Question 3

If, at the current price, there is a surplus of a good, then:

	A.	the quantity demanded is greater than the quantity supplied.
	B.	the market must be in equilibrium
	C.	the price is above the equilibrium price
	D.	Both A and C.

Question 4

The price elasticity of teenagers' demand for cigaretteshas been found to be greater than 1. The price elasticity of demand for adult cigarettes is said to be less than 1.Which of the following explanations can help explain the difference in the size of the elasticities?

	A.	Teenagers are more likely to be addicted to cigarettes than adults, hence teenagers have fewer alternatives to smoking than adults
	B.	Spending on cigarettes represents a larger portion of a the budget of teenagers compared with the budget of adults
	C.	The adult elasticity of demand is likely to be long run estimate while the teenagers estimate is more of short run estimate
	D.	None of these explanations represent economically sound reasoning.

Question 5

An increase in people's taste and preferences, for organic food, will cause which of the following to happen in the market for organic food?

	A.	Equilibrium price increases and Equilibrium quantity decreases
	B.	Equilibrium price and Equilibrium quantity decreases
	C.	Equilibrium price and Equilibrium quantity increases
	D.	Equilibrium price decreases and Equilibrium quantity increasesd

QUESTION 6

If the government puts a price ceiling in this market at a price of $20, then there will be a

	A.	Neither a surplus or a shortage
	B.	a shortage of 100 units
	C.	A shortage of 50 units
	D.	A surplus of 100 units

Question 7

The law of supply reflects the fact that:

	A.	Suppliers can sell more goods at lower prices
	B.	Suppliers have an incentive to supply more at higher prices in order to maximize profits.
	C.	Suppliers need higher prices of a product to increase production to offset the increased opportunity costs that can occur at increased quantities
	D.	Both B and C

Question 8

When the price of good x decreases,and people buy more of good x because it is relatively cheaper compared to other goods, holding other things constant, this called the:

	A.	Real Income Effect
	B.	Substitution Effect
	C.	Ceteris ParibusEffect
	D.	Both A and B.

Question 9

In a competitive market,equilibrium price is determined by

	A.	Government
	B.	Consumers
	C.	The interaction of supply and demand
	D.	Businesses

Question 10

Identify the area of Consumer Surplus, if the government creates a price ceiling at P3 in this market.

	A.	Areas A +B
	B.	Area A
	C.	Areas C +E
	D.	Areas A+C

Q 11

Nike knows that the price elasticity of demand for its product is currently price elastic. What should Nike to do the price if it wants to increase its total revenues?

	A.	increase price
	B.	lower price
	C.	keep price the same
	D.	you cannot tell from the above information

Q12

Which of the following increases the market supply of roses?

	A.	A decrease in energy costs
	B.	An increase in the price of roses
	C.	A decrease in the numberof rose producers
	D.	Both A and B

Question 14

Which of the following properly describes the events which occur in the market for new houses if the profitability of commercial buildings increases?

	A.	The supply for new houses decreases. This causes a shortage at the old equilibrium price which causes an upward pressure on the price of new houses. The increased price causes the quantity supplied of new houses to increase and the quantity demanded for new houses to decrease.
	B.	The supply for new houses increases.This causes surpluses at the old equilibrium price which causes a downward pressure on the price of new houses.The decreased price causes the quantity supplied of new houses to decrease and the quantity demanded of new houses to increase
	C.	The supply for new houses decreases. This causes a shortage at the old equilibrium price which causes an upward pressure on price of new houses. The increased price causes the supply of new houses to increase and demand for new houses to decrease.
	D.	The demand for new houses decreases. This causes surpluses at the old equilibrium price which causes a downward pressure on the price of new houses. The decreased price causes the quantity supplied of new houses to decrease and the quantity demanded of new houses to increase.

Question 15

Which of the following correctly states the events that will follow a surplus in the market for widgets?

	A.	a downward pressure on the price of widgets, which causes an increase in the quantity demanded and a decrease in quantity supplied of widgets
	B.	a downward pressure on the price of widgets which causes an increase in the quantity demanded of widgets and a increase in the quantity supplied of widgets
	C.	an upward pressure on the price of widgets, which causes a decrease in the quantity demanded of widgets and a increase in the quantity supplied of widgets
	D.	a downward pressure on the price of widgets, which causes an increase in the demand for widgets and a decrease in thesupply of widgets

Question 17

A substantial increase in the price of bullets will cause the equilibrium price of guns to:

	A.	Decrease and equilibrium quantity to decrease.
	B.	Increase and equilibriumquantity to increase.
	C.	Increase and equilibriumquantity to decrease.
	D.	Decrease and equilibriumquantity to increase.

