Set 6

What effect is working when the price of a good falls and consumers tend to buy it instead of other goods?
1. the substitution effect.
2. the ceteris paribus effect.
3. the total price effect.
4. the income effect.
The quantity demanded (Qd) of a soft drink brand A has decreased. This could be because:
1. A’s consumers have had an increase in income.
2. the price of A has increased.
3. A’s advertising is not as effective as in the past
4. the price of rival brand B has increased.
Demand curves in P-Q space are derived while holding constant
1. consumer tastes and the prices of other goods.
2. incomes, tastes, and the price of the good.
3. incomes and tastes.
4. incomes, tastes, and the prices of other goods
Demand curves in P-Q space are derived while holding constant
1. consumer tastes and the prices of other goods.
2. incomes, tastes, and the price of the good.
3. incomes and tastes.
4. incomes, tastes, and the prices of other goods
Suppose the demand for good Z goes up when the price of good Y goes down. We can say
1. a normal good.
2. a complementary good.
3. an inferior good.
4. a substitute good.
Which of the following will NOT cause a shift in the demand curve for compact discs?
1. a change in the price of pre-recorded cassette tapes.
2. a change in wealth.
3. a change in income.
4. a change in the price of compact discs.
Which of the following is consistent with the law of supply?
1. As the price of calculators rises, the supply of calculators increases, ceteris paribus.
2. As the price of calculators falls, the supply of calculators increases, ceteris paribus.
3. As the price of calculators rises, the quantity supplied of calculators increases, ceteris paribus .
4. As the price of calculators rises, the quantity supplied of calculators decreases, ceteris paribus.
10 The price of computer chips used in the manufacture of personal computers has fallen. This will lead to __________ personal computers.
1. a decrease in the supply of
2. a decrease in the quantity supplied of
3. an increase in the supply of
4. an increase in the quantity supplied of
When there is excess demand in an unregulated market, there is a tendency for
1. quantity demanded to increase.
2. quantity supplied to decrease.
3. price to fall.
4. price to rise
Equilibrium in the market for good A obtains
1. when there is no surplus or shortage prevailing in the market
2. where the demand and supply curves for A intersect
3. when all of what is produced of A is consumed
4. all of the above
A shift in the demand curve (drawn in the traditional Price-Quantity space) to the left may be caused by
1. a decrease in supply
2. a fall in income.
3. a fall in the price of a complementar y good.
4. a fall in the number of substitute goods.
A shift in the demand curve (drawn in Income-Quantity space) to the left may be caused by
1. a fall in the price of a complementar y good.
2. a fall in income.
3. a change in tastes such that consumers prefer the good more.
4. a rise in the number of substitute goods.
A movement along the demand curve (drawn in Quantity-Price space) to the left may be caused by
1. an increase in supply
2. a rise in income.
3. a rise in the price of a complementary good.
4. a fall in the number of substitute goods.
When the market operates without interference, price increases will distribute what is available to those who are willing and able to pay the most. This process is known as
1. price fixing.
2. quantity setting.
3. quantity adjustment.
4. price rationing.
How many different equilibria can obtain when you allow for shifts in the demand and/or the supply curves?
1. 2
2. 4
3. 8
4. 16
What will happen to equilibrium price and quantity when the demand curve shifts to the left and the supply curve shifts to the right
1. price falls unambiguously but the effect on quantity cannot be determined
2. both price and quantity falls unambiguously
3. quantity falls unambiguously but the effect on price cannot be deter mined
4. the effect on both price and quantity cannot be determined
What will happen to equilibrium price and quantity when both the demand and supply curves shift to the left
1. price falls unambiguously but the effect on quantity cannot be determined
2. both price and quantity falls unambiguously
3. quantity falls unambiguously but the effect on price cannot be determined
4. the effect on both price and quantity cannot be determined
A price ceiling imposed by the government can cause a shortage (excess demand)
1. when the price ceiling is above the free (or unregulated) market price
2. when the price ceiling is below the free (or unregulated) market price
3. when the price ceiling is equal to the free (or unregulated) market price
4. either of the above
What is the effect of imposing a fixed per unit tax on a good on its equilibrium price and quantity?
1. Price falls, quantity rises
2. Price rises, quantity falls
3. Both price and quantity fall
4. Both price and quantity rise
A price floor is
1. a maximum price usually set by government, that sellers may charge for a good or
  service.
2. a minimum price usually set by government, that sellers m ust charge for a good or service .
3. the difference between the initial equilibrium price and the equilibrium price after a decrease in supply.
4. the minimum price that consumers are willing to pay for a good or service.
The need for rationing a good arises when
1. there is a perfectly inelastic demand for the good.
2. supply exceeds demand.
3. demand exceeds supply.
4. a surplus exists.
If the “regulated-market” price is below the equilibrium (or “free-market” price) price,
1. the quantity demanded will be greater than quantity supplied .
2. demand will be less than supply.
3. quantity demanded will be less than quantity supplied.
4. quantity demanded will equal quantity supplied.
If a government were to fix a minimum wage for workers that was higher than the market-clearing equilibrium wage, economists would predict that
1. more workers would become employed.
2. there would be more unemployment.
3. the costs and prices of firms employing cheap labour would increase.
4. wages in general would fall as employers tried to hold down costs.

Set 6

Quiz