1

ECONOMICS

1. The relationship between the price of the commodity and quantity of the
commodity demanded :
(a) Supply (b) Demand (c) Elasticity (d) None

2 The relation of Price and quantity demanded:

(a) Negative (b) Positive (c) No relation (d) None

3. The relationship between the price of the commodity and quantity of the
commodity supplied:
(a) Demand (b) equilibrium (c) Supply (d) None

4. The relationship between income and consumption:

(a) Consumption (b) Saving (c) Investment (d) None

5. The transformation of physical inputs in to physical outputs:

(a) Production (b) Consumption (c) Distribution (d) Investment

6. The difference between total revenue and the total Cost:

(a) Cost (b) Income (c) Profit (d) revenue

7. The relation between investment and the rate of interest:

(a) Investment (b) Saving (c) Income (d) Money

8. The difference between the present level of income and the past level of
income:
(a) Saving (b) Consumption (c) Investment (d) None

9) The physical and mental effort people use to produce goods and services is a description of
which factor of production?
A) physical capital B) human capital C) labor D) entrepreneurship

10) The effort used to coordinate the factors of production is a description of

A) physical capital. B) human capital. C) labor. D) entrepreneurship.

11) All of the following are considered natural resources EXCEPT

A) a coral reef. B) gold. C) labor. D) a redwood forest.
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12) Normative economics

A) is the focus of most modern economic reasoning.
B) answers the question "What ought to be?"
C) predicts the consequences of alternative actions.
D) answers the question "What is?"

13) Which of the following is an example of a normative question?

A) How will an increase in the inheritance tax affect tax revenues?
B) What fraction of an income tax cut will be spent on imported goods?
C) Should Florida implement a state income tax to reduce its deficit?
D) How will an increase in unemployment benefits affect the unemployment rate?

14) Which of the following is a question answered with positive economic analysis?
A) Should the college reduce tuition for out-of-state residents?
B) Should the college charge higher tuition for part-time students?
C) If the college increased its eligibility requirements for enrollment, will class sizes decline?
D) Should the college eliminate its athletic program to cut its costs?

15) Which of the following is a question answered with normative economic reasoning?
A) If the college offers free textbooks for students, will more students read their textbooks?
B) If the college provided less financial aid for out-of-state students, would more in-state
students benefit?
C) If the college increased its enrollment requirements, would class size decline?
D) Should the college increase tuition to fund its athletic programs?

16) The 3 key economic questions include all of the following EXCEPT
A) "what products do we produce?" B) "how do we produce these products?"
C) "where should these products be produced?"
D) "who consumes the products?"

17) Deciding how a society's products are distributed among its citizens answers the economic
question of
A) who consumes the products produced.B) what products will be produced.
C) where will the products be consumed. D) how will the products be produced.

18) Deciding if a company will produce automobiles by robotics or manual labor answers the
economic question of
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A) who consumes the products produced. B) what products will be produced.

C) where will the products be consumed. D) how will the products be produced.

19 The proportionate change in quantity demanded and the proportionate

change in price is:
(a) Price elasticity (b)Income elasticity (c) Cross elasticity (d)None

20) An economic model is a

A) realistic version of an economic environment.
B) detailed version of an economic issue.
C) fictional representation of an entire economy.
D) simplified representation of an economic environment.

21) Economic models are used to

A) explain every detail of an economic theory.
B) explore decision making by individuals, firms and other organizations.
C) build physical renditions of government construction projects.
D) represent the complexities of economic environments.

22 The ratio of the proportionate change in the quantity purchased of a

good to the proportionate change in income:
(a) Price elasticity (b) income elasticity (c) Cross elasticity (d) None

23 An increase in income lead to the increase in quantity demanded of the

good:
a) Negative good (b) positive good (c) Superior good (d) Normal good

24. There are thousands of wheat farmers who produce and sell wheat and there are millions
of consumers who use wheat and wheat products. The market for wheat would be
considered
a. oligopolistic. b. monopolistic. c. perfectly competitive.
d. monopolistically competitive.
25. As a seller, you would be considered part of a perfectly competitive market if
a. your actions are quickly followed by competitors.
b. your actions essentially have no effect on the market price.
c. your pricing has no impact on the amount you can sell.
d. increases in the price of your product have an impact on the market price.
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26) Which of the following statements provides the best definition of economics?
A) The study of the most equitable distribution of scarce resources.
B) The study of the use of scarce resources to satisfy unlimited human wants.
C) The study of the production of goods and services.
D) The study of the productive capacity of a nation's factors of production.
E) The study of production and increasing its efficiency.

