Sample practice Exam I

(chapter 1,2,3)
1) In economics, "demand" refers to
A) what people need instead of want without paying for it.
B) the minimum amount of a good people needs to survive.
C) the satisfaction a good will provide a person.
D) how much of a good people will buy at any price during a given time period.

2) The law of demand states that

A) consumers with more income will spend more on goods and services.
B) a higher price will lead to increased sales.
C) the price can never be too high for some consumers.
D) quantity demanded of a good will vary inversely with the price of that good.

3) The law of demand includes the statement "other things being equal." These other things
include all of the following EXCEPT
A) the price of that good in the law of demand.
B) consumers' income.
C) consumers' tastes and preferences.
D) the number of potential buyers.

4) Refer to the above figure. Which panel demonstrates the law of demand?
A) Panel A
B) Panel B
C) Panel C
D) Panel D

5) According to the law of demand, a decrease in the price of a good causes

A) a rightward shift of the demand curve for that good.
B) a leftward shift of the demand curve for that good.
C) an upward movement along the demand curve for that good.
D) a downward movement along the demand curve for that good.
6) Market demand is
A) the total quantities demanded of all consumers of a particular item at given prices.
B) a movement along the demand curve in response to the market.
C) total equilibrium demand for the market.
D) the demand for and supply of a good or service.

7) Demand is defined as
A) a schedule of how much of an item people will purchase at any particular price of that item
during a specified time period, other things being constant.
B) a specific quantity of an item that people want at a particular price of that item during a
specified time period, other things being constant.
C) a schedule of how much of a good or service people will purchase at any particular price of a
different item during the specified time period, other things being constant.
D) a specific quantity of a good or service that people will purchase at one particular price of
another item during a specified time period, other things being constant.

8) The fact that when the price of a good goes down, people buy more of it is called
A) the law of supply.
B) the law of demand.
C) market equilibrium.
D) ceteris paribus.

9) Suppose that the demand curve for apples is downward sloping and the price per pound
decreases from $1.25 to $1.00. We would then expect
A) the demand for apples to decrease.
B) the quantity of apples demanded to fall.
C) the demand curve to shift toward the origin.
D) the quantity of apples demanded to increase.

10) Which of the following will occur as the price of a good decreases?
A) The demand curve for that good will shift to the left.
B) The demand curve for that good will shift to the right.
C) The quantity demanded for that good will increase.
D) Demand for that good will increase.

11) Adding the quantities demanded by all consumers at every price will yield
A) the market-clearing price.
B) the number of consumers.
C) the total substitution effect from a price change.
D) the market demand curve.

12) Gasoline prices in the United States decreased significantly between 2014 and 2016. A
decrease in the price of gasoline, holding other things constant, will cause which of the following
to occur?
A) increase the demand for gasoline.
B) decrease the demand for gasoline.
C) increase the quantity of gasoline demanded.
D) decrease the quantity of gasoline demanded.

13) A demand curve represents a(n)

A) direct relationship between price and quantity demanded.
B) direct relationship between price and demand.
C) indirect or inverse relationship between price and quantity demanded.
D) indirect or inverse relationship between price and supply.

14) If more buyers came into the market for a good, we would expect to see the market demand
curve
A) shift inward and to the left.
B) remain unchanged since none of the determinants of individual demand changed.
C) shift outward and to the right.
D) reflect a positive relationship between price and quantity demanded.

12) Suppose an individual experience a permanent increase in income. As a result of this

increased income, further assume that the individual eats dinner at restaurants more frequently
each month. This information suggests that dinners at restaurants for this individual are
A) an inferior good.
B) a substitute good.
C) a normal good.
D) both complimentary and inferior.

13) An inferior good is one for which

A) demand increases as income increases.
B) demand decreases as income increases.
C) the demand curve is vertical.
D) the demand curve slopes up.

14) Which of the following will cause a rightward shift of the demand curve?
A) a decrease in the cost of production
B) a decrease in the price of the good
C) an increase in the expected future price of the good
D) all of the above

15) If bagels and croissants are substitute goods, which of the following is likely to occur if the
price of bagels has decreased?
A) The demand curve for bagels shifts to the right.
B) A leftward movement along the bagel demand curve.
C) The demand curve for croissants shifts to the right.
D) The demand curve for croissants shifts to the left.

16) Of the following, which is the least likely to be an example of substitute goods?
A) beer and pretzels
B) margarine and butter
C) beef and chicken
D) tea and coffee

17) Which of the following will cause a movement along the demand curve for shoes?
A) an increase in the price of socks
B) an increase in income
C) an increase in the price of shoes
D) all of the above

18) The law of supply implies that the supply curve is

A) flat.
B) upward sloping.
C) downward sloping.
D) vertical.

19) If the price of portable power banks increases, then there will be ________ of portable power
banks.
A) a decrease in the supply
B) an increase in the supply
C) an increase in the quantity supplied
D) a decrease in the quantity supplied

20) A movement along a supply curve is induced by a change in

A) input prices.
B) taxes and subsidies.
C) price expectations.
D) the product's own price.

21) Other things being equal, an increase in the price of a good leads to an increase in the amount
produced. This is known as
A) the law of demand.
B) the law of supply.
C) ceteris paribus.
D) equilibrium.

22) Which of the following causes a movement along a supply curve?

A) a change in resource costs
B) a change in technology
C) a change in the price
D) all of the above

23) A per-unit government tax on producers of a good tends to

A) reduce the supply of the good.
B) increase the supply of the good.
C) cause an upward movement along the supply curve.
D) not have any effect on the good's supply.

24) All of the following will cause the supply curve of good A to shift rightward EXCEPT
A) a reduction in the prices of inputs used to produce good A.
B) an increase in the number of firms in the industry producing good A.
C) a decrease in the per-unit tax on good A which producers must pay.
D) an increase in the market price of good A.

25) Refer to the above figure. Moving from point A to point B indicates
A) an increase in supply.
B) an increase in quantity supplied.
C) a decrease in supply.
D) a decrease in quantity supplied.

26) According to the above table, at a price of $8 per unit, other things constant
A) consumers will continue to bid prices upward.
B) there will be no tendency for the market to approach an equilibrium.
C) a surplus of 100 units will exist.
D) a shortage of 80 units will exist.
27) According to the market data for good X in the above table, a stable equilibrium price is
established at
A) $2.
B) $4.
C) $6.
D) $8.

28) Given the market data for good X in the above table, an equilibrium quantity is established at
A) 90 units.
B) 60 units.
C) 30 units.
D) 120 units.

29) At a market clearing price

A) the quantity demanded will just equal the quantity supplied.
B) there will be an excess quantity demanded.
C) there will be a tendency for price to rise over time.
D) the demand function will shift outward.

30) A surplus occurs whenever

A) price is below the equilibrium price.
B) price is above the equilibrium price.
C) price is equal to the equilibrium price.
D) the supply curve is downward sloping.

31) Equilibrium in a market occurs when

A) demand and supply indicate a small surplus of a good.
B) price is at its minimum.
C) quantity supplied and quantity demanded are equal at the market clearing price.
D) the market price leads to a decrease in quantity demanded.