1) The opportunity cost of good A in terms of good B is equal to the
A) price of good A minus the price of good B.
B) price of good B minus the price of good A.
C) ratio of the price of good A to the price of good B.
D) ratio of the price of good B to the price of good A.
Answer: C
2) The law of demand states that the quantity of a good demanded varies
A) inversely with its price.
B) inversely with the price of substitute goods.
C) directly with income.
D) directly with population.
Answer: A
3) People buy more of good 1 when the price of good 2 rises. These goods are
A) complements.
B) substitutes.
C) normal goods.
D) inferior goods.
Answer: B
4) The demand curve for a normal good shifts leftward if income ____ or the expected
future price ____.
A) decreases; falls
B) decreases; rises
C) increases; falls
D) increases; rises
Answer: A
5) If income increases or the price of a complement falls,
A) the demand curve for a normal good shifts leftward.
B) the demand curve for a normal good shifts rightward.
C) the supply curve of a normal good shifts leftward.
D) the supply curve of a normal good shifts rightward.
Answer: B
6) Normal goods are those for which demand decreases as
A) the price of a complement falls.
B) the price of a substitute falls.
C) income decreases.
D) the good’s own price rises.
Answer: C
7) Which of the following does NOT shift the supply curve?
A) A technological advance.
B) A decrease in the wages of labor used in production of the good.
C) A fall in the price of a substitute in production.
D) An increase in the price of the good.
Answer: D
8) A price below the equilibrium price results in
A) a surplus.
B) a shortage.
C) excess supply.
D) a further price fall.
Answer: B
9) A shortage causes the
A) demand curve to shift leftward.
B) supply curve to shift rightward.
C) price to fall.
D) price to rise.
Answer: D
10) When supply decreases and demand does not change, the equilibrium quantity
A) increases and the price rises.
B) decreases and the price falls.
C) increases and the price falls.
D) decreases and the price rises.
Answer: D
11) An increase in demand combined with no change in supply causes
A) the equilibrium price to rise.
B) the equilibrium price to fall.
C) a movement rightward along the demand curve.
D) a decrease in demand because the supply curve does not shift.
Answer: A
12) The equilibrium price in the above figure is
A) $2.
B) $4.
C) $6.
D) $8.
Answer: C
Topic: Market Equilibrium
Skill: Recognition
13) The equilibrium quantity in the above figure is
A) 200 units.
B) 300 units.
C) 400 units.
D) 600 units.
Answer: B
Topic: Surplus
Skill: Analytical
14) At a price of $10 in the above figure, there is
A) a surplus of 200 units.
B) a shortage of 200 units.
C) a surplus of 400 units.
D) a shortage of 400 units.
Answer: C
Topic: Shortage
Skill: Analytical
15) At a price of $4 in the above figure,
A) the equilibrium quantity is 400 units.
B) there is a surplus of 200 units.
C) the quantity supplied is 400 units.
D) there is a shortage of 200 units.
Answer: D
Topic: Predicting Changes in Price and Quantity; Demand Changes
Skill: Conceptual
16) If the good in the above figure is a normal good and income rises, then the new
equilibrium quantity
A) is less than 300 units.
B) is 300 units.
C) is more than 300 units.
D) could be less than, equal to, or more than 300 units.
Answer: C
Topic: Predicting Changes in Price and Quantity; Supply Changes
Skill: Conceptual
17) The initial supply and demand curves for a good are illustrated in the above figure. If
there are technological advances in the production of the good, then the new price for
the good
A) is less than $6.
B) is $6.
C) is more than $6.
D) could be less than, equal to, or more than $6.
Answer: A
Topic: Predicting Changes in Price and Quantity; Demand Changes
Skill: Conceptual
18) The initial supply and demand curves for a good are illustrated in the above figure. If
there is a rise in the price of the resources used to produce the good, then the new price
A) is less than $6.
B) is $6.
C) is more than $6.
D) could be less than, equal to, or more than $6.
Answer: C
19) A technological improvement lowers the cost of producing coffee. At the same time,
consumers’ preferences for coffee increase. The equilibrium price of coffee will
A) rise.
B) fall.
C) remain the same.
D) rise, fall, or stay the same, depending on the relative size of the shifts in the demand
and supply curves.
Answer: D
20) Which of the following definitely causes a fall in the equilibrium price?
A) An increase in both demand and supply.
B) A decrease in both demand and supply.
C) An increase in demand combined with a decrease in supply.
D) A decrease in demand combined with an increase in supply.
Answer: D