27. A monopoly is a market

a. with one seller. b.with few sellers. c.with one buyer.
d. where the government sets the price.

28 The transformation of physical inputs in to outputs:

(a) Production function (b) consumption function
(c)Saving function (d) None

29) Society's resources are often divided into broad categories. They are
A) goods and services. B) factors of consumption.
C) land, labour, and capital. D) population and natural resources.
E) tangible commodities and intangible commodities.

30) The opportunity cost of going to college or university for four years is
A) equal to the wage rate a person will earn after graduation.
B) the least valued alternative one forfeits to attend.
C) the cost of tuition and books and four years of lost wages from employment.
D) the cost of tuition, residence fees and books.

31) The key decision makers in a market economy are

A) households, firms, and government.
B) individual citizens, non-profit organizations, and the Bank of Canada.
C) governments and all institutions under government control.
D) large corporations and labour organizations.
E) corporations and governments.

32) Economists usually assume that households and firms, respectively, maximize
A) income and sales. B) savings and profits.
C) wages and revenues. D) utility and profits. E) expenditures and profits.
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33) Which of the following is illustrated by the circular flow of income?

A) the flows of expenditures and income in a household
B) that firms own the factors of production
C) the interaction of households and firms through the factors and goods markets
D) that the flow of payments moves in the same direction as the flow of goods
E) that there is no relationship between goods markets and factor markets

34) A basic underlying point in economics is that

A) people have unlimited wants in the face of limited resources.
B) there are unlimited resources.
C) governments should satisfy the needs of the people.
D) people have limited wants in the face of limited resources.
E) governments should never interfere in the workings of a market economy.

35) Which of the following best describes the study of economics?

A) how to plan an economy
B) how to limit human wants so that scarce resources are sufficient
C) why resources are scarce
D) the allocation of scarce resources among alternative uses
E) how to distribute income as equally as possible

36) Economics can best be described as

A) the study of how a society ought to allocate its resources.
B) the study of the use of scarce resources to satisfy unlimited human wants.
C) the application of sophisticated mathematical models to address social problems.
D) a normative science.
E) the study of how to reduce inflation and unemployment.

37) Scarcity is likely to be

A) a problem that will be solved by the proper use of available resources.
B) unique to the twentieth century.
C) a problem that will always exist.
D) a result of the work ethic.
E) eliminated with a better understanding of economics.

38) The concept of scarcity in economics usually refers to a condition

A) where society is not employing all of its available resources in an efficient manner.
B) where people's wants can never be satisfied by the available resources.
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C) that afflicts only poor countries.

D) where too many frivolous goods and services are produced at the expense of socially
desirable goods and services.
E) where production is efficient, but distribution is inefficient.

39) Because resources are scarce, individuals are required to

A) make choices among alternatives.
B) use resources inefficiently. C) sacrifice production but not consumption.
D) improve distribution but not production. E) improve production but not distribution.

40) Deciding if a power company will generate electricity from wind power or coal answers
the economic question of
A) who consumes the products produced. B) what products will be produced.
C) where will the products be consumed. D) how will the products be produced.

41) Economics is best defined as the study of

A) financial decision-making. B) how consumers make purchasing decisions.
C) the choices made by people faced with scarcity.
D) inflation, unemployment, and economic growth.

42) Economics is the study of

A) how to invest in the stock market. B) how society uses limited resources.
C) the role of money in markets. D) how government officials decide which goods and
services are produced.

43) Scarcity can best be defined as a situation in which

A) there are no buyers willing to purchase what sellers have produced.
B) there are not enough goods to satisfy all of the buyers' demand.
C) the resources we use to produce goods and services are limited.
D) there is more than enough money to satisfy consumers' wants.

44) An arrangement that allows buyers and sellers to exchange things is called
A) a contract. B) a market. C) money. D) efficient.

45) Because resources are limited

A) only the very wealthy can get everything they want.
B) firms will be forced out of business.
C) the availability of goods will be limited but the availability of services will not.
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D) people must make choices.

46) Tradeoff is
A) allowing the government and other organizations to choose for us.
B) sacrificing one thing for another.
C) deciding who consumes the products produced in an economy.
D) holding other variables fixed.

