ECON 232 Chapter 3 Study Quiz
 
 
 
 
1. In 2000 the price of oil rose dramatically, which in turn caused the price of natural gas to increase. This can best be explained by saying that oil and natural gas are:
A. complementary goods and the higher price for oil increased the demand for natural gas.
B. substitute goods and the higher price for oil increased the demand for natural gas.
C. complementary goods and the higher price for oil decreased the supply of natural gas.
D. substitute goods and the higher price for oil decreased the supply of natural gas.

 
2. A shift to the right in the demand curve for product A can be most reasonably explained by saying that:
A. consumer incomes have declined and they now want to buy less of A at each possible price.
B. the price of A has increased and, as a result, consumers want to purchase less of it.
C. consumer preferences have changed in favor of A so that they now want to buy more at each possible price.
D. the price of A has declined and, as a result, consumers want to purchase more of it.

 
3. The rationing function of prices refers to the fact that government must distribute any surplus goods that may be left in a competitive market.
A. True
B. False

 
4. Assume product A is an input in the production of product B. In turn product B is a complement to product C. We can expect a decrease in the price of A to:
A. increase the supply of B and increase the demand for C.
B. decrease the supply of B and increase the demand for C.
C. decrease the supply of B and decrease the demand for C.
D. increase the supply of B and decrease the demand for C.

 
5. With a downsloping demand curve and an upsloping supply curve for a product, an increase in consumer income will:
A. increase equilibrium price and quantity if the product is a normal good.
B. decrease equilibrium price and quantity if the product is a normal good.
C. have no effect on equilibrium price and quantity.
D. reduce the quantity demanded, but not shift the demand curve.

 
6. If a product is in surplus supply, its price:
A. is below the equilibrium level.
B. is above the equilibrium level.
C. will rise in the near future.
D. is in equilibrium.

 
7. By an "increase in demand" we mean that :
A. product price has fallen so consumers move down to a new point on the demand curve.
B. the quantity demanded at each price in a set of prices is greater.
C. the quantity demanded at each price in a set of prices is smaller.
D. a leftward shif of the demand curve has occurred.

 
8. A government subsidy per unit of output increases supply.
A. True
B. False

 
9. Suppose in each of four successive years producers sell more of their product and at lower prices. This could be explained:
A. by small annual increases in supply accompanied by large annual increases in demand.
B. in terms of a stable supply curve and increasing demand.
C. in terms of a stable demand curve and increasing supply.
D. as an exception to the law of supply.

 
10. If price is above the equilibrium level, competition among sellers to reduce the resulting:
A. surplus will increase quantity demanded and decrease quantity supplied.
B. shortage will decrease quantity demanded and increase quantity supplied.
C. surplus will decrease quantity demanded and increase quantity supplied.
D. shortage will increase quantity demanded and decrease quantity supplied.

 
11. Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity?
A. an increase in supply
B. an increase in demand
C. a decrease in supply
D. a decrease in demand

 
12.
In the following question(s) you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X, (2) the equilibrium price (P) of X and (3) the equilibrium quantity (Q) of X.
R-1 REF03127

Refer to the above. If X is an inferior good, a decrease in income will:
A. decrease D, decrease P, and decrease Q.
B. decrease D, decrease P, and increase Q.
C. increase S, decrease P, and increase Q.
D. increase D, increase P, and increase Q.


 
13.
In the following question(s) you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X, (2) the equilibrium price (P) of X and (3) the equilibrium quantity (Q) of X.
R-1 REF03127

Refer to the above. An increase in income, if X is a normal good, will:
A. increase D, increase P, and increase Q.
B. increase D, increase P, and decrease Q.
C. increase S, increase P, and increase Q.
D. decrease D, increase P, and increase Q.


 
14. Cameras and film are:
A. substitute goods.
B. complementary goods.
C. independent goods.
D. inferior goods.

 
15. In a competitive market the equilibrium price and quantity occur where:
A. the downsloping demand curve intersects the upsloping supply curve.
B. the upsloping demand curve intersects the downsloping supply curve.
C. consumers and suppliers bargain to a mutually acceptable price.
D. quantity demanded exceeds quantity supplied or vice versa.

 
16.

R-2 c0388r

Refer to the above table. If demand is represented by columns (3) and (2) and supply is represented by columns (3) and (5), equilibrium price and quantity will be:
A. $10 and 60 units.
B. $9 and 50 units.
C. $8 and 60 units.
D. $7 and 50 units.


 
17.

R-2 c0388r

Refer to the above table. In relation to column (3), a change from column (5) to column (4) would indicate a(n):
A. increase in demand.
B. decrease in demand.
C. increase in supply.
D. decrease in supply.


 
18. The law of demand states that:
A. price and quantity demanded are inversely related.
B. the larger the number of buyers in a market, the lower will be product price.
C. price and quantity demanded are directly related.
D. consumers will buy more of a product at high prices than at low prices.

 
19.

R-3 C0356r

A decrease in demand is depicted by a:
A. move from point x to point y.
B. a shift from D1 to D2.
C. shift from D2 to D1.
D. move from point y to point x.


 
20.
(Advanced analysis) Answer the next question(s) on the basis of the following information. The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q.
R-4 REF03150

Refer to the above information. If demand changed from P = 10 - .2Q to P = 7 - .3Q, we can conclude that:
A. demand has increased.
B. demand has declined.
C. supply will increase.
D. supply will decrease.


 
21. If L and M are complementary goods, an increase in the price of L will result in:
A. an increase in the sales of L.
B. no change in either the price or sales of M.
C. a decrease in the sales of M.
D. an increase in the sales of M.

 
22. A market:
A. reflects upsloping demand and downsloping supply curves.
B. entails the exchange of goods, but not services.
C. is an institution that brings together buyers and sellers.
D. always entails face-to-face contact between buyer and seller.

 
23. Assume in a competitive market that price is initially below the equilibrium level. We can predict that price will:
A. decrease, quantity demanded will decrease, and quantity supplied will increase.
B. decrease and quantity demanded and quantity supplied will both decrease.
C. decrease, quantity demanded will increase, and quantity supplied will decrease.
D. increase, quantity demanded will decrease, and quantity supplied will increase.

 
24.
R-5 F03140

Which of the above diagrams illustrate(s) the effect of a decrease in incomes on the market for secondhand clothing?
A. A and C
B. A only
C. B only
D. C only


 
25.
R-5 F03140

Which of the above diagrams illustrate(s) the effect of a governmental subsidy on the market for AIDS research?
A. A only
B. B only
C. C only
D. D only


 
26. At the equilibrium price:
A. quantity supplied may exceed quantity demanded or vice versa.
B. there are no pressures on price to either rise or fall.
C. there are forces that cause price to rise.
D. there are forces that cause price to fall.

 
27.
R-6 F03083

Refer to the above diagram. A shortage of 160 units would be encountered if price was:
A. $1.10, that is, $1.60 minus $.50.
B. $1.60.
C. $1.00.
D. $.50.


 
28.
R-6 F03083

Refer to the above diagram. A surplus of 160 units would be encountered if price was:
A. $1.10, that is, $1.60 minus $.50.
B. $1.60.
C. $1.00.
D. $.50.


 
29.

R-7 c0370r

A decrease in supply is depicted by a:
A. move from point x to point y.
B. a shift from S1 to S2.
C. shift from S2 to S1.
D. move from point y to point x.


 
30. At the point where the demand and supply curves for a product intersect:
A. the "selling price" and the "buying price" need not be equal.
B. the market may, or may not, be in equilibrium.
C. either a shortage or a surplus of the product might exist, depending on the degree of competition.
D. the quantity that consumers want to purchase and the amount producers choose to sell are the same.

 

This is the end of the test. When you have completed all the questions and reviewed your answers, press the button below to grade the test.