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MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) All of the following, except one, is demand. Which is the exception?

A) The quantities which consumers want to buy.
B) A hypothetical construct which expresses the desire and ability to purchase, not at a single
price, but over a range of prices.
C) The quantities which consumers are willing and able to buy per period of time at various
prices.
D) The relationship between various prices and quantities demanded for a product.
Answer: A

2) What is the term for the quantities which consumers are willing and able to buy per period of time at
various prices?
A) Demand.
B) Desire.
C) Human wants.
D) Supply.
E) Market.
Answer: A

3) What is the term for a table that shows the various quantities demanded per period of time at
different prices?
A) Production possibilities table.
B) Schedule of equilibrium points.
C) Supply schedule.
D) Demand schedule.
E) Market schedule.
Answer: D

4) What is meant by the term change in the quantity demanded?

A) The change in the quantity which results from a change in any factor other than the price and
implies a movement along the demand curve.
B) The change in the quantity which results from a price change and implies a movement along
the demand curve.
C) The change in the quantity which results from a change in any factor other than the price and
implies a shift in the demand curve.
D) The change in the quantity which results from a price change and implies a shift in the demand
curve.
Answer: B

1
 5) What is the most likely reason that your instructor does not have a demand for a top-of-the-line
BMW?
A) He or she cannot afford to own such an expensive car.
B) He or she does not wish to own such an expensive car.
C) He or she would prefer to own no car at all.
D) He or she does not want to own a German-made car.
Answer: A

6) What is meant by the term ceteris paribus?

A) Other things being equal. B) A downward-sloping demand curve.
C) All things vary. D) Prices remain constant.
Answer: A

7) What is the correct way to label the axis on a graph which illustrates a demand curve?
A) Price on horizontal axis and quantity on the vertical axis.
B) Income on the horizontal axis and price on the vertical axis.
C) Price on the horizontal axis and income on the vertical axis.
D) Quantity on horizontal axis and price on the vertical axis.
Answer: D

8) What is the term for income measured by the amount of goods and services which it will buy?
A) Net income.
B) Real income.
C) Nominal income.
D) Actual income.
E) Income effect.
Answer: B

9) What is the term for the total demand for a product by all consumers?
A) Schedule of wants.
B) Market Demand.
C) Market Supply.
D) Quota.
E) Product market.
Answer: B

10) What is market demand?

A) An increase or decrease in prices based on the quantity demanded of a product.
B) The total demand for a product by all consumers.
C) The desire to purchase cheaper competing products rather than relatively more expensive
products.
D) The substitution of one product for another as a result of a change in their relative prices.
Answer: B

2
11) What is the income effect?
A) The effect of a change in income on the demand for a product.
B) The effect of a change in income on the demand for a substitute product.
C) The effect of a change in income on the demand for an inferior product.
D) The effect of a price change on real income and therefore on the quantity demanded of a
product.
Answer: D

12) What is the substitution effect?

A) The substitution of one product for another as a result of a change in their relative prices.
B) The substitution of a normal product for an inferior product as the result of an increase in
income.
C) The effect that a change in income has on the demand for a substitute product.
D) The sacrifice which has to be made when an additional quantity of one product is purchased.
Answer: A

13) What is the term for the substitution of one product for another as a result of a change in their
relative prices?
A) Substitution effect. B) Income effect.
C) Market effect. D) Law of demand.
Answer: A

14) What is the effect of a decrease in the price of a product?

A) It will decrease the quantity demanded. B) It will increase the demand.
C) It will decrease the demand. D) It will increase the quantity demanded.
Answer: D

15) What is the term for the effect which a price change has on real income and therefore on the
quantity demanded of a product?
A) Market demand.
B) Change in the quantity demanded.
C) Substitution effect.
D) Income effect.
E) Opportunity cost.
Answer: D

16) Which of the following is explained by the combination of the substitution effect and the income
effect?
A) Ceteris paribus. B) Market demand.
C) Downward sloping demand curves. D) Equilibrium price.
Answer: C

3
17) Which of the following is explained by the combination of the substitution effect and the income
effect?
A) Equilibrium price.
B) The inverse relationship between price and quantity demanded.
C) Market demand.
D) The direct relationship between price and quantity demanded.
Answer: B

18) What is supply?