47) Resources are all of the following EXCEPT

A) unlimited and in abundance. B) the things we use to produce goods and services.
C) limited in quantity and can be used in different ways.
D) scarce and therefore require choices to be made.

48) The knowledge and skills acquired by a worker through education and experience is a
description of which factor of production?
A) physical capital B) human capital C) labor D) entrepreneurship

49) The opportunity cost of going to college

A) is zero if your parents pay your tuition.
B) is equal to the cost of tuition, room and board, and other expenses.
C) includes wages you lose by going to school instead of working.
D) is the same for all students at a particular school who pay full tuition.

50) Suppose that you own a house. What is the opportunity cost of living in the house?
A) There is no opportunity cost because you own the house.
B) There is no opportunity cost unless you could set up a business in the house.
C) The opportunity cost is the rent you could have received from a tenant if you didn't live
there.
D) The opportunity cost is the cost of your monthly mortgage payment plus bills.

51) The opportunity cost of something is

A) the cost of the labor used to produce it. B) what you sacrifice to get it.
C) the price charged for it. D) the search cost required to find it.

52) To make things simpler and focus attention on what really matters, economists would
A) use assumptions. B) ignore all variables. C) think at the margin.
D) respond to incentives.
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53) A variable measures

A) something that always has the same value.
B) something that can take on different values.
C) factors that occur with high degrees of uncertainty.
D) the degree to which something varies over time.

54) The Latin phrase ceteris paribus means that when a relationship between two variables is
being studied,
A) both are treated as unpredictable.
B) neither of those two variables is allowed to change.
C) all other variables are held fixed.
D) we recognize that some factors are unknown.

55) To think at the margin means to consider

A) how nothing remains constant over time.
B) how a small change in one variable affects another variable.
C) how people behave in their own self-interest.
D) how people will decide what to purchase.

56) Suppose that your tuition to attend college is $12,000 per year and you spend $3,000 per
year on room and board. If you were working full time, you could earn $22,000 per year. What
is your opportunity cost of attending college?
A) $15,000 B) $25,000 C) $34,000 D) $37,000

57) Antonio quit his job as a bartender where he made $38,000 per year to start his own tattoo
parlor. His business expenses are $8,000 per year on rent, $9,000 per year on supplies, and
$6,000 per year on part time help. As for his personal expenses, his apartment costs him
$9,600 per year and his personal bills are an extra $3,400 per year. What is Antonio's
opportunity cost of running the business?
A) $74,000 B) $61,000 C) $36,000 D) $23,000

58) An unemployed individual decides to spend the day fishing. The opportunity cost of
fishing is equal to
A) the cost of bait and any other monetary expenses.
B) zero, because the person doesn't have a job.
C) the cost of bait, any other monetary expenses, and the value of the individual's wages while
he was working.
D) the cost of bait, any other monetary expenses, and the value of the best alternative use of
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the individual's time.

59. In a market economy,

a. demand is determined by supply. b. supply is determined by demand.
c. price is determined by quantity. d. quantity is determined by price.
e. Either a or b are correct, depending on the product.
60. Who is it that ultimately determines the demand for a product or service?
a. those who buy the product or service
b. the government
c. the producers who create the product or service
d. those who supply the raw materials used in the production of the good or service

61) The study of the choices made by individual households, firms, and government is called
A) macroeconomics. B) microeconomics. C) managerial economics.
D) market economics.

62) Microeconomics is best described as the study of

A) the choices made by individual households, firms, and governments.
B) inflation, unemployment, gross national product, and the nation's economy as a whole.
C) how markets interact in the aggregate economy.
D) marginal changes in the economy.

63) Which of the following is a microeconomic question?

A) Should companies pay for employees' health insurance?
B) Why do some countries have higher economic growth rates than other countries?
C) Should Congress and the president take action to reduce the unemployment rate?
D) Should the Fed attempt to influence the interest rate to control potential inflation?

64) Which of the following is a microeconomic question?

A) Should the government decrease unemployment benefits to reduce the unemployment rate?
B) Why do some countries have higher inflation rates than other countries?
C) Should the government subsidize corn farmers to encourage the production of ethanol?
D) Should congress decrease taxes to help stimulate the economy?

65) The principle of opportunity cost

A) is more relevant for firms than for individuals. B) only refers to monetary payments.
C) is only relevant in economics. D) is applicable to all decision-making.
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66) The principle that the cost of something is equal to what is sacrificed to get it is known as
the
A) marginal principle. B) principle of opportunity cost.
C) principle of diminishing returns. D) reality principle.

