1.A supply curve reveals:

a)the quantity of output consumers is willing to purchase at each possible market price.

b)the difference between quantity demanded and quantity supplied at each price.

c)the maximum level of output an industry can produce, regardless of price.

d)the quantity of output that producers are willing to produce and sell at each possible market price.

2.When an industry's raw material costs increase, other things remaining the same,

a)the supply curve shifts to the left.

b)the supply curve shifts to the right.

c)output increases regardless of the market price and the supply curve shifts upward.

d)output decreases and the market price also decreases.

3.Sugar can be refined from sugar beets. When the price of those beets falls,

a)the demand curve for sugar would shift right.

b)the demand curve for sugar would shift left.

c)the supply curve for sugar would shift right.

d)the supply curve for sugar would shift left.

4.Which of the following events will cause a leftward shift in the supply curve of gasoline?

a)A decrease in the price of gasoline

b)An increase in the wage rate of refinery workers

c)Decrease in the price of crude oil

d)An improvement in oil refining technology

e)all of the above

Refer to the Figure below for q5-6. Lower material costs make production more profitable.

5. Starting at point A, which of the following best represents this assertion?

a)The move from A to B

b)The move from A to C

c)A move from A to B, and then to C

d)A move from A to C, and then to B

Refer to the Figure above. Starting from point A,

6. How do the firms in the market react when the price of coffee increases from $6.00 to $7.50 per pound?

a)The supply curve shifts to the right and the quantity supplied increases to 10 million pounds per year.

b)The supply curve shifts from S1 to S2, but the market moves from A to B, so the quantity supplied increases to 9 million pounds per year.

c)The market moves from A to B temporarily, but eventually will settle at point C, where the quantity supplied will be 10 million pounds.

d)The supply curve does not shift, but the quantity supplied increases from 7 to 9 million pounds per year.

7. Plastic and steel are substitutes in the production of body panels for certain automobiles. If the price of plastic increases, with other things remaining the same, we would expect:

a)the price of steel to fall.

b)the demand curve for steel to shift to the right.

c)the demand curve for plastic to shift to the left.

d)nothing to happen to steel because it is only a substitute for plastic.

e)the demand curve for steel to shift to the left.

8. Coffee and cream:

a)are both luxury goods.

b)are complements.

c)are both more inelastic in demand in the long run than in the short run.

d)have a positive cross price elasticity of demand.

9. Which of the following would shift the demand curve for new textbooks to the right?

a)A fall in the price of paper used in publishing texts

b)A fall in the price of equivalent used textbooks

c)An increase in the number of students attending college

d)A fall in the price of new textbooks.

10. Assume that steak and potatoes are complements. When the price of steak goes up, the demand curve for potatoes:

a)shifts to the left.

b)shifts to the right.

c)remains constant.

d)shifts to the right initially and then returns to its original position.

11. You are analyzing the demand for good X. Which of the following will result in a shift to the right of the demand curve for X?

a)A decrease in the price of X

b)An increase in the price of a good that is a complement to good X

c)An increase in the price of a good that is a substitute for X

d)all of the above

12. The price of good A goes up. As a result, the demand for good B shifts to the left. From this we can infer that:

a)good A is used to produce good B.

b)good B is used to produce good A.

c)goods A and B are substitutes.

d)goods A and B are complements.

e)none of the above

13. Due to the recent increase in the price of natural gas, the quantity of coal demanded by electric power generation plants has increased. Based on this information, coal and natural gas are:

a)complements.

b)substitutes.

c)independent goods.

d)none of the above

Refer to the Figure below for q14-15;

14. If the price of coffee decreases, from $7.50 to $6.00 per pound, which of the following will occur?

a)The quantity demanded of coffee will increase, from 6 to 7 million pounds per year.

b)The demand curve will shift to the right and the quantity demanded will increase to 10 million pounds per year.

c)Both moves, from A to B and then from B to C, will occur simultaneously.

d)It is possible that the market demand will show the move from A to B, or that it moves directly from A to C.

15. Refer to the Figure above. The price of coffee is currently $6.00, and quantity demanded is 7 million pounds. Then there is a notable increase in the preference for coffee over other substitutes, like tea. Which move best describes this change?

a)A move from B to A

b)A move from B to C

c)A move from B to A, and then to C

d)A move from B to C, and then to A

16. When the current price is above the market-clearing level we would expect:

a)quantity demanded to exceed quantity supplied.

b)quantity supplied to exceed quantity demanded.

c)a shortage.

d)greater production to occur during the next period.

17. Assume that the current market price is below the market clearing level. We would expect:

a)a surplus to accumulate.

b)downward pressure on the current market price.

c)upward pressure on the current market price.

d)lower production during the next time period.