A) The total demand for a product by all consumers.
B) The quantity which prevails at the equilibrium price.
C) The quantities which producers are both willing and able to sell per period of time at various
prices.
D) The quantity sold at a certain price.
Answer: C

19) What is the term for a table showing the various quantities supplied per period of time at different
prices?
A) Supply schedule. B) Demand schedule.
C) Market supply. D) Price schedule.
Answer: A

20) What is the term for a change in the amounts that a producer is willing and able to make available as
a result of a price change?
A) Change in the individual supply. B) Change in the market demand.
C) Change in the market supply. D) Change in the quantity supplied.
Answer: D

21) What is the term for the quantities which producers are willing and able to sell per period of time at
various prices?
A) Quantity demanded.
B) Surplus.
C) Quantity supplied.
D) Supply.
E) Product availability.
Answer: D

22) What is supply?

A) The quantities that producers are willing and able to sell per period of time at various prices.
B) The total quantity of goods produced but not sold.
C) The maximum possible quantity that producers could make available.
D) The quantity made available by a typical producer.
Answer: A

4
23) What is the term for the total supply of a product offered by all producers?
A) Saturation point. B) Aggregate supply.
C) Market Supply. D) Equilibrium quantity.
Answer: C

24) What is market supply?

A) The surplus over and above the market demand.
B) The total quantity sold in a market.
C) The total supply of a product offered by all producers.
D) The total supply of a product demanded by all consumers.
Answer: C

25) What is the effect of an increase in the price of a product?

A) An increase in supply. B) A decrease in supply.
C) A decrease in the quantity supplied. D) An increase in the quantity supplied.
Answer: D

26) Graphically, what is the effect of a decrease in the price of a product?

A) A rightward shift in the supply curve.
B) A rightward movement on the supply curve.
C) A leftward movement on the supply curve.
D) A leftward shift in the supply curve.
Answer: C

27) What is the term for the mechanism which brings buyers and sellers together to assist them in
negotiation the exchange of products?
A) Supply and demand.
B) Laissez-faire.
C) The market.
D) Production possibilities.
E) Opportunity cost.
Answer: C

28) Which of the following is n ot a result of the greater availability of electronic communication?
A) Buyers have access to more information.
B) Supply chain bottlenecks are increasing.
C) The need to stockpile inventory is diminishing.
D) The sellers markets are expanding.
Answer: B

5
29) Which of the following is a result of the greater availability of electronic communication?
A) Markets are becoming smaller.
B) Markets are becoming inefficient.
C) Markets are becoming more efficient.
D) There is more emphasis on personal service in the market.
Answer: C

30) What is the equilibrium price?

A) The price at which everyone is able to buy the quantities they desire.
B) The price at which the quantity demanded equals the quantity supplied.
C) The price at which there is no shortage, but there may be a surplus.
D) The price at which there is no surplus, but there may be a shortage.
E) The price that both buyers and sellers agree is fair.
Answer: B

31) If the price of a product does not change immediately, which of the following will cause an initial
surplus of a product?
A) A decrease in the demand or a decrease in the supply.
B) A change in the quantity demanded.
C) An increase in the demand or an increase in the supply.
D) An increase in the demand or a decrease in the supply.
E) A decrease in the demand or an increase in the supply.
Answer: E

32) If the price of a product does not change immediately, which of the following will cause an initial
shortage of a product?
A) A decrease in the demand or a decrease in the supply.
B) An increase in the demand or a decrease in the supply.
C) A change in the quantity supplied.
D) A decrease in the demand or an increase in the supply.
E) An increase in the demand or an increase in the supply.
Answer: B

6
33) Refer to
the graph above to answer this question. What is the effect if the price is $800?
A) There is a surplus of 30.
B) There is a shortage of 60.
C) 160 will be purchased.
D) There is a shortage of 30.
E) The price will increase.
Answer: B

34) Refer tothe graph above to answer this question. What is the effect if the price is $1,000?
A) Price will rise. B) The quantity traded is 100.
C) Price will fall. D) There is neither a shortage nor a surplus.
Answer: D

35) Refer to
the graph above to answer this question. What is the effect if the price is $1,200?
A) The quantity demanded is 120. B) Price will rise.
C) The quantity traded is 120. D) The quantity supplied is 160.
Answer: D

36) Refer tothe graph above to answer this question. What is the effect if the price is $600?
A) The quantity demanded is 120. B) The quantity traded is 40.
C) Price will fall. D) The quantity supplied is 120.
Answer: B