67) The saying that "There's no such thing as a free lunch" refers to the
A) marginal principle. B) spillover principle.
C) principle of opportunity cost. D) reality principle.

68) Suppose that your tuition to attend college is $16,000 per year and you spend $6,000 per
year on room and board. If you were working full time, you could earn $20,000 per year. What
is your opportunity cost of attending college for one year?
A) $22,000 B) $26,000 C) $36,000 D) $42,000

69) Steven lives in a big city where there is a shortage of parking. He has a parking spot in his
driveway where he parks his car. Which of the following statements is most correct?
A) Steven has a lower opportunity cost of owning a car than his neighbor, who must rent a
parking spot.
B) The opportunity cost of using the spot is zero, because Steven owns the house.
C) The opportunity cost of using the parking spot is the price he could charge someone else for
using the spot.
D) The opportunity cost depends on how much Steven's mortgage payment is.

70. If Francis receives a decrease in his pay, we would expect

a. Francis’s demand for each good he purchases to remain unchanged.
b. Francis’s demand for normal goods to increase.
c. Francis’s demand for luxury goods to increase.
d. Francis’s demand for inferior goods to increase.

71. A good is considered either a normal good or an inferior good based on

a. the quality of the good. b. the price of the good.
c. personal preference toward the good. d.the amount of a person’s income.

72. You lose your job and as a result you buy fewer mystery books. This shows that you
consider mystery books to be a/an
a. normal good. b.inferior good. c.luxury good. d.complementary good.
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73) You rent a copy of a new action/adventure movie. The rental is for seven days and you
watch the movie on the first day. You tell a friend about the film and your friend asks to come
over and watch the movie with you before it is due back. What is your opportunity cost if you
decide to watch the movie a second time instead of going to a football game?
A) the entire cost of the movie rental, since you have already watched the movie
B) one half the rental cost, because you have already watched the movie one time
C) The answer depends on how much you liked the movie in the first place.
D) the football game you forego by watching the movie again

74) You have an hour between your economics and math classes. What is the opportunity cost
of that time if you use it to complete your math homework instead of your economics
homework?
A) the economics homework you could have completed
B) the math homework you chose to complete
C) the cost of your calculator and math textbook
D) zero, because it doesn't cost any money to do your math homework

75) Spending money on a new car instead of a used car when you are on a fixed budget is an
example of
A) the incursion of an opportunity cost.
B) isolating variables.
C) a bad thing to do because you run out of money.
D) living on the edge
76. The behavior of people as they interact with one another in markets is referred to as
a. economics. b. interaction. c. demand and supply.
d. social psychology.
77. Which of the following is true?
a. Buyers determine supply and sellers determine demand.
b. Buyers determine demand and sellers determine supply.
c. Buyers and sellers as one group determine supply.
d. Buyers and sellers as one group determine demand.
78. For each good produced in a market economy, demand and supply determine
a. the price of the good, but not the quantity.
b. the quantity of the good, but not the price.
c. both price and quantity.
d. neither price nor quantity is determined by demand and supply, because prices are
ultimately set by producers.
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79. Price takers have no influence over market prices because there are
a. numerous buyers. b. numerous sellers.
c. distinctive products d. Both a and b are correct.
80. A market is a
a. group of demanders and suppliers of a particular good or service.
b. group of people with common desires.
c. place where only sellers meet.
d. place where only buyers come together.
81. An economy’s scarce resources are allocated by
a. economic planners. b. producers who use resources.
c. prices for resources. d. government regulation of scarce resources.
82. A competitive market is one in which
a. there is only one seller of the product.
b. each seller of the product is free to set the price of his product.
c. each seller attempts to compete with other sellers, causing fewer sellers in the market.
d. there are so many buyers and many sellers that each has a negligible impact on price.
83. In a competitive market,
a. only a few sellers sell the same product.
b. each seller has limited control over the price of his product.
c. if one buyer chooses to purchase a large quantity of the product, the price will rise.
d. if one seller withholds his product from the market, prices will rise.
84. In a competitive market, each seller has limited control over the price of his product
because
a. other sellers are offering similar products.
b. in competitive markets, buyers have more influence over price than sellers.
c. the products sold in competitive markets are generally in abundant supply.
d. sellers in competitive markets prefer to meet and set a price that each will profit from.
85. For a competitive market, which of the following is true?
a. A seller who charges more than the going price can increase her profit.
b. If a seller charges more than the going price, buyers will go elsewhere.
c. A seller often charges less than the going price to increase sales and profit.
d. A buyer can influence the price of the product, but only when purchasing from several
sellers.
86. Which of the following is NOT a characteristic of a perfectly competitive market?
a. similar products b. numerous sellers
c. market power d. numerous buyers
87. Price takers refer to buyers and sellers in
a. a perfectly competitive market. b.a monopolisticly competitive market.
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c. an oligopolistic market. d. a monopolistic market.

