- 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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