18. As long as the actual market price exceeds the equilibrium market price, there will be:

a)downward pressure on the market price.

b)upward pressure on the market price.

c)no purchases made.

d)Both A and C are correct.

e)Both B and C are correct.

19. If the actual price were below the equilibrium price in the market for bread, a:

a)surplus would develop that cannot be eliminated over time.

b)shortage would develop; which market forces would eliminate over time.

c)surplus would develop, which market forces would eliminate over time.

d)shortage would develop; which market forces would tend to exacerbate.

20. Suppose the quantity of nursing services demanded exceeds the quantity of nursing services supplied. The nursing wage rate will:

a)decrease.

b)increase.

c)not change.

d)none of the above

Refer to:The demand for books for q21-26is:Q_d= 120 - P

The supply of books is:Q_s= 5P

21. What is the equilibrium price of books?

a)5

b)10

c)15

d)20

e)none of the above

22. What is the equilibrium quantity of books sold?

a)25

b)50

c)75

d)100

e)none of the above

23. If P = $15, which of the following is true?

a)There is a surplus equal to 30.

b)There is a shortage equal to 30.

c)There is a surplus, but it is impossible to determine how large.

d)There is a shortage, but it is impossible to determine how large.

24. If P = $15, which of the following is true?

a)Quantity supplied is greater than quantity demanded.

b)Quantity supplied is less than quantity demanded.

c)Quantity supplied equals quantity demanded.

d)There is a surplus.

25. If P = $25, which of the following is true?

a)There is a surplus equal to 30.

b)There is a shortage equal to 30.

c)There is a shortage, but it is impossible to determine how large.

d)There is a surplus, but it is impossible to determine how large.

26. If P = $25, which of the following is true?

a)Quantity supplied is greater than quantity demanded.

b)Quantity supplied is less than quantity demanded.

c)Quantity supplied equals quantity demanded.

d)There is a shortage.

27. The current market price for good X is below the equilibrium price, and then the demand curve for X shifts rightward. What is the likely outcome of the demand shift?

a)The surplus increases.

b)The surplus decreases.

c)The shortage increases.

d)The shortage decreases.

28. Suppose there is currently a surplus of wheat on the world market. The problem of excess supply may be removed from the market by:

a)lowering the market price.

b)shifting the supply curve leftward.

c)shifting the demand curve leftward.

d)Both A and B are plausible actions.

29. Elasticity measures:

a)the slope of a demand curve.

b)the inverse of the slope of a demand curve.

c)the percentage change in one variable in response to a one percent increase in another variable.

d)sensitivity of price to a change in quantity.

Refer to the Figure below for q30-35.

30. Between points B and C, demand is:

a)small.

b)inelastic, but not completely inelastic.

c)unit elastic.

d)elastic, but not infinitely elastic.

e)infinitely elastic.

31. At point A, demand is:

a)completely inelastic.

b)inelastic, but not completely inelastic.

c)unit elastic.

d)elastic, but not infinitely elastic.

e)infinitely elastic.

32. Between two points near D, demand is:

a)completely inelastic.

b)inelastic, but not completely inelastic.

c)unit elastic.

d)elastic, but not infinitely elastic.

e)infinitely elastic

33. Between points E and F, demand is:

a)completely inelastic.

b)inelastic, but not completely inelastic.

c)unit elastic.

d)elastic, but not infinitely elastic.

e)infinitely elastic.

34. At point E, demand is:

a)completely inelastic.

b)inelastic, but not completely inelastic.

c)unit elastic.

d)elastic, but not infinitely elastic.

e)infinitely elastic.

35. Which of the following statements about the demand curve in the figure?

a)Demand is infinitely elastic.

b)Demand is completely inelastic.

c)Demand becomes more inelastic as price declines.

d)Demand becomes more elastic as price declines.

36. The cross-price elasticity of demand for peanut butter with respect to the price of jelly is -0.3. If we expect the price of jelly to decline by 15%, what is the expected change in the quantity demanded for peanut butter?

a)+15%

b)+45%

c)+4.5%

d)-4.5%

37. For U.S. consumers, the income elasticity of demand for fruit juice is 1.1. If the economy enters a recession next year and consumer income declines by 2.5%, what is the expected change in the quantity of fruit juice demanded next year?

a)-2.75%

b)+2.75%

c)-27.5%

d)+27.5%

38. The price elasticity of gasoline supply in the U.S. is 0.4. If the price of gasoline rises by 8%, what is the expected change in the quantity of gasoline supplied in the U.S.?

a)+3.2%

b)-3.2%

c)+32.0%

d)+0.32%

39. Suppose the U.S. demand curve for gasoline shifts rightward, and the U.S. supply curve for gasoline remains unchanged. As a result, the price of gasoline increases by 9 percent, and the equilibrium quantity increases by 3 percent. Which of the following statements is true based on this information?

a)The price elasticity of supply for gasoline is roughly 0.33.

b)The price elasticity of supply for gasoline is roughly 3.

c)The price elasticity of demand for gasoline is roughly 0.33.

d)The price elasticity of demand for gasoline is roughly -3.