88. Buyers and sellers who have no influence on market price are referred to as
a. price makers. b. market pawns.
c. price takers. d. powerless.

89. The forces that make market economies work are

a. price and quantity. b. demand and supply.
c. the Senate and House of Representatives.
d. the Constitution and the Bill of Rights.
90. Which of the following are the words most commonly used by economists?
a. surplus and shortage b. scarcity and human wants
c. supply and demand d. price and quantity
91. Generally, the market for ice cream would be considered
a. a monopolistic market. b. a competitive market.
c. more organized than an auction. d. a market where individual sellers have
significant pricing power.
92. If a seller in a competitive market chooses to charge more than the market price, then
a. buyers would tend to buy more from this seller.
b. the owners of the raw materials used in production would raise the prices for the raw
materials.
c. other sellers would also raise their price.
d. buyers will tend to make purchases from other sellers.
93. If buyers and/or sellers are price takers, then individually
a. they have no influence on market price.
b. they have ultimate control over market price.
c. buyers will be able to find prices lower than those determined in the market.
d. they can somewhat influence the market price.
94. Economists in general
a. do not try to explain people’s tastes, but do try to explain what happens when tastes
change.
b. must be able to explain people’s tastes to explain what happens when tastes change.
c. do not believe that people’s tastes determine demand and therefore ignore the subject
of tastes.
d. believe that tastes and demand move in opposite directions.
95. A person’s expectations about the future
a. cannot affect demand because expectations change.
b. can affect future demand.
c. can affect current demand.
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d. cannot shift a demand curve.

96. You love peanut butter. You hear on the news that 50 % of the peanut crop in the South
has been wiped out, which will cause the price to double by the end of the year. As a
result,
a. your demand for peanut butter will increase by the end of the year.
b. your demand for peanut butter increases today.
97. Each of the following are determinants of demand EXCEPT
a. tastes. b. technology.
c. income. d. the price of related goods.
98. The amount of the good buyers are willing and able to purchase is the
a. demand. b. quantity supplied.
c. quantity demanded. d. supply.
99. If a good is “normal,” then an increase in income will result in
a. no change in the demand for the good.
b. an increase in the demand for the good.
c. a decrease in the demand for the good.
d. a lower market price.
100. According to the law of demand price and quantity
a. supplied are inversely related.
b. demanded are inversely related.
c. demanded are positively related.
d. supplied are positively related.
101. The law of demand says that when price
a. rises, quantity demanded falls.
b. rises, quantity demanded rises also.
c. falls, quantity supplied rises.
d. falls, quantity supplied falls also.
102. For economists, people’s tastes and demand are
a. beyond the realm of economics.
b. negatively related.
c. not related.
d. positively related.
c. your demand for peanut butter falls as you look for a substitute good.
d. you decide to give up peanut butter completely.
103. The behavior of buyers is represented by
a. demand.
b. supply.
c. a market.
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d. competition.
104. Which of the following would NOT be a determinant of demand?
a. the price of related goods
b. income
c. tastes
d. the prices of the inputs used to produce the good
105. If the price of a substitute to good X increases, then the
a. demand for good X will decrease.
b. market price of good X will decrease.
c. demand for good X will increase.
d. quantity demanded for good X will increase.
106. Suppose that a decrease in the price of X results in less of good Y sold. This would mean
that X and Y are
a. complementary goods. b. normal goods.
c. inferior goods. d. substitute goods.
107. Two goods are substitutes if a decrease in the price of one good
a. increases the demand for the other good.
b. reduces the demand for the other good.
c. reduces the quantity demanded of the other good.
d. increases the quantity demanded of the other good.
108. Two goods are complements if a decrease in the price of one good
a. increases the quantity demanded of the other good.
b. reduces the demand for the other good.
c. reduces the quantity demanded of the other good.
d. raises the demand for the other good.
109. If goods A and B are complements, an increase in the price of A will result in
a. more of good A sold. b. more of good B sold.
c. less of good B sold. d. no difference in the quantity sold of either good.
110. Suppose you like banana cream pie made with vanilla pudding. Assuming all other things
are constant, you notice that the price of bananas is higher. How would your demand for
vanilla pudding be affected by this?
a. It would decrease.
b. It would increase.
c. It would be unaffected.
d. There is insufficient information given to answer the question.
111. Alyssa rents 5 movies per month when the price is $3.00 each and 7 movies per month
when the price is $2.50. Alyssa has demonstrated the
a. law of price.
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b. law of supply.
c. actions of an irrational consumer.
d. law of demand.
112. A higher price for batteries would tend to
a. increase the demand for flashlights.
b. increase the demand for electricity.
c. decrease the demand for electricity.
d. increase the demand for batteries.
113. If a decrease in income increases the demand for a good, then the good is
a. a substitute good.
b. a complement good.
c. a normal good.
d. an inferior good.
114. What will happen in the rice market if buyers are expecting higher prices in the near
future?
a. The demand for rice will increase.
b. The demand for rice will decrease.
c. The demand for rice will be unaffected.
d. The supply of rice will increase.
115. A table that shows the relationship between the price of a good and the quantity
demanded is called a
a. demand table.
b. demand schedule.
c. price-quantity table.
d. quantity demanded schedule.
116. A demand schedule is a table showing the relationship between
a. the price of a good and the quantity supplied.
b. income and the quantity of the good demanded.
c. the price of a good and the quantity buyers are willing and able to purchase.
d. the determinants of demand and the quantity demanded.
117. When constructing a demand curve
a. demand is on the vertical axis and quantity is on the horizontal axis.
b. price is on the horizontal axis and quantity is on the vertical axis.
c. price is on the vertical axis and demand is on the horizontal axis.
d. price is on the vertical axis and quantity is on the horizontal axis.
118. The downward-sloping line which relates prices and quantity demanded is called the
a. demand schedule.
b. demand curve.
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c. quantity demanded line.

