Giải đề thi: môn kinh tế vi mô problem set 2

purchase.
9. Jessie's demand schedule for candy bars
indicates:
A. Her opportunity cost of buying candy bars.
B. How much she likes candy bars.
C. How many candy bars she will actually buy.
D. Why she likes candy bars.
10. The term opportunity cost refers to the:
A. Value of all the alternatives given up when a good or
service is produced.
B. Financial costs of all the factors of production used
to produce a good or service.
C. Amount of resources used to produce a good or
service.
D. Value of the best alternative given up when a good or
service is produced.
11. The most desired goods or services that are given
up when a choice is made is called the:
A. Rationing device.
B. Economic profit.
C. Opportunity cost.
D. Utility cost.
12. Ceteris paribus, if the opportunity cost of
purchasing a good rises, then the maximum price a
particular consumer is willing to pay for that good:
A. Does not change since the demand curve does not
change.
B. Decreases.
C. Increases.
D. Decreases as long as supply also falls.
13. According to the law of demand, during a given

period of time, the quantity of a good demanded:
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.
14. According to the law of demand, a demand
curve:
A. Has a negative slope
B. Is a horizontal, or flat, line.
C. Has a positive slope
D. Exceeds the economy's ability to produce.
15. A lower quantity demanded of a good reflects,
ceteris paribus:
A. Lower income.
B. A downward shift of the supply curve.
C. A higher price of the good.
D. Fewer units actually purchased.
16. Ceteris paribus, if the price of a digital camera
rises, then we can expect:
A. An increase in the demand for digital cameras.
B. An increase in the quantity demanded of digital
cameras.
C. A decrease in the demand for digital cameras.
D. A decrease in the quantity demanded of digital

Problem set – Topic 2
Supply and Demand
Multiple Choice Questions
1. A factor market is any place where:
A. Finished goods are bought and sold.

B. Land, labor, or capital is bought and sold.
C. Finished services are bought and sold.
D. Factories are bought and sold.
2. Which of the following is purchased in a product
market?
A. Cell phone service
B. Undeveloped farmland in Texas
C. Crude oil
D. The skills of an X-ray technician
3. Which of the following is purchased in a factor
market?
A. A bag of jellybeans
B. National defense
C. The labor of a state university professor
D. A motorized scooter
4. Business firms supply goods and services to ____
and purchase factors of production in ____.
A. Factor markets; product markets
B. National markets; factor markets
C. Product markets; factor markets
D. Factor markets; national markets
5. Individual consumers supply _ and purchase _.
A. Factors of production; final goods and services
B. Intermediate goods; final goods and services
C. Final goods and services; factors of production
D. National goods and services; factors of production
6. International participants:
A. Take no part in American markets.
B. Participate only in American product markets
C. Participate only in American factor markets.

D. Participate in both American factor markets and
American product markets.
7. A market in which final goods and services are
exchanged is a:
A. Public-goods market.
B. Product market.
C. Factor market.
D. Labor market.
8. A buyer is said to have a demand for a good only
when:
A. The buyer wants to own the good.
B. The buyer is both willing and able to purchase the
good at alternative prices.
C. The price of the good is low enough.
D. An adequate supply of the good is available for



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cameras.
17. Ceteris paribus, which of the following is most
likely to cause an increase in the quantity demanded
of perfume?
A. A decrease in the price of perfume
B. A decrease in tastes for perfume
C. An increase in income
D. An increase in the price of electricity
18. Which of the following is not held constant along

a given demand curve for a good?
A. Price
B. Consumer's income
C. The price of substitutes
D. Consumer tastes
19. Ceteris paribus, which of the following would
generally cause an increase in the demand for
automobiles?
A. A decrease in the price of automobiles
B. An increase in consumers' income
C. The new models are perceived as ugly compared
with old models
D. Consumer expectations that the price of automobiles
will be lower next year
20. Ceteris paribus, which of the following would you
expect to have no effect on the demand for
automobiles?
A. A rise in the price of gasoline
B. Consumer expectation that the price of automobiles
will be lower next year
C. Consumer expectation that a significant recession
will develop and last for a year
D. An increase in the price of automobiles
21. Ceteris paribus, if buyers expect the price of
airline tickets to fall in the future, then right now
there should be:
A. An increase in the demand for airline tickets.
B. A decrease in the supply of airline tickets.
C. A decrease in the demand for airline tickets.
D. No change in the supply of or demand for airline

tickets because the price is not changing right now.
22. Which determinant of demand changes in the
personal computer market as more individuals
become interested in "surfing the Internet"?
A. Cost of factors of production
B. Income
C. Expectations
D. Number of buyers
23. Assume that pencils and pens are substitutes. If
the price of pencils rises, then we will see:
A. An increase in the demand for pens.
B. A decrease in the demand for pens.
C. An increase in the supply of pens.
D. A decrease in the supply of pens.
24. If bagels and donuts are substitutes, then a
decrease in the price of donuts will result in:



A. An increase in the demand for donuts.
B. A decrease in the demand for donuts.
C. An increase in the demand for bagels.
D. A decrease in the demand for bagels.
25. If there are only two airlines that fly between
Dallas and New Orleans, what will happen in the
market for one airline if the other one goes out of
business?
A. The demand curve will shift to the right
B. The demand curve will shift to the left
C. There will be a movement to the right along the

initial demand curve
D. There will be a movement to the left along the initial
demand curve
26. Peanut butter and jelly are complements. A
decrease in the price of one will result in:
A. A decrease in the demand for the other.
B. A decrease in the quantity demanded of the other.
C. An increase in the demand for the other.
D. An increase in the quantity demanded of the other.
27. Assume a series of forest fires reduces the supply
of lumber which is an input in the production of
wooden bats. Baseballs and wooden bats are
complements. If the price of wooden bats increases,
we can expect the:
A. Demand for baseballs to decrease.
B. Supply of baseballs to decrease.
C. Demand for baseballs to increase.
D. Supply of baseballs to increase.
28. Ceteris paribus means:
A. Holding everything constant except for the variables
you are interested in examining.
B. Allowing the free market to decide, not government.
C. Changing prices to see how demand or supply shifts.
D. Holding constant the determinant of demand or
supply that you are interested in examining.
29. A change in demand means there has been a shift
in the demand curve, and a change in quantity
demanded:
A. Results from a change in price of other goods.
B. Means a shortage or surplus will result from holding

prices constant.
C. Also means demand has shifted.
D. Means that price has changed and there is movement
along the demand curve.
30. Market demand is determined by all of the
following except for:
A. The number of potential sellers.
B. Income.
C. Tastes.
D. Expectations about future income.
31. To calculate market demand we:
A. Add the quantities demanded for each individual
demand schedule horizontally.
B. Add the quantities demanded for each individual

2


demand schedule vertically.
C. Find the average quantity demanded at each price.
D. Find the difference between the quantity demanded
and the quantity supplied at each price.
32. Which of the following is a determinant of
supply?
A. Suppliers' tastes for the good they produced
B. Consumers' income
C. Consumers' desire for the good
D. Available technology
33. Which of the following is a determinant of
supply?

A. Consumer tastes or preferences
B. The prices of the factors of production
C. Income
D. Number of buyers
34. A change in the price of a good:
A. Causes a shift in the supply curve.
B. Results in a change in quantity supplied.
C. Results in a change in supply.
D. Is a determinant of supply.
35. Which of the following is not held constant along
a given supply curve for a good?
A. The cost of factors of production
B. Price
C. Technology
D. Taxes
36. Ceteris paribus, which of the following is most
likely to cause an increase in the quantity supplied of
perfume?
A. An improvement in perfume-making technology
B. An increase in the salaries paid to perfume makers
C. An increase in the price of perfume
D. An increase in the number of sellers of perfume
37. A shift in supply is defined as a change in:
A. Price.
B. Quantity supplied because of a change in price.
C. Equilibrium quantity.
D. Supply because of a change in a non-price
determinant.
38. Ceteris paribus, which of the following is most
likely to cause a decrease in the supply of

skateboards?
A. An increase in the price of skateboards
B. An increase in the cost of materials used to produce
skateboards
C. An improvement in skateboard-making technology
D. All of the choices
39. The law of supply implies that:
A. Supply curves are flat.
B. Supply curves are upward-sloping to the right.
C. Supply curves are downward-sloping to the right.
D. A change in a determinant of demand shifts the
supply curve.
40. To calculate market supply we:



A. Add the quantities supplied for each individual
supply schedule horizontally.
B. Add the quantities supplied for each individual
supply schedule vertically.
C. Find the average quantity supplied at each price.
D. Find the difference between the quantity supplied
and the quantity demanded at each price.
41. Ceteris paribus, if the subsidies given to corn
syrup producer decrease, then we can expect:
A. A decrease in the demand for corn syrup.
B. A decrease in the supply of corn syrup.
C. An increase in the demand for corn syrup.
D. An increase in the supply of corn syrup.
42. Which of the following events would cause a

rightward shift in the market supply curve for
automobiles?
A. A technological improvement which reduces the cost
of production
B. An increase in the wages of autoworkers
C. A higher sales tax on automobiles
D. A decrease in the number of sellers
43. If corn and wheat are alternative pursuits for a
farmer, a change in the supply of corn will take place
when, ceteris paribus:
A. The price of corn changes
B. The price of wheat changes.
C. The demand for corn changes.
D. Consumers want to buy more corn at the same price.
44. Which of the following would not cause the
market supply of cell phones to change?
A. Telecommunications are deregulated, and anyone
who wants to can produce and sell cell phones
B. A cheaper technology for producing plastics used in
producing cell phones is developed
C. A reduction in the demand for cell phones causes the
price to fall
D. Taxes levied on cell phone production are reduced
45. Assume that steel is used to produce monkey
wrenches. Ceteris paribus, if the price of steel rises,
then:
A. The supply curve for monkey wrenches will shift to
the left
B. The supply curve for monkey wrenches will shift to
the right.

