PRACTICE TEST 4 (Bassam AbuAlFoul) CHAPTER 3 Supply and Demand Part I.

Multiple Choice: Choose the best answer for the following questions. 1. There is "demand" for a good or service a. only if people are forced to buy it against their will. b. if people are willing to buy it, regardless of their ability to do so. c. if people are both willing and able to buy it. d. if its price is allowed to fluctuate free of government interference. 2. The number of units of a good that individuals are willing and able to buy at a particular price during some time period is called the a. demand for the good. b. quantity demanded of the good. c. equilibrium quantity of the good. d. market for the good. 3. The typical demand curve demonstrates the "law of demand" by a. bowing outward from the origin rather than being a straight line. b. intersecting the supply curve. c. being downward sloping. d. having a positive horizontal intercept at a price of zero. 4. An increase in the number of buyers in an area will result in________ the demand curve. a. a rightward shift of b. a leftward shift of c. movement up along d. movement down along 5. A rise in the price of margarine causes_______ the demand curve for butter. a. a rightward shift of b. a leftward shift of c. movement up along d. movement down along 6. Assume that good X is an "inferior good." A decrease in the income of buyers causes_______ the demand curve for good X. a. a rightward shift of b. a leftward shift of c. movement up along d. movement down along 7. Assume romaine lettuce is a "normal good." An increase in income causes an increase in the_______ that good. a. supply of b. quantity supplied of c. quantity demanded of d. demand for 8. For which of the following goods does the "law of supply" definitely not hold? a. asparagus, considering a time period of several years b. Edvard Munch's painting The Scream c. infomercial air time on cable TV channels d. laser videodisc players 9. A good that obeys the law of supply has______ supply curve displaying ______relation between price and quantity supplied. a. a downward-sloping, a direct b. a downward-sloping, an inverse c. an upward-sloping, a direct d. an upward-sloping, an inverse 10. In the potato chip market, a rise in the price of corn chip causes the a. demand curve to shift to the left. b. demand curve to shift to the right. c. supply curve to shift to the left. d. supply curve to shift to the right. 11. If the price of a good is expected to fall in the future, this causes a. a rightward shift of the good's supply curve. b. a leftward shift of the good's supply curve. c. movement down along the good's supply curve. d. no change in the supply-and-demand diagram of the good. 12. What can cause a change in the quantity supplied of a good? a. a change in the price of a resource used to produce the good b. a change in the expected future price of the good c. a change in the price of the good d. a change in the number of sellers of the good

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13. At a price for which quantity supplied exceeds quantity demanded, a ______ is experienced, which pushes the price _______ toward its equilibrium price. a. surplus, downward b. surplus, upward c. shortage, downward d. shortage, upward 14. If demand rises by less than supply rises, then equilibrium price ______ and equilibrium quantity _______. a. rises, rises b. rises, falls c. falls, rises d. falls, falls

15. In Figure 3.1, imposing a per-unit production tax will cause equilibrium to move from------ (Assume initial demand is D2 and initial supply is S1) a. D to C. b. D to B. c. B to A. d. A to C. 16. In Figure 3.1, a rise in the price of a substitute good will cause equilibrium to move from------ (Assume initial demand is D1 and initial supply is S2) a. A to C. b. D to C. c. A to B. d. B to D. 17. In Figure 3.1, lower future prices expected by both suppliers and demanders will cause equilibrium to move from------------ (assume initial demand is D2 and initial supply is S2) a. C to B. b. B to C. c. A to D. d. D to A.

Part II: Internet:

http://highered.mcgraw-hill.com/sites/007712961x/student_view0/index.html
ANSWERS (For Part I):
1. c This comes from the definition of "demand." 2. b This is the definition of "quantity demanded." 3. c An inverse relationship between price and quantity demanded is shown by a downward-sloping curve. 4. a A greater quantity demanded at each price is what we mean when we say the demand curve has shifted to the right. 5. a A rise in the price of a substitute causes a greater quantity demanded at each price. 6. a For an inferior good, lowering income increases the quantity demanded at each price, shifting the demand curve to the right. 7. d For this normal good, there is a rightward shift of the demand curve, called an "increase in demand." 8. b There can only be one (original) The Scream regardless of its price. 9. c By the law of supply, higher price increases quantity supplied, shown along an upward-sloping supply curve. 10. b There is a rise in the price of corn chips, an obvious substitute for potato chips. 11. a With lower prices expected, firms will increase quantity supplied at each current price. 12. c For a change in quantity supplied we move along an unchanged supply curve, owing to a change in the good's price. 13. a A price that gives rise to a surplus will be bid downward until the surplus disappears. 14. c Shifting the two curves pulls the equilibrium point down and to the right. 15. b The tax causes supply to decrease. 16. c A rise in the price of a substitute causes demand to increase. 17. b Supply increases while demand decreases-making lower future prices a .'self-fulfilling prophecy."

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