d. quantity demanded curve.
119. A demand curve illustrates the
a. tradeoff between inflation and unemployment.
b. positive relationship between price and quantity demanded.
c. negative relationship between price and quantity demanded.
d. maximum quantity of two goods an economy is capable of producing with available
resources and technology.
120. Which of the following would NOT affect an individual’s demand curve?
a. expectations b. income
c. price of related goods d. the number of buyers
121. Morgan tells you that the price of DVDs at the video store will be going up next week.
You will probably respond by
a. decreasing your current demand for DVDs.
b. increasing your current demand for DVDs.
c. not changing your current demand for DVDs.
d. refusing to ever buy anymore DVDs at that store.
122. The number of buyers in a market affects
a. the market demand for a good.
b. individual demand curves for a good.
c. both individual demand curves and the market demand for a good.
d. neither individual nor market demand.
123. If the number of buyers in the market decreases, the
a. demand in the market will increase.
b. demand in the market will decrease.
c. supply in the market will increase.
d. supply in the market will decrease.
124. Ryan tells you that he thinks the price of potato chips, his favorite food, will decrease in
the near future. He will probably respond by
a. decreasing his current demand for chips.
b. not changing his current demand for chips.
c. increasing his current demand for chips.
d. currently refusing to buy anymore chips.
125. The sum of all individual demand curves for a product is called
a. total demand. b. consumption demand.
c. summation demand. d. market demand.
126. The market demand is
a. the sum of all individual demands.
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b. the demand for every product in an industry.