C. There will be a leftward movement along the initial
supply curve for monkey wrenches.
D. There will be a rightward movement along the initial
supply curve for monkey wrenches.
46. Which of the following can change without
shifting either demand or supply, ceteris paribus?
A. The price of the good itself
B. The prices of other goods
C. Incomes
D. Expectations
47. Ceteris paribus, which of the following is most

3


likely to shift both the demand and the supply
curve?
A. Technology
B. Expectations
C. The price of the good itself
D. Income
48. A market is said to be in equilibrium when:
A. Demand is fully satisfied at all alternative prices.
B. The buying intentions of all consumers are realized.
C. The supply intentions of all sellers are realized.
D. The quantity demanded equals the quantity supplied.
49. The equilibrium price in a market is found
where:
A. The market supply curve intersects the market
demand curve.

B. The market supply curve intersects the y-axis.
C. The market demand curve intersects the y-axis.
D. The market supply curve intersects the x-axis.
50. At the equilibrium price there are:
A. Shortages.
B. Surpluses.
C. Excess inventories.
D. No shortages or surpluses.
51. If there is a shortage at a given price, then:
A. That price is the equilibrium price.
B. That price is greater than the equilibrium price.
C. That price is less than the equilibrium price.
D. There is no equilibrium price in the market.
52. If there is a surplus at a given price, then:
A. The market is in equilibrium at that price.
B. That price is greater than the equilibrium price.
C. That price is lower than the equilibrium price.
D. The price is zero.
53. In most markets, the equilibrium price is
achieved:
A. Through detailed databases.
B. Using an equilibrium price formula.
C. Through government mandate.
D. Through trial and error.
54. The term market mechanism refers to:
A. The use of market prices and sales to determine
resource allocation.
B. The establishment of a ceiling price in a market.
C. Supply and demand curves.
D. Government laws and regulations concerning how

the market should operate.
55. When a surplus exists for a product:
A. Producers increase supply.
B. Consumers increase demand.
C. Government purchases decrease.
D. Producers reduce the level of output and reduce price.
56. A ballet performance had many empty seats. This
implies that the:
A. Hall where the performance was being held was very
large.



B. Price of the tickets must have been very low because
of the low demand.
C. Ballet group was not very well known.
D. Price of the tickets must have been above the
equilibrium price.
57. If the quantity demanded of a good is greater
than the quantity supplied of the good at the current
price, then:
A. Price will increase until it reaches the equilibrium
price.
B. The demand curve will shift to the left to create
equilibrium.
C. The supply curve will shift to the right to create
equilibrium.
D. There is a surplus of the good.
58. A market shortage is:
A. The amount by which the quantity demanded

exceeds the quantity supplied at a given price.
B. The result of a price floor.
C. A situation in which producers cannot sell all the
goods and services that they are willing and otherwise
able to sell.
D. The amount by which the cost of production exceeds
the price of a good.
59. As a result of a shortage:
A. Consumers increase demand for the product.
B. Producers reduce supply.
C. Producers increase output and raise the price.
D. Government purchases decrease.
60. Tickets to a sporting event go on sale and sell out
almost instantly. This implies that:
A. There are too many tickets to the event.
B. The price for the tickets is below the equilibrium
price.
C. The tickets must be very expensive.
D. There is a surplus of tickets.
61. A rightward shift in a demand curve and a
rightward shift in a supply curve both result in a:
A. Lower equilibrium price.
B. Lower equilibrium quantity.
C. Higher equilibrium price.
D. Higher equilibrium quantity.
62. A rightward shift in a demand curve and a
leftward shift in a supply curve both result in a:
A. Lower equilibrium price.
B. Lower equilibrium quantity.
C. Higher equilibrium price.

D. Higher equilibrium quantity.
63. A leftward shift of the market demand curve for
HDTVs, ceteris paribus, causes equilibrium price to:
A. Increase and quantity to decrease.
B. Decrease and quantity to decrease.
C. Increase and quantity to increase.
D. Decrease and quantity to increase.
64. Ceteris paribus, an increase in the number of

4


sellers of running shoes causes equilibrium price to:
A. Decrease and equilibrium quantity to increase.
B. Decrease and equilibrium quantity to decrease.
C. Increase and equilibrium quantity to increase.
D. Increase and equilibrium quantity to decrease.
65. Assume peanut butter and jelly are complements.
Ceteris paribus, an increase in the price of peanut
butter will cause the equilibrium price for jelly to:
A. Increase and the equilibrium quantity of jelly to
decrease.
B. Increase and the equilibrium quantity of jelly to
increase.
C. Decrease and the equilibrium quantity of jelly to
decrease.
D. Decrease and the equilibrium quantity of jelly to
increase.
66. A rightward shift of the market demand curve
for MP3 players, ceteris paribus, causes

equilibrium:
A. Price to increase and quantity to decrease.
B. Price to decrease and quantity to decrease.
C. Price to increase and quantity to increase.
D. Price to decrease and quantity to increase.
67. When the demand for coffee increases, ceteris
paribus, the equilibrium price will also increase
because:
A. A shortage exists at the old equilibrium price.
B. There must be a surplus of the good.
C. The market supply and demand curves do not
intersect.
D. Market demand must be upward sloping.
68. Assume two goods are substitutes. Ceteris
paribus, a decrease in the price of one good will
cause the equilibrium price of the other good to:
A. Increase and the equilibrium quantity of the other
good to increase.
B. Increase and the equilibrium quantity of the other
good to decrease.
C. Decrease and the equilibrium quantity of the other
good to increase.
D. Decrease and the equilibrium quantity of the other
good to decrease.
69. Assume milk is used to produce ice cream.
Ceteris paribus, a decrease in the price of milk will
cause the equilibrium price of ice cream to:
A. Increase and the equilibrium quantity of ice cream to
increase.
B. Increase and the equilibrium quantity of ice cream to

decrease.
C. Decrease and the equilibrium quantity of ice cream
to increase.
D. Decrease and the equilibrium quantity of ice cream
to decrease.
70. An increase in the supply of gasoline, ceteris
paribus, will cause equilibrium price:



A. To rise and quantity to fall.
B. To fall and quantity to rise.
C. And quantity to rise.
D. And quantity to fall.
71. In 2007 a company sold 35,000 MP3 players at
$150 each. In 2008 the same company sold 40,000
MP3 players at $170 each. This information suggests
that:
A. The supply of MP3 players increased from 2007 to
2008.
B. The demand for MP3 players increased from 2007 to
2008.
C. The price of MP3 players increased because the costs
of production increased from 2007 to 2008.
D. >From 2007 to 2008 the demand curve for MP3
players was upward sloping because of improved
technology.
72. Suppose there are a series of forest fires which
affect the lumber industry while, at the same time,
consumers demand more wooden furniture. The

wooden furniture market would experience:
A. An increase in price and an indeterminate change in
quantity.
B. An increase in price and an increase in quantity.
C. An increase in quantity and an indeterminate change
in price.
D. A decrease in price and an indeterminate change in
quantity.
73. Suppose both the demand and supply of salsa
increase (although not necessarily by the same
amount). What can we conclude about changes in the
price and quantity of salsa?
A. Both the price and quantity increase
B. The price increases but the change in the quantity
cannot be determined
C. The quantity increases but the change in the price
cannot be determined
D. Both the price and quantity decrease
74. An increase in the equilibrium price of electricity
can be caused by:
A. An increase in the supply of electricity.
B. An increase in the demand for electricity.
C. A decrease in the demand for electricity.
D. An increase in the quantity demanded of electricity.
75. A decrease in the price of electricity can best be
explained by:
A. A decrease in the population
B. Abnormally cold winters and hot summers.
C. The increased use of electronic devises such as
computers.

D. A growing economy.
76. Which of the following is most likely to occur
because of an increase in the price of electricity in
California?
A. An increase in electricity imported into California

5


B. A decrease in electricity imported into California
C. An increase in the consumption of electricity in
California
D. A decrease in the supply of electricity in California
77. When the market mechanism is allowed to
operate freely, prices will determine:
A. The mix of output to be produced and the resources
to be used in the production process.
B. The resources to be used in the production process
and for whom the output is produced.
C. The mix of output to be produced, the resources to be
used in the production process, and for whom the output
is produced.
D. For whom the output is produced and the mix of
output to be produced.
78. In a market economy, the people who receive the
goods and services produced are those who:
A. Need the goods and services the most.
B. Want the goods and services the most.
C. Have the most political power.
D. Are willing and able to pay the market price.

79. When economists talk about "optimal outcomes"
in the marketplace, they mean that:
A. The allocation of resources by the market is perfect.
B. All the consumer desires are satisfied and business
profits are maximized.
C. The allocation of resources by the market is likely to
be the best possible, given scarce resources and income
constraints.
D. Everyone who wants a good or service can have it.
80. Price ceilings are intended to address the
problem of:
A. Inefficiency in production.
B. Inequity in the distribution of goods and services.
C. Business bankruptcies.
D. Shortages.
81. The price ceiling that federal government placed
on human organs caused:
A. An increase in demand.
B. An increase in supply.
C. A shortage.
D. A surplus.
82. If the government places a binding price ceiling
on cancer-treating drugs, then:
A. Fewer people will die from cancer.
B. More people will die from cancer.
C. There will be no change in the number of people who
die from cancer.
D. The supply of cancer-treating curves will increase.
83. If a price ceiling is to be binding, it should be set:
A. Below the equilibrium price and it will create a

market shortage.
B. Below the equilibrium price and it will create a
market surplus.
C. Above the equilibrium price and it will create a



market shortage.
D. Above the equilibrium price and it will create a
market surplus.
84. Suppose a hurricane hits Florida causing
widespread damage to houses and businesses. The
governor of Florida places a price ceiling on all
building materials to keep the prices reasonable.
Which of the following is the most likely result?
A. A faster recovery from the storm
B. More people will be able to purchase building
materials
C. Shortages of building materials and a slower
recovery from the storm
D. The supply of building materials to Florida will
increase
85. Which of the following statements about markets
is not true?
A. Markets necessarily have a physical location.
B. Markets have to have both a demand side and a
supply side.
C. The two types of markets include the factor and
product markets.
D. Every market transaction involves an exchange of

dollars for goods or resources.
86. Priceelasticityofdemandshowshow:
A. To compute the slope of the demand curve.
B. Responsive the quantity demanded is to a change in
price.
C. Responsive the quantity demanded is to a change in
the price of related goods.
D. Responsive the price is to a change in demand.
87. The price elasticity of demand is equal to:
A. Percentage change in quantity demanded times the
percentage change in price.
B. Unit change in price divided by the unit change in
quantity demanded.
C. Percentage change in quantity demanded divided by
the percentage change in price.
D. Unit change in quantity demanded times the unit
change in price.
88. Along a downward-sloping linear demand curve,
the price elasticity of demand:
A. Is constant at each point on the curve.
B. Varies throughout the demand curve.
C. Tends to be elastic at relatively low prices.
D. Is equal to the slope of the demand curve.
89. The price elasticity of demand for a good is likely
to be elastic if the marginal utility for that good:
A. Decreases slowly as additional units are consumed.
B. Remains constant as additional units are consumed.
C. Increases rapidly as additional units are consumed.
D. Decreases rapidly as additional units are consumed.
90. Assume the price elasticity of demand for U.S.

Frisbee Co. frisbees is 0.5. If the company increases
the price of each frisbee from $12 to $16, the number

6


of frisbees demanded will:
A. Decrease by 14.3 percent.
B. Decrease by 33.3 percent.
C. Increase by 20.0 percent.
D. Increase by 7.0 percent.
91. Assume the price elasticity of demand for JT
Chip Co. chips is 4.0. If the company decreases the
price of each bag of chips from $1.89 to $1.49, the
number of bags sold will:
A. Decrease by 78 percent.
B. Increase by 95 percent.
C. Increase by 48 percent.
D. Increase by 78 percent.
92. If the price elasticity of demand is 0.6, then a 10
percent increase in the price of the good will lead to a
________ in the quantity demanded.
A. 6 percent increase
B. 6 percent decrease
C. 0.6 percent increase
D. 0.6 percent decrease
93. For product XYZ, the price elasticity of demand
has an absolute value of 3.5. This means that
quantity demanded will increase by:
A. 1 percent for each 3.5 percent decrease in price,

ceteris paribus.
B. 1 unit for each $3.50 decrease in price, ceteris paribus.
C. 3.5 percent for each 1 percent decrease in price,
ceteris paribus.
D. 3.5 units for each $1 decrease in price, ceteris paribus.
94. Suppose the quantity demanded of ski boats falls
from 4.0 million to 3.0 million as a result of an
average price increase from $20,000 to $25,000 per
boat. The absolute value of the price elasticity of
demand is closest to:
A. 0.20.
B. 1.29.
C. 0.78.
D. 0.29.
95. Suppose a university raises its tuition by 6
percent and as a result the enrollment of students
decreases by 3 percent. The absolute value of the
price elasticity of demand is:
A. 0.5.
B. 2.0.
C. 8.0.
D. 6.0.
96. A demand curve that is completely inelastic is:
A. Horizontal.
B. Vertical.
C. Upward sloping.
D. Downward sloping.
97. When the percentage change in quantity
demanded is less than the percentage change in price,
ceteris paribus:

A. Demand is elastic.



B. Demand is inelastic.
C. Demand is unitary elastic.
D. Elasticity is impossible to calculate.
98. When Claudia goes to the gas station she buys 10
gallons of gas no matter what the price per gallon.
What does this imply about her price elasticity of
demand for gasoline?
A. It is unitary
B. It is relatively elastic
C. It is perfectly inelastic
D. It is perfectly elastic
99. A demand curve that is completely elastic is:
A. Horizontal.
B. Vertical.
C. Upward sloping.
D. Downward sloping.
100. Which of the following does not influence the
price elasticity of demand?
A. The availability of substitutes
B. The price of the item relative to your budget
C. Costs of production
D. The length of time
101. Which of the following would most likely have a
price-elasticity coefficient greater than 1?
A. Cigarettes
B. Gasoline in the short run

C. Electricity
D. Airline travel in the long run
102. Which of the following would most likely have a
price-elasticity coefficient less than 1?
A. Coffee
B. Televisions
C. Fresh fish
D. New cars
103. Which of the following is likely to have the most
inelastic price elasticity of demand?
A. Automobiles
B. Pickup trucks
C. Hondas
D. The Hondas one Honda dealer sells
104. Ceteris paribus, as the number of substitutes for
a good increase, the:
A. Price elasticity of demand should become smaller.
B. Price elasticity of demand should become larger.
C. Cross-price elasticity of demand should become
negative.
D. Income elasticity of demand should become negative.
105.
Which of the following causes demand to be
more elastic with respect to price?
A. Shorter periods of time to adjust to a change in price
B. A steeper demand curve for a given price and
quantity
C. Fewer substitutes
D. A high ratio of price to income
106. Ceteris paribus, the longer the time period, the:

7


A. Smaller the income elasticity for the good.
B. Less elastic the demand for the good.
C. More unitary elastic the demand for the good.
D. More elastic the demand for the good.
107.
If price elasticity of demand is equal to 2, the
good has _____ demand.
A. Elastic
B. Inelastic
C. Unit elastic
D. Restrictive
108.
The total revenue effect of a movement along
a demand curve can best be predicted using the:
A. Law of diminishing marginal utility.
B. Price elasticity of demand.
C. Utility-maximizing rule.
D. Law of demand.
109. The local baseball team owner hires you to help
maximize the team's profits. You are told that costs
are constant because enough help is always hired in
case of a full stadium, so assume your task is to
maximize revenues from ticket sales. Your advice to
the owner should be:
A. Set the ticket price in the inelastic region of the
demand curve in order to increase revenues.

B. Raise the price as high as possible until the number
of tickets sold begins to fall.
C. Set the price as low as possible to make sure the
stadium is always full.
D. Set the price of tickets at the unitary elasticity price.
110.
Assume a good has a downward-sloping,
linear demand curve. Starting at a price of zero, as
the price of the good increases, total revenue:
A. Increases indefinitely.
B. Decreases indefinitely because the quantity sold will
decrease.
C. Remains constant.
D. Increases, then decreases.
111. If the price elasticity of demand is 1.0, and a
firm raises its price by 10 percent, the total revenue
will:
A. Rise by 10 percent.
B. Fall by 10 percent.
C. Not change.
D. Rise by 100 percent.
112. If Carmen's Coffee Company wants to increase
total revenue and the price elasticity of demand is
0.43, the company should:
A. Increase the price of coffee.
B. Decrease the price of coffee.
C. Keep the price constant since a price increase or
decrease will cause total revenue to fall.
D. Advertise since this is only option that will increase
total revenue.

113. Carter has budgeted $40 per month for candy
bars. No matter how the price of candy bars changes,



he spends exactly $40 per month. Carter's price
elasticity of demand for candy bars must:
A. Equal zero.
B. Be unitary.
C. Be very inelastic since the amount he spends is not
responsive to a price change.
D. Be very elastic since the quantity he demands will
change significantly if the price changes.
114. Assume the price elasticity of demand for MC
Pretzel Co. pretzels is 0.8. If the company increases
the price of each bag of pretzels, total revenue will:
A. Decrease because fewer bags will be sold.
B. Increase because the company will receive more
revenue per bag.
C. Increase because the percentage increase in price is
greater than the percentage decrease in quantity
demanded.
D. Be impossible to predict because the percentage
change in price is not known.
115. When demand is price inelastic, ceteris paribus,
an increase in:
A. Price leads to lower total revenue.
B. Total revenue means quantity rises.
C. Total revenue indicates a reduction in price.
D. Price leads to greater total revenue.

116.
A price decrease will cause total revenue to
fall if:
A. Demand is elastic.
B. Demand is inelastic.
C. Demand is unitary-elastic.
D. The price elasticity of demand is less than zero.
117.
If the price of Good X falls and total revenue
rises, then:
A. Demand for Good X is inelastic.
B. Demand for Good X is unitary elastic.
C. Demand for Good X is elastic.
D. The price elasticity of demand for Good X is equal to
1.
118. Maximum total revenue occurs when:
A. Total revenue is -1.0.
B. The absolute value of the price elasticity of demand
is 1.0.
C. Price multiplied by quantity is 1.0.
D. The absolute value of the price elasticity of demand
is 100.
119. Which of the following is the best measure of
the effects of a recession?
A. Income elasticity of demand
B. Price elasticity of demand
C. Cross-price elasticity of demand
D. Utility-maximizing rule
120.
Suppose the income elasticity of demand for

used jet skis is 3.5. If the level of income decreases by
1 percent, the number of used jet skis sold will,
ceteris paribus:

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A. Rise by 0.29 percent.
B. Rise by 3.5 percent.
C. Fall by 0.29 percent.
D. Fall by 3.5 percent.
121.
If income falls 4 percent for a year and as a
result the quantity of new homes demanded falls
from 23 million to 20 million units for the year, the
value of the income elasticity of demand for housing
is closest to:
A. 0.6.
B. 1.8.
C. 2.9.
D. 3.5.
122.
Suppose income falls 5 percent in a year and
as a result, housing construction falls from 10 million
to 5 million units annually. Based on this information
housing starts are:
A. An inferior good.
B. A normal good.
C. Price elastic.
D. Price inelastic.

123.
Ceteris paribus, if income increases and as a
result, the demand for good X increases and the
demand for good Y falls:
A. Good X is an inferior good and good Y is a normal
good.
B. Good X is a normal good and good Y is an inferior
good.
C. Goods X and Y are substitute goods.
D. Goods X and Y are complementary goods.
124.
If a good is normal, then its:
A. Price elasticity of demand is positive.
B. Income elasticity is negative.
C. Income elasticity is positive.
D. Cross-price elasticity is positive.
125. 154. If a good is inferior, then its:
A. Cross-price elasticity is negative.
B. Price elasticity of demand is negative.
C. Income elasticity is positive.
D. Income elasticity is negative.
126.
If income rises by 10 percent and the
quantity sold of a particular vehicle falls by 7 percent,
then this particular type of vehicle is:
A. A normal good.
B. An inferior good.
C. An irregular good.
D. A sub-standard good.
127.

Which of the following is most likely an
inferior good?
A. Rolex watches
B. Nike running shoes
C. Generic vitamins
D. A custom-built mansion
128.
Assume that store brand cereal is an inferior
good. If income rises, then the price of store brand



cereal will ________ and the quantity sold of store
brand cereal will ________.
A. Rise; rise
B. Rise; fall
C. Fall; fall
D. Fall; rise
129.
Suppose computer prices at an office supply
store fall from $1,000 to $900 and as a result the
quantity demanded of typewriters decreases from 40
to 20 per month. The cross-price elasticity is closest
to:
A. 0.16.
B. 0.2.
C. 5.0.
D. 6.3.
130.
Assume apples and oranges are substitutes.

Suppose apple growers launch a very successful
advertising campaign that convinces consumers
apples are a better product. As a result the crossprice elasticity of apples and oranges will become:
A. Less negative (move closer to zero).
B. More negative.
C. Less positive (move closer to zero).
D. More positive.
131.
MP3 players and MP3 files are
complementary goods. The cross-price elasticity of
demand between MP3 players and MP3 files is
expected to be:
A. Positive.
B. Negative.
C. Equal to zero.
D. Undefined.
132.
When the prices of postage stamps rise, the
demand for Internet service increases, ceteris
paribus. Postage stamps and Internet service are
therefore:
A. Elastic.
B. Inelastic.
C. Complements.
D. Substitutes.
133.
Suppose the price of video games falls from
$40 to $20 and as a result the quantity demanded of
scooters falls from 40,000 to 10,000 per year. The
value of the cross-price elasticity of demand is:

A. 1.80.
B. 1.00.
C. 0.83.
D. 0.56.
134.
Suppose the price of soccer shoes decreases
by 7 percent and as a result, there is a 12 percent rise
in the quantity of shin guards demanded. The value
of the cross-price elasticity of demand is:
A. -1.71.
B. -0.58.
C. 1.71.

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D. 0.58.
135.
If DVD players and DVDs are
complementary goods, an increase in the price of
DVDs will, ceteris paribus:
A. Increase the quantity demanded of DVDs.
B. Increase the quantity demanded of DVD players.
C. Reduce the demand for DVD players.
D. Reduce the demand for DVDs.
136.
If the cross-price elasticity of demand for
SUVs with respect to the price of gasoline is -0.10,

and gasoline prices rise by 18 percent, then SUV
sales should, ceteris paribus:
A. Fall by 1.8 percent.
B. Fall by 18 percent.
C. Rise by 1.8 percent.
D. Rise by 18 percent.

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True / False Questions
137. As a result of specialization and trade individuals no longer have to make choices about how to spend their
incomes.
138.
The basic goals of utility maximization, profit maximization, and welfare maximization explain most market
activity.
139.
Unlike consumers and business firms, the public sector has no maximizing goals.
140.
One of the two reasons why we are driven to buy and sell goods and services in the market is that most of us
are incapable of producing everything we want to consume.
141.
Markets require a physical location to permit sellers to supply money to buyers for goods and services.
142.
Land, labor, and capital, are bought and sold in the product market.
143.
Government goods are delivered "free," which means that they are costless.
144.
Money is critical in facilitating market exchanges and the specialization that these exchanges permit.

145.
"Demand" is a statement of actual purchases.
146.
According to the law of demand, a decrease in price leads to an increase in quantity demanded.
147.
A change in price changes the quantity demanded and is represented by a movement along the demand curve.
148.
If the prices of the factors used to produce a good change, both the demand curve and the supply curve of the
good will shift.
149.
An increase in the price of one good can cause the demand for another good to increase if the goods are
substitutes.
150.
An increase in the price of one good can cause the demand for another good to increase if the goods are
complements.
151.
When the number of buyers in a market changes, the market demand curve shifts, even if individual demand
curves do not shift.
152.
When a seller sells a good, the supply curve shifts to the right.
153.
When individual supply curves shift, ceteris paribus, the market supply curve shifts.
154.
The market supply is a statement of actual sales by suppliers.
155.
The law of supply and the law of demand both rely on the concept of opportunity cost.
156.
The market price equals the equilibrium price if quantity demanded equals quantity supplied at the market
price.
157.

Market price is the same thing as equilibrium price.
158.
The market mechanism satisfies all consumer desires and maximizes business profits.
159.
There are never shortages or surpluses when the price in a market is equal to the equilibrium price for the
market.
160.
As one moves down the demand curve for carrots, the desire for carrots changes.
161.
Scalping is likely to appear when price is set below equilibrium price by the seller.
162.
Optimal market outcomes are the same as perfect market outcomes.
163.
In the U.S., market shortages of human organs are the result of price ceilings.
164.
In the U.S., price ceilings on human organs have caused an increase in demand.
165.
In the United States, consumers, businesses, government and foreigners participate in both the product and
factor markets.

Problems and short answer questions
Question 1:
Use supply and demand curves to illustrate how each of the following events would affect the prive of butter and
the quantity of butter bought and sold:
a) An increase in the price of magarine
b) An increase in the price of milk
c) A decrease in average income levels
Question 2:
Consider a competitive market for which the quantities demanded and supplied (per year) at various prices are given as

11


follow:

a)
b)
c)
d)

Price
Demand
Supply
($)
(millions)
(millions)
60
22
14
80
20
16
100
18
18
120
16
20

Calculate the price elasticity of demand when the price is $80. When the price is $100.
Calculate the price elasticity of supply when the price is $80. When the price is $100.
What are the equilibrium price and quantity?
Suppose the government sets a price ceiling of $80. Will there be a shortage, and if so, how large will it be?

Question 3:
Beef supplies are sharply reduced because of drought in the beef-raising states, and consumers turn to pork as a
substitute for beef. How would you illustrate this change in the beef-market in supply-and-demand terms?
Question 4:
Given the following data for widgets:
P = 80 - Q (Demand)
P = 20 + 2Q (Supply)
a) Given the above demand and supply equations for widgets, find the equilibrium price and quantity.
b) Now suppliers must pay a tax of $6 per unit. Find the new equilibrium price-inclusive price and quantity.
Question 5:
In the market for good X, the demand curve and supply curve are given by:
Qd = -5P + 150
Qs = 5P - 10
Where price is in $ and Qd, Qs are in units.
a) Calculate the price elasticity of demand when the price is $12. When the price is $18.
b) Find the equilibrium price and quantity. Calculate the price elasticity of demand at that price.
c) Suppose the government sets a price ceiling of $14. What will happen to the market? What should the
government do to keep the ceiling price effective?
Question 6:
Use a diagram to illustrate how each of the following events affects the equilibrium price and quantity of pizza.
a. The price of mozzarella cheese rises.
b. The health hazards of hamburgers are widely publicized.
c. The price of tomato sauce falls.
d. The incomes of consumers rise and pizza is an inferior good.
e. Consumers expect the price of pizza to fall next week.

Question 7:
Katherine advertises to sell cookies for $4 a dozen. She sells 50 dozen, and decides that she can charge more. She
raises the price to $6 a dozen and sells 40 dozen. What is the elasticity of demand? Assuming that the elasticity of
demand is constant, how many would she sell if the price were $10 a box?
Question 8:
Yesterday, the price of envelopes was $3 a box, and Julie was willing to buy 10 boxes. Today, the price has gone up to
$3,75 a box, and Julie is now willing to buy 8 boxes. Is Julie's demand for envelopes elastic or inelastic? What is Julie's
elasticity of demand?
Question 9:
In the market for good X, the demand curve and supply curve are given by
𝑃 = 100 − 𝑄!
𝑃 = 𝑄! − 4



12


Where price is in $ and 𝑄! , 𝑄! are in units.
a) Find the equilibrium price and quantity.
b) Suppose the government sets tax of $1 per unit. What will happen to the market? How is the tax burden
divided between buyers and sellers?
c) Calculate the tax revenue.
Question 10: If consumers expect the price of some good to rise next week, then we generally observe the price of
the good rising this week. Explain this fact using a graph.
Question 11: The following table shows information on the demand and supply for bicycles, where the quantities of
bicycles are measured in thousands.
a) What is the quantity demanded and the quantity supplied at a price of
$210?
b) At what price is the quantity supplied equal to 48,000?

c) Graph the demand and supply curve for bicycles.
d) How can you determine the equilibrium price and quantity from the graph?
How can you determine the equilibrium price and quantity from the table?
What are the equilibrium price and equilibrium quantity?
e) If the price was $120, what would the quantities demanded and supplied
be? Would a shortage or surplus exist? If so, how large would the shortage
or surplus be?

Price
($)
120
150
180
210
240

Demand

Supply

50
40
32
28
24

36
40
48
56

70

Question 12: Show in a diagram the effect on the demand curve, the supply curve, the equilibrium price, and
the equilibrium quantity of each of the market for bagels if:
Case 1: People realize how fattening bagels are.
Case 2: People have less time to make themselves a cooked breakfast.





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