1- Suppose that the market for engagement rings is in equilibrium. Then political unrest in South Africa shuts down the diamond mines there. South Africa is the world’s primary supplier of diamonds. What will happen?
a- The equilibrium quantity of engagement rings will decrease.
b-The equilibrium price of engagement rings will decrease.
c-The demand for engagement rings will decrease.
d-The supply of engagement rings will increase.
2- Which of the following would lead to a DECREASE in the demand for tennis balls?
a-An increase in the price of tennis balls
b- A decrease in the price of tennis rackets
c-An increase in the cost of producing tennis balls
d-A decrease in average household income when tennis balls are a normal good
e-None of the above
3-With a given supply curve, a decrease in demand leads to
a-a decrease in equilibrium price and an increase in equilibrium quantity.
b-an increase in equilibrium price and a decrease in equilibrium quantity.
c-a decrease in equilibrium price and a decrease in equilibrium quantity.
d-no change in price and a decrease in equilibrium quantity.
e-none of the above
4-The change in price that results from a leftward shift of the supply curve will be greater if
a-the demand curve is relatively steep than if the demand curve is relatively flat.
b-the demand curve is relatively flat than if the demand curve is relatively steep.
c-the demand curve is horizontal than if the demand curve is vertical.
d-the demand curve is horizontal than if the demand curve is downward sloping.
5-Yesterday’s newspaper reported the results of a study indicating that people who eat more bananas are more attractive to the opposite sex. What do you expect to happen to the market price and quantity of bananas?
a-price will decrease, quantity will decrease
b-price will decrease, quantity will increase
c-price will increase, quantity will decrease
d-price will increase, quantity will increase
6-Suppose that a decrease in the price of good X results in fewer units of good Y being sold. This implies that X and Y are
7-If a supply curve goes through the point P = $10 and Qs = 320, then
a-$10 is the highest price that will induce firms to supply 320 units.
b-$10 is the lowest price that will induce firms to supply 320 units.
c-at a price higher than $10 there will be a surplus.
d-at a price lower than $10 there will be a shortage.
e-both c and d
8-Which of the following would shift the demand curve for gasoline in the current period to the right?
a. a decrease in the price of gasoline
b. an increase in consumer income, assuming gasoline is a normal good
c. an increase in the price of cars, a complement for gasoline
d. a decrease in the expected future price of gasoline
9-If the market price of eggs rises at the same time as the market quantity of eggs purchased decreases, this could have been caused by
a-an increase in demand with no change in supply.
b- a decrease in supply with no change in demand.
c-an increase in supply and an increase in demand.
d-an increase in supply and a decrease in demand
10-Because bagels and cream cheese are often eaten together, they are complements. Suppose we observe that both the equilibrium price of cream cheese and the equilibrium quantity of bagels have risen. Which of the following explanations is consistent with these changes in the bagels and cream cheese markets?
a-Price of milk increased.
b-Price of milk decreased.
c-Price of flour increased.
d-Price of flour decreased.
11-Use the following demand and supply functions to answer the next two questions
Demand: Qd = 900 – 60P
Supply: Qs = – 200 + 50P
Equilibrium price and output are:
a-P = $7 and Q = 480.
b-P = $10 and Q = 300.
c-P = $20 and Q = 150.
d-P = $100 and Q = 5,300.
e-none of the above
12-If M = $15,000 and PR = $20 and the supply function is Qs= 30 + 3P, then, when the price of the good is $60,
a-there is a shortage of 60 units of the good.
b-there is equilibrium in the market.
c-there is a surplus of 60 units of the good.
d-the quantities demanded and supplied are indeterminate.
13-Assuming neither supply or demand curves is horizontal, in which of the following cases must price always fall?
a-Demand increases and supply increases.
b-Demand decreases and supply decreases.
c-Supply increases and demand remains constant.
d-Demand decreases and supply increases.
e-Both c and d
14-We observe that the equilibrium price of coffee falls and the equilibrium quantity falls. Which of the following best fits the observed data?
a-an increase in demand with supply constant.
b-an increase in demand coupled with a decrease in supply.
c-an increase in demand coupled with an increase in supply
d-a decrease in demand with supply constant.
16 -If M = $15,000 and PR = $20 and the supply function is Qs
= 30 + 3P, equilibrium price and quantity are, respectively,
a-P = $55 and Q = 195.
b-P = $6 and Q = 38.
c-P = $12 and Q = 200.
d-P = $50 and Q = 170.
e-P = $40 and Q = 250.
17-If M = $15,000 and PR = $20, the demand function is
a-P = 690 – 9Qd.
b-Qd= 690 – 9P.
c-Qd = 680 – 9P.
d-P = 680 – 9Qd.
e- Qd= 800 – 19P.
18-Use the following general linear demand relation to answer questions 5 through 8:
Qd = 680 – 9P + 0.006M – 4PR
where M is income and PR is the price of a related good, R.
From this relation it is apparent that the good is:
a-an inferior good
b-a substitute for good R
c-a normal good
d-a complement for good R
e-both c and d