7
37) Refer tothe graph above to answer this question. What would be the new equilibrium price and
quantity if demand increased by 60?
A) $1,600 and 120.
B) $1,000 and 180.
C) $1,400 and 140.
D) $1,200 and 160.
E) $1,000 and 140.
Answer: D

38) Refer tothe graph above to answer this question. What would be the new equilibrium price and
quantity if demand decreased by 60?
A) $1,400 and 60 B) $800 and 80. C) $1,000 and 80. D) $1,400 and 80.
Answer: B

39) Refer tothe graph above to answer this question. What would be the new equilibrium price and
quantity if supply increased by 120?
A) $1,000 and 240. B) $800 and 140. C) $600 and 160. D) $600 and 240.
Answer: C

40) Refer tothe graph above to answer this question. What would be the new equilibrium price and
quantity if supply decreased by 120?
A) $1,000 and 40. B) Supply would be zero.
C) $1,400 and 80. D) $800 and 80.
Answer: C

8
41) Refer tothe above graph to answer this question. What are the implications if the price of this
product is $8?
A) There would be a surplus of 300 units.
B) There would be a surplus of 600 units.
C) There would be a shortage of 600 units.
D) There would be a shortage of 300 units.
E) The price would be above equilibrium.
Answer: D

42) Refer to
the above graph to answer this question. If the price of the product is $8, how many units
would be sold?
A) 800 units.
B) 400 units.
C) 500 units.
D) 600 units.
E) Cannot be determined.
Answer: B

43) Refer tothe above graph to answer this question. What is the maximum price the quantity sold at a
price of $8 could have been sold for?
A) $10.
B) $14.
C) $8.
D) $12.
E) Cannot be determined.
Answer: B

9
44) Refer to the above graph to answer this question. What are the implications if the price of this
product is $14?
A) The price would be below equilibrium. B)
There would be a surplus of 1,200 units. C)
There would be a shortage of 1,200 units. D)
There would be a surplus of 600 units.
E) There would be a shortage of 600 units.
Answer: D

45) Refer to the above graph to answer this question. If the price of the product is $14, how many units
would be sold?
A) 600 units.
B) 800 units.
C) 1,000 units.
D) 400 units.
E) Cannot be determined.
Answer: D

46) Refer to the above graph to answer this question. What is the minimum price the quantity sold at a
price of $14 could have been sold for?
A) $6.
B) $10.
C) $8.
D) $12.
E) Cannot be determined.
Answer: C

47) What is the name of those products whose demand will increase as a result of an increase in
income?
A) Substitute products. B) Normal products.
C) Inferior products. D) Complementary products.
Answer: B

48) What is the term for those products whose demand will decrease as a result of an increase in income
and will increase as a result of a decrease in income?
A) Complementary products.
B) Inferior products.
C) Related products.
D) Substitute products.
E) Normal products.
Answer: B

10
49) What is the term for those products which consumers see as interchangeable (one for the other)?
A) Complementary products. B) Normal products.
C) Inferior products. D) Substitute products.
Answer: D

50) What is the term for those products which tend to be purchased jointly and whose demands
therefore are related?
A) Inferior products. B) Complementary products.
C) Normal products. D) Substitute products.
Answer: B

51) What is a normal product?

A) It is a product which consumers buy more of as their incomes decrease.
B) It is a product which consumers buy regularly.
C) It is a product which consumers buy more of as their incomes increase.
D) It is a product which consumers buy less of as their incomes increase.
Answer: C

52) What is an inferior product?

A) It is a low-quality luxury product.
B) It is a product which consumers buy less of as their incomes decrease. C)
It is a product which consumers buy less of as their incomes increase. D) It
is a product which consumers buy more of as their incomes increase.
Answer: C

53) What is true of substitute products?

A) When the price of one increases, the quantity purchased of the other decreases.
B) They are products which are always purchased together.
C) When the price of one decreases, the quantity purchased of the other increases.
D) When the price of one increases, the quantity purchased of the other increases.
Answer: D

54) What is true of complementary products?

A) When the price of one increases, the quantity purchased of the other increases.
B) When the price of one decreases, the quantity purchased of the other decreases.
C) When the price of one increases, the quantity purchased of the other decreases.
D) They are products which compete with one another.
Answer: C

11
55) Which of the following pairs of products are substitutes?
A) Grapefruits and wine.
B) Grapes and grapefruits.
C) Grapefruit juice and beer.
D) Grapes and beer.
E) Grapes and wine.
Answer: B

56) Which of the following pairs of products are complements?