Question 18

Which of the following shows how the Real Income Effect explains the Law of Demand?

	A.	that as price of a good increases, an individual's purchasing power decreases, therefore quantity demanded for that good increases
	B.	As income increases, the demand for a normal good increases
	C.	that as the price of a good increases, an individual's purchasing power increases, therefore quantity demanded for that good decreases
	D.	that as the price of a good decreases, an individual's purchasing power increases, therefore quantity demanded for that good increases

Question 20

Equilibrium price will decrease and equilibrium quantity will increase in the widget market, if:

	A.	Price of a widget complement increases
	B.	Price of a widgetsubstitute decreases
	C.	Price of a widget resource Increases
	D.	Technologies in widgetproductionincrease

Question 21

Lost surplus or value from efficient trades that do not happen is the definition of:

	A.	Consumer Surplus
	B.	Deadweightloss
	C.	Producer Surplus
	D.	Consumer Loss

Question 22

The United States currently conducts a "supply side war on drugs," that is to say that they focus their attentions on decreasing the supply of drugs like cocaine and heroin, rather than demand. For simplicity sake, let's assume that the war is only fought against supply, (.i.e. no demand effects) and the demand for drugs is relatively price inelastic.

What affect does this supply side war have on the total revenue of drug suppliers of cocaine and heroin?

	A.	total revenue of the drug dealers increases,
	B.	total revenue of the drug dealers decreases
	C.	total revenue of the drug dealers is unchanged.
	D.	Cannot tell based on the above information and assumptions.

Question 23

What happens in the market for cigarettes if the government imposes a tax on cigarettes?

	A.	Equilibrium price decreases, and Equilibrium quantity decreases
	B.	Equilibrium price decreases and Equilibrium quantity increases.
	C.	Equilibrium price increases, and Equilibrium quantity decreases
	D.	Equilibrium price increases and Equilibrium quantity increases

Question 24

As one moves (to the right) along a demand curve:

	A.	total utility falls but marginal utility rises
	B.	total utility falls and marginal utility falls
	C.	total utility rises and marginal utility rises
	D.	total utility rises, but marginal utility falls

Question 25

According to the law of demand, the quantity of a good demanded in a given time period:

	A.	Increases as its price rises, ceteris paribus
	B.	Increases as its price falls, ceteris paribus
	C.	Decreases as its price falls, ceteris paribus
	D.	Does not change when price changes,ceteris paribus

Question 26

Devon is deciding where to spend her vacation. If she goes to Maine , the trip will give her 6,000 units of utility and will cost her $200. If, instead, she travels to New Jersey, the trip will give her 2,000 units of utility and will cost her only $100.Devonwill do best:

	A.	going to Maine because her pleasure per dollar will be greater.
	B.	going to New Jersey because her total cost will be lower.
	C.	going to New Jersey because her pleasure per dollar will be greater.
	D.	going to Maine because her total pleasure will be greater.

Question 27

The Law of Demand states that:

	A.	An increase in the price of a product will reduce the quantity demanded,
	B.	A decrease in the price of a product will increase the quantity demanded, ceteris paribus
	C.	An increase in demand for a product will increase the price of a product, ceteris paribus
	D.	Both B and C

Question 28

Assume bus tickets are an inferior good. A decrease in consumer income will cause which of the following, in the market for bus tickets:

	A.	Supply of bus tickets decreases
	B.	Supply of bus tickets increases
	C.	Demand for bus tickets decreases
	D.	Demand for bus tickets increases

Question 29

Use the following to answer the following question.

The market price of skisin Winter Town increased recently. Some students (group A) in an economics class suggest that the price rose because of an increase in the price of fiberglass, as skis are made from fiberglass. Other students (group B) attributed the increase in the price of skis more to an increase in the price of snowboards.

Which of the these groups of students have provided an explanation that makes possible economics sense?

	A.	Group A
	B.	Group B
	C.	Both Group A and Group B
	D.	Neither Group A nor Group B

Question 30

A price ceiling:

	A.	is a maximum price that can legally be charged for a particular good or service.
	B.	is a minimum price that can legally be charged for a particular good or service.
	C.	creates a surplus in the market
	D.	Both A and C