QUESTION 11

Which of the following statements is false?

A.

When the price of an item goes down, ceteris paribus, the quantity supplied will go down, but the supply will not change.

B.

When the supply curve for an item shifts to the right, ceteris paribus, it will cause the price of that item to go up.

C.

There is a direct (positive) relationship between price and quantity supplied.

D.

A change in the supply of an item will cause a change in its price, but a change in the price of an item will not cause a change in its supply.

QUESTION 12

Which of the following does not explain why is there an inverse (negative) relationship between price and quantity demanded?

A.

When the price of an item increases, you buy more because it is more valuable.

B.

Substitution effect -- that is, a price change can affect the opportunity cost of purchasing some item and your willingnessto switch to (or from) another item.

C.

Income effect -- that is, a price change can affect the amount of some item you can afford to purchase.

D.

Diminishing marginal utility -- as you consumer more, as the result of a price decrease, the additional satisfaction received from the additional units consumed will start to go down.

QUESTION 13

Which of the following statements is true?

A.

A price ceiling set below the equilibrium price in a particular market will cause a shortage.

B.

A price floor set above the equilibrium price, in a particular market, will have no effect on that market.

C.

A price ceiling set above the equilibrium price, in a particular market, will cause a surplus.

D.

A price floor set below the equilibrium price in a particular market will cause a shortage.

QUESTION 14

Which of the following is true?

A.

Rent control is an example of a price floor.

B.

A price ceiling on gasoline, set below its current equilibrium price, would assure that everyone would be able to buy gasoline at an affordable price.

C.

A price ceiling on some item, set below its equilibrium price, creates rationing problems.

D.

A price floor for a resource, such as the minimum wage, set above its equilibrium price, would increase the demand for that resource.

QUESTION 15

Which of the following is not a determinant of demand?

A.

Household's income and wealth.

B.

Consumers' expectations about their income, wealth and/or the price of the item

C.

Changes in the price of a substitute or complement

D.

The price of the item