c. the average quantity demanded at each price.
d. difficult to determine and is generally an estimation for most markets.
127. Suppose that the American Medical Association announces that men who shave their
heads are less likely to die of heart failure. We could expect the current demand for
a. hair gel to increase. b. razors to increase.
c. combs to increase. d. hair dye for men to increase.
128. Suppose that scientists find evidence that proves chocolate pudding lowers cholesterol.
We would expect to see
a. no change in the demand for chocolate pudding.
b. a decrease in the demand for chocolate pudding.
c. an increase in the demand for chocolate pudding.
d. a decrease in the supply of chocolate pudding.
129. If buyers now wanted to purchase larger quantities of Vanilla Coke,
a. the demand curve for Vanilla Coke would shift to the left.
b. we would move down the demand curve for Vanilla Coke.
c. the demand curve for Vanilla Coke would shift to the right.
d. we would move up the demand curve for Vanilla Coke.
130. When the price of a good or service changes,
a. supply shifts in the opposite direction.
b. demand shifts in the opposite direction.
c. demand shifts in the same direction.
d. there is a movement along a stable demand curve.
131. If a study by the AMA found that brown sugar caused weight loss while white sugar
caused weight gain we would see
a. an increase in demand for brown sugar and a decrease in demand for white sugar.
b. no change in either demand because weight loss is not a nonprice determinant of
demand.
c. an increase in demand for brown sugar, but no change in the demand for white sugar.
d. a decrease in the demand for white sugar, but no change in the demand for brown
sugar.
132. Nancy likes pasta today more than she did yesterday.
a. Nancy must now consider pasta a luxury.
b. Nancy must have received an increase in income.
c. Nancy is now willing to pay more than before for pasta.
d. The supply of pasta must have increased.

133. A country with an aging population will generally experience

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a. no change in either market demand or individual demand for prescription drugs.

b. a decrease in the market demand for prescription drugs.
c. an increase in individual demand for prescription drugs, but no change in market
demand.
d. an increase in the market demand for prescription drugs.
134. If there is a shortage of farm laborers, we would expect
a. the wages of farm laborers to increase.
b. the wages of farm laborers to decrease.
c. the prices of farm commodities to decrease.
d. a decrease in the demand for substitutes for farm labor.
135. What is the law of demand?
a. When the price of a good falls, buyers respond by purchasing more.
b. When income levels increase, buyers respond by purchasing more.
c. When buyers tastes for the good increase, they purchase more of the good.
d. When the price of a good or service rises, buyers respond by purchasing more.
136. An increase in the number of scholarships issued for college education would
a. increase the supply of education. b.decrease the supply of education.
c. increase the demand for education. d. decrease the demand for education.
137. For market economies, which would NOT be correct?
a. Prices guide economic decisions and thereby allocate scarce resources.
b. Prices ensure that quantity supplied and quantity demanded are in balance.
c. Prices ensure that anyone who wants a product can get it.
d. Prices influence how much of a good buyers choose to purchase and how much sellers
choose to produce.
138. The side of the market that deals with the willingness and ability to produce and sell is
a. demand. b. competition. c. supply. d. a monopoly.
139. The relationship between price and quantity supplied is
a. negative, or inverse. b. positive, or direct.
c. nonexistent. d.the same as the relationship between price and quantity demanded.
140. Other things equal, when the price of a good rises, the
a. quantity demanded of the good increases
b. supply increases
c. quantity supplied of the good rises.
d. demand curve shifts to the left.
141. When quantity demanded has increased at every price, it might be because
a. the number of buyers in the market has decreased.
b. income has increased and this good is an inferior good.
c. the consumer prefers another good more than this good.
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d. the price of a substitute good has increased.

142. In a free market system, what coordinates the actions of millions of people with their
varying abilities and desires?
a. producers b. prices c. consumers d. the government
143. For a seller, which of the following is NOT positively related?
a. the price of the good and the seller’s profit
b. the price of the good and quantity supplied
c. the seller’s profit and product cost
d. the seller’s profit and quantity supplied
144. The positive relationship between price and quantity supplied is called
a. a market. b. a change in supply. c. the demand curve.
d. the law of supply.
145. Other things equal, when the price of a good rises, the quantity supplied of the good also
rises. This is the law of
a. increasing costs. b. diminishing returns. c. supply. d. demand.
146. If the number of sellers in a market increases, the
a. demand in that market will increase.
b. supply in that market will increase.
c. supply in that market will decrease.
d. demand in that market will decrease.
147. If suppliers expect the price of their product to fall in the future they will
a. decrease supply now. b. increase supply now.
c. increase supply in the future but not now.
d. do nothing, since there is nothing they can do to affect the price in the future.
148. Suppose there is an increase in input prices. We would expect supply
a. to decrease. b. to increase. c.could increase or decrease.
d.to remain unchanged.
149. The unique point at which the supply and demand curves intersect is called
a. market unity. b.an agreement. c.cohesion. d. equilibrium.
150. The price where quantity supplied equals quantity demanded is called the
a. coordinating price. b.monopoly price. c.equilibrium price.
d.All of the above are correct./.