
shown in the graph?
a.
technology improves production
b.
the number of firms increases
c.
inputs become cheaper
d.
taxes increase for a business
26. What does the movement shown on this graph
represent? (along the line movement)
a.
b.
c.
d.
a change in supply
the law of diminishing returns
a change in quantity supplied
a shift in the market supply curve
27. Which will not cause supply to increase (or a shift in
the supply curve)?
a.
b.
c.
d.
decrease in the price for a product
an improvement in technology
a reduction in input costs
a lower price expected in the future
28. In a market economy, a high price is a signal for
a.
b.
c.
d.
producers to supply less and consumers to buy less.
producers to supply less and consumers to buy more.
producers to supply more and consumers to buy less.
producers to supply more and consumers to buy more.
29. At a given price, a surplus occurs when
a. the quantity demanded is more than the quantity supplied.
b. the quantity demanded is the same as the quantity
supplied.
c. the quantity supplied is less than the quantity demanded.
d. the quantity supplied is greater than the quantity
demanded.
30. On a supply and demand diagram, if the demand curve shifts
to the left which of the following will happen to the equilibrium
price and quantity? (may want to draw a supply and demand
graph to visually see)
a.
b.
c.
d.
Both price and quantity will rise.
Both price and quantity will decline.
Price will rise and quantity will decline.
Price will decline and quantity will rise.
31. Suppose the demand curve shifts from D1 to D2, as shown
on the graph. How does the quantity supplied and quantity
demanded change at the new equilibrium price?
a. Quantity supplied increases and quantity demanded
decreases.
b. Quantity supplied decreases and quantity demanded
increases.
c. Both quantity supplied and quantity demanded increase.
d. Both quantity supplied and quantity demanded decrease.
32. If there is a shortage in a market, the price
is likely to
a.
b.
c.
d.
increase
decrease
remain the same
fluctuate
33. When price ceilings occur, what do they cause?
a.
b.
equilibrium
surpluses
c.
d.
shortages
inflation
34. Senator Harris fears that flower growers in his state will not
be able to afford to stay in business given the low price for tulips.
He proposes that a minimum price be established for tulips that
are above the current equilibrium price. Which of the following
would BEST describe this law and its effect?
a.
b.
c.
d.
It is a price ceiling that will cause a surplus
It is a price floor that will cause a surplus.
It is a price ceiling that will cause a shortage.
It is a price floor that will cause a shortage
35. If a new higher minimum wage is implemented by
the government, then what is the effect in the
marketplace?
a.
b.
c.
d.
surplus of jobs
surplus of workers
shortage of jobs
shortage of workers
36. Perfect competition is characterized by all of the
following EXCEPT
a.
b.
c.
d.
a large number of buyers and sellers.
sellers set prices.
identical products.
easy to get into the market
37. Under perfect (pure) competition,
a. products are similar but not identical.
b. numerous restrictions prevent firms from
entering the market.
c. sellers are at the mercy of the consumer
(price taker)
d. a single seller can affect price for large profits
38. A market structure in which only one producer supplies a good
that is in demand, thereby permitting them to set the price by
how much they supply, is called what?
a.
b.
c.
d.
competition
monopoly
oligopoly
conglomerate
39. What is the market structure where there are
only a few large sellers?
a.
b.
c.
d.
monopolistic competition
oligopoly
pure competition
monopoly
40. Monopolistic competition is different from
perfect competition by
a.
b.
c.
d.
collusion
product differentiation
profit maximization
imperfect competition