Test Your Knowledge!

Question 1 of 10

1. Question

10 points

Which of the following is a correct application of the law of demand?

A grocery store lowers the price of its produce and notices that the amount of produce purchased by its customers increases the next week.
A grocery store raises the price of its produce and notices that the amount of produce purchased by its customers increases the next week.
A grocery store raises the salary of its personnel and notices that the quantity of its produce decreases the next week.
A grocery store raises the salary of its personnel and notices that the profits for the store are lower the next week.

Question 2 of 10

2. Question

10 points

A graph of a typical demand curve shows a ______________ line (or curve) which illustrates that as the price of the product ______________, the quantity purchased _________________.

downward sloping (from top left to bottom right); decreases; increases.
downward sloping (from top left to bottom right); increases; increases.
upward sloping (from bottom left to top right); decreases; increases.
upward sloping (from bottom left to top right); increases; increases.

Question 3 of 10

3. Question

10 points

When we graph the supply curve we notice that it ________________. This means that as the price of the product ____________, the quantity purchased ________________.

Slopes upward (from bottom left to top right); increases; increases.
Slopes downward (from bottom right to top left); decreases; increases.
Slopes upward (from bottom left to top right); increases; decreases.
Slopes downward (from bottom right to top left); decreases; decreases.

Question 4 of 10

4. Question

10 points

The income effect as it relates to the law of supply states that:

As the price of the product increases, the seller's income rises. This gives the seller greater incentive and ability to produce more products.
As the price of the product decreases, the seller's income rises. This gives the seller greater incentive and ability to produce more products.
As the price of the product increases, other competing products, ceteris paribus, will become less attractive to produce.
As the price of the product decreases, other competing products, ceteris paribus, will become less attractive to produce.

Question 5 of 10

5. Question

10 points

In a free market, the market price of a good or service occurs at the ___________________; if a government sets the price of the good or service above this point (for example, a minimum wage), then we will end up with a ______________ of the good or service.

intersection of the demand and supply curve; surplus
bottom part of the marginal cost curve; shortage
the most outward point on the production possibilities curve; shortage
the most outward point on the production possibilities curve; surplus

Question 6 of 10

6. Question

10 points

Four of the following five describe factors that shift the demand curve; these are what we call demand determinants. Which one of the five is not a demand determinant?

Technology changes
Changes in income and wealth
Changes in the prices of related products
Changes in expected future prices
Changes in tastes and preferences

Question 7 of 10

7. Question

10 points

Let’s say that we are looking at the market for electric cars. What happens to the demand and the supply and the market (equilibrium) price and quantity of electric cars if, ceteris paribus, oil (gasoline) prices fall significantly?

Demand for electric cars will fall; supply of electric cars (the supply curve) will stay the same; the equilibrium price and quantity of electric cars will fall.
Demand for electric cars will rise; supply of electric cars (the supply curve) will fall; the equilibrium price and quantity of electric cars will rise.
Demand for electric cars will fall; supply of electric cars will rise (the supply curve moves to the right); the equilibrium price will fall and the equilibrium quantity of electric cars will rise.
Demand for electric cars will rise; supply of electric cars will fall (the supply curve moves to the left); the equilibrium price will rise and the equilibrium quantity of electric cars will rise.

Question 8 of 10

8. Question

10 points

Let’s consider the market for apartments (rentals). What will happen to the price (rent) and quantity (number of apartments) at equilibrium if the following two changes occur simultaneously?
A. Interest rates rise; this makes it more expensive to purchase homes for sale (a substitute good).
B. The government increases its subsidies for the production of rental apartments.

Both demand and supply increase; therefore, the equilibrium quantity increases, and the change in the equilibrium price is indeterminate (unknown).
Both demand and supply decrease; therefore, the equilibrium quantity decreases, and the change in the equilibrium price is indeterminate (unknown).
The demand increases, and the supply decreases; therefore, the equilibrium quantity change is indeterminate (unknown), and the equilibrium price decreases.
The demand decreases, and the supply increases; therefore, the equilibrium quantity change is indeterminate (unknown), and the equilibrium price decreases.

Question 9 of 10

9. Question

10 points

Let’s consider the market for corn (a normal good). What will happen to the market (equilibrium) price and quantity of corn if the following two changes occur at the same time? Note: take the magnitude of each change into account.
A. Because of a growing economy, peoples’ average incomes increase by a modest (8%) amount over the next decade.
B. Because of significant advances in technology (genetic modifications, etc.), the cost of producing corn is expected to fall significantly (at least 30%).

The demand for corn increases a little bit; the supply of corn increases significantly. Consequently, the equilibrium quantity increases and the equilibrium price decreases.
The demand for corn decreases a little bit; the supply of corn decreases significantly. Consequently, the equilibrium quantity decreases and the equilibrium price increases.
The demand for corn increases a lot; the supply of corn increases a little bit. Consequently, the equilibrium quantity increases and the equilibrium price increases.
The demand for corn decreases a lot; the supply of corn increases a little bit. Consequently, the equilibrium quantity increases and the equilibrium price change is indeterminate.

Question 10 of 10

10. Question

10 points

Consumer surplus is the sum total of the difference between what consumers are willing to pay for product and how much they actually value the product. Producer surplus is the sum total of the difference between what producers are willing to sell the product for and how much they are actually receiving for the product. What happens to consumer surplus and producer surplus if both the demand and the supply of the product decrease by equal amounts (so that the market price stays the same)?

Both consumer surplus and producer surplus decrease
Both consumer surplus and producer surplus increase
Consumer surplus decreases and producer surplus increases
Consumer surplus increases and producer surplus decreases

Quiz-summary

Information

Results

Categories

1. Question

2. Question

3. Question

4. Question

5. Question

6. Question

7. Question

8. Question

9. Question

10. Question

3 Comments

Leave a reply Cancel reply

Unit 2