40. The inverse supply curve of coffee beans equals P = -5 - 2rain + Qs, where rain equals the number of inches of rain per year. How much does supply change when rain increases from 30 inches to 40 inches per year?

a)Qs decreases by 40.

b)Qs increases by 40.

c)Qs increases by 20.

d)Qs decreases by 30.

41. How will a decrease in price affect a firm's revenues?

a)It depends on the price elasticity of demand.

b)Revenues will stay the same.

c)Revenues will decrease.

d)Revenues will increase.

42. An agricultural corn market faces a positive supply shock due to a beneficial rainy season and the use of new genetically modified seeds. As a result, farmers face the largest crop harvest in decades. Which answer below explains how a farm could actually go bankrupt under this scenario.

a)The elasticity of supply for corn is elastic such that a positive shock reduces total revenue.

b)The demand for corn is inelastic such that a positive supply shock reduces total revenue.

c)An inelastic demand curve will cause revenue to fall because price decreases by more than the increase in quantity demanded.

d)B and C

43. 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.

44. The change in price that results from a rightward shift in demand will be greater if

a)the supply curve is horizontal than if the supply curve is upward sloping.

b)the supply curve is relatively steep than if the supply curve is relatively flat.

c)the supply curve is upward sloping than if the supply curve is vertical.

d)the supply curve is horizontal than if the supply curve is vertical.

45. Which of the following statements about the relationship between the price elasticity of demand and revenue is TRUE?

a) If demand is price inelastic, then increasing price will decrease revenue.

b) If demand is price elastic, then decreasing price will increase revenue.

c) If demand is perfectly inelastic, then revenue is the same at any price.

d) Elasticity is constant along a linear demand curve and so too is revenue.

46. If - given consumer preferences - a certain good has few close substitutes available, then:

a) The demand for that good will be relatively inelastic, compared to goods for which there are many close substitutes.

b) The supply of that good will be relatively inelastic, compared to goods for which there are many close substitutes.

c) The demand for that good will be relatively elastic, compared to goods for which there are many close substitutes.

d) The supply of that good will be relatively elastic, compared to goods for which there are many close substitutes.

47. Utility is the set of numerical values that

a)yields an absolute level of pleasure from a bundle of goods.

b)reflects the relative ranking of various bundles of goods.

c)describes how much more a consumer prefers one bundle to another.

d)yields a cardinal ranking of bundles.

48. The principle that "More is better" results in indifference curves

a)sloping down.

b)not intersecting.

c)reflecting greater preferences the further they are from the origin.

d)All of the above.

49. Assume the price of juice is $4, the price of pizza is $10 and the consumer's income is $250. Which consumption bundle will NOT be the consumer's choice?

a)5 juice, 5 Pizza

b)0 juice, 25 Pizza

c)25 juice, 15 Pizza

d)None of the bundle will be chosen.

50. In most cases, at the optimal consumption bundle:

a)the consumer cannot increase utility without some change in market conditions or preferences.

b)the last dollar spent on each good brings the same amount of satisfaction to the consumer.

c)the marginal rate of substitution is equal to the absolute values of the slope of the budget constraint.

d)the indifference curve is just tangent to the budget constraint.

e)all of the above

Q2:

After a careful statistical analysis, the Chidester Company concludes the demand function for its product is:

Q= 500 - 3P+ 2Pr+ 0.1I

where Q is the quantity demanded of its product,Pis the price of its product,

Pris the price of its rival's product, andIis per capita disposable income

(in dollars).

At present, P = $10, Pr= $20, and I = $6,000.

a. What is the price elasticity of demand for the firm's product?

b. What is the income elasticity of demand for the firm's product?

c. What is the cross- price elasticity of demand between its product and its rival's product?

Q3:

a) Often, we assume that consumers have diminishing MRS. Explain what that means and how it is reflected in indifference curves.

b) Can you draw an indifference curve that does not have diminishing MRS, but that is still allowed?

Q4:

If the Prices for laptops are described by the following price equation:

Ln P = 7 +.35 Ln(D) +.3 Ln(B) -.25 Ln(W),

where P is price in dollars, D is the size of hard disk in gigabytes, B is the battery life in hours, and W is the weight of the laptop in pounds. Your current product has a 10Gb hard disk, battery life of 2 hours, and a weight of 5 pounds. It sells for $2000.

If you modify the laptop to include an improved battery, the battery life would increase to 3 hours, but the weight would also increase to 6 pounds.By how much percentage the laptop's price would increase?What is the new price?