A) Automobiles and steel.
B) Flour and wheat.
C) Cameras and films.
D) Steel and oil.
E) Bread and flour.
Answer: C

57) What is the relationship between computers and printers?

A) They are rival products.
B) They are competitive products.
C) They are cooperative products.
D) They are complementary products.
E) They are substitute products.
Answer: D

58) What is the relationship between pizzas and hamburgers?

A) They are cooperative products.
B) They are complementary products.
C) They are unrelated products.
D) They are substitute products.
E) They are customary products.
Answer: D

59) What will cause the demand for a normal product to increase?
A) An increase in the price of a complementary product.
B) The expectation by consumers that future prices will be higher.
C) A decrease in the size of the population.
D) A decrease in the price of a substitute product.
E) A decrease in income levels.
Answer: B

12
60) What will cause the demand for a normal product to decrease?
A) An increase in income levels.
B) The expectation by consumers that future prices will be higher.
C) An increase in the size of the population.
D) An increase in the price of a substitute product.
E) An increase in the price of a complementary product.
Answer: E

61) All of the following except one will cause the demand for a normal product to decrease. Which is
the exception?
A) A decrease in the price of a substitute product.
B) The fear of consumers of a future recession.
C) A decrease in consumer incomes.
D) The expectation by consumers that the future price will be higher.
E) An increase in the price of a complementary product.
Answer: D

62) All of the following except one will cause the demand for a normal product to increase. Which is
the exception?
A) An increase in the price of a complementary product.
B) An increase in consumer incomes.
C) The fear of consumers of a future strike in the industry.
D) The expectation by consumers that the future price will be higher.
E) An increase in the price of a substitute product.
Answer: A

63) What is the effect on an inferior product if income increases?

A) It will cause an increase in demand.
B) It will cause an increase in supply.
C) It will cause a decrease in supply.
D) It will cause an increase in the quantity demanded.
E) It will cause a decrease in demand.
Answer: E

64) What is the effect on a normal product if income increases?

A) It will cause an increase in the quantity demanded.
B) It will cause an increase in demand.
C) It will cause an increase in supply.
D) It will cause a decrease in supply.
E) It will cause a decrease in demand.
Answer: B

13
 65) What is the effect of consumers' expecting that the future price of a product will increase?
A) It will cause a decrease in demand.
B) It will cause a decrease in supply.
C) It will cause an increase in demand.
D) It will cause a decrease in the quantity demanded.
E) It will cause an increase in the quantity demanded.
Answer: C

66) What is the effect on product A of an increase in the price of substitute product B?
A) It will cause an increase in demand.
B) It will cause an increase in the quantity demanded.
C) It will cause a decrease in demand.
D) It will cause an increase in supply.
E) It will cause a decrease in supply.
Answer: A

67) What is the effect on product A of an increase in the price of complementary product B?
A) It will cause an increase in demand.
B) It will cause an increase in the quantity demanded.
C) It will cause a decrease in supply.
D) It will cause an increase in supply.
E) It will cause a decrease in demand.
Answer: E

The following table shows the initial weekly demand (D1) and the new demand (D2) for packets of pretzels (a ba

68) Refer to the information above to answer this question. In order to produce the change in demand
from D1 to D2, what might have happened to the price of a substitute product like a packet of nuts?
A) It has not changed, but people must be buying less.
B) It has not changed, but people must be buying more.
C) It has increased.
D) It has decreased.
Answer: C

14
 69) Refer tothe information above to answer this question. In order to have produced the change in
demand from D1 to D2, what might have happened to the price of a complementary product like
beer?
A) It has not changed, but people must be buying less.
B) It has decreased.
C) It has not changed, but people must be buying more.
D) It has increased.
Answer: B

The product is a normal product.

70) Refer to the graph above to answer this question. All of the following except one could have caused
the shift from D1 to D2. Which is the exception?
A) Growth in the size of the market.
B) An increase in the price of a substitute good.
C) An increase in income.
D) An increase in the price of a complement good.
Answer: D

71) Refer to
the graph above to answer this question. What does the distance Q1 - Q2 represent?
A) A surplus at price P1. B) The result of a decrease in income.
C) A shortage at price P1. D) An increase in the quantity demanded.
Answer: C

15
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