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1. Which of the following statements about quantity demanded is not true? Quantity demanded is:
- A. a desired quantity, not necessarily the quantity exchanged.
- B. effective demand, or the amount people are willing to buy at a particular price.
- C. expressed as a certain amount per period of time.
- D. the entire relation between price and quantity.
2. To say that the demand curve for movies is downward sloping to the right means that:
- A. less will be demanded at lower prices.
- B. more will be demanded as color TV sets become more expensive.
- C. less will be demanded at higher prices.
- D. less will be demanded if movies become poorer in quality.
3. Which of the following will NOT, all else equal, cause demand for good A to change?
- A. a change in the price of A.
- B. a change in the price of B, a complement.
- C. a change in the price of C, a substitute.
- D. an increase in average income.
- E. all of the above cause demand for good A to change.
4. One purpose of advertising is to:
- A. shift the demand curve for the good to the right.
- B. shift the demand curve for the good to the left.
- C. shift the supply curve for the good to the left.
- D. make the demand curve for substitute goods shift to the right, thus increasing the demand for the
advertised good.
5. Consider automobiles and automobile tires. When the price of automobiles decreases, the demand for tires is
predicted to:
- A. increase.
- B. decrease.
- C. remain unchanged, although tire prices are likely to fall.
- D. remain unchanged, although quantity demanded increases.
6. As a household's average income rises, we usually expect:
- A. the proportion of its income allocated to food to increase, as food is a necessity.
- B. its expenditure habits to remain constant, as income changes have no effect on demand.
- C. its demand for goods to increase because the price of these goods will decline.
- D. its demand for luxuries to increase.
7. A fall in the price of raw milk, used in the production of ice cream, will:
- A. decrease the supply of ice cream, causing the supply curve of ice cream to shift to the left.
- B. increase the supply of ice cream, causing the supply curve of ice cream to shift to the right.
- C. have no effect on the supply of ice cream at all.
- D. have no effect on the supply curve of ice cream, but will cause a downward movement along the supply
curve of ice cream.
8. An increase in the price of cheese, all else equal, is likely to have all of the following effects except a:
- A. decrease in the quantity demanded of cheese.
- B. decrease in the supply of pizza.
- C. increase in demand for peanut butter (a substitute good).
- D. decrease in the demand for apple pie (a complimentary good).
- E. all of the above will occur.
9. Which of the following will cause an increase in the supply of U.S. wheat?
- A. unionization of farm labor.
- B. the introduction into the U.S. of a disease which kills high yield hybrid wheat strains but NOT low yield
strains.
- C. A temperance movement in the U.S. gains popular acceptance and demand for beer and barley (an input in
beer production) fall. (Assume wheat and barley are substitutes in production.)
- D. "natural" grains and cereals (including wheat) become more popular in the U.S.
- E. none of the above.
10. Legalizing the use of addicting drugs would have all of the following effects except:
- A. the supply of addicting drugs would increase.
- B. the demand for addicting drugs would increase.
- C. in the long-run, price would fall while quantity exchanged would rise.
- D. the quality of addicting drugs being sold in the legalized market would be expected to be better than
in the illegal market.
- E. all of the above.
11. In class, we demonstrated that the quantity demanded for a given product was inversely related to its absolute
price, all else equal. This relationship is explained by which of the following statements?
- A. consumers gain more satisfaction from goods when the good's absolute price is lower.
- B. the substitution effect causes consumers to buy more of any good at lower absolute prices, all else
equal.
- C. quantity demanded depends upon relative price not absolute price and since absolute and relative price
are inversely related a fall in absolute price always leads to a decrease in quantity demanded.
- D. since real income rises as absolute price rises, all else equal, quantity demanded will increase for any
good assuming it is a normal good.
- E. none of the above.
12. Which one of the following would be most likely to cause the demand for firewood to increase?
- A. a decrease in the price of firewood.
- B. a decrease in the price of electricity.
- C. an increase in the price of fuel oil.
- D. a reduction in the price of chain saws, which are used to cut firewood.
- E. all of the above will cause an increase in demand for firewood.
13. A fall in the price of raw milk, used in the production of ice cream, will:
- A. decrease the supply of ice cream.
- B. increase the quantity supplied of ice cream.
- C. have no effect on the supply of ice cream.
- D. decrease the price while increasing the quantity demanded of ice cream.
- E. none of the above.
14. Suppose it is observed that initially increases in income cause consumption of hamburger to rise but that as
income continues to rise consumption of hamburger begins to decline. This would imply that hamburger:
- A. is a normal good.
- B. is an inferior good.
- C. is a normal good at low income levels but an inferior good at high income levels.
- D. is an inferior good at low income levels but a normal good at high income levels.
15. Which of the following is a stock concept?
- A. the weekly receipts of a drugstore.
- B. a household's rent payment.
- C. an accountant's salary.
- D. the number of incoming freshmen at Missouri State in fall 1988.
- E. all of the above are flow variables.
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