10. The law of supply and demand states that:

a. supply must be always equal to demand.

b. supply creates its own demand.

c. demand creates its own supply.

d. price adjusts to bring the quantity demanded into equilibrium with the quantity supplied.

11.Use the three-step demand-supply analysis discussed in class to analyze changes to the California electricity market whenelectric producers discover a much cheaper technology to produce electricity

Step 1: Decide if the new technology affects the electricity demand or supply curve or both:

a.cheaper production cost affects the demand curve.

b.cheaper production cost affects the supply curve.

c.cheaper production cost affects demand and supply curves.

d.cheaper production cost does not affect electricity demand or supply.

12.Step 2: Decide the direction of the shift (left, right, or unchanged),

ademand curve shifts to the left (decrease).

b.the demand curve shifts to the right (increase).

c.the supply curve shifts to the left (decrease).

d.the supply curve shifts to the right (increase

14.When government prohibits smoking in public parks,

a.the cigarette demand curve shifts to the left (decrease).

b.the cigarette demand curve shifts to the right (increase).

c.the cigarette supply curve shifts to the left (decrease).

15. A nation's gross domestic product (GDP) measures:

a. the dollar value of all output produced by its citizens, regardless of borders.

b. the value of the total output including non-market transactions.

c. the value of the total output including underground economy.

d. the market value of the total final output produced within the borders of the nation in a given year.

d.the cigarette supply curve shifts to the right (increase).

16. GDP data are criticized as being inaccurate measures of economic welfare because:

a. they do not take into account underground economy.

b. they do not take into account changes in the amount of leisure or in product quality.

c. they do not take into account the adverse effects of economic activity on the environment.

d. all of the above.

17.The consumer price index (CPI):

a. is an average of the prices of all consumer goods purchased each year.

b. is the same as GDP price deflator.

c. measures prices of goods, but not services.

d. measures changes in the prices of a fixed basket of goods and services purchased by urban consumers.

18. CPIis an imperfect measure of the cost of living because CPI does not account for:

a. consumers' ability to switch to substitute goods that become relatively cheaper over time.

b. increases in the purchasing power of the dollar due to the introduction of new goods.

c. changes in the quality of goods and services over time.

d. all of the above.

19.The costs of the fixed basket of goods (BOG) in 2005, 2006, and 2007 are $10,000, $11,000, and $12,000 respectively.What are the CPIs for these three years with 2005 as the base year? [CPI year N = (100*Cost of BOG year N) / (Cost of BOG in the base year)].

a.$10,000, $11,000, and $12,000.

b.2005, 2006, and 2007.

c.100, 110, and 120.

d.100, 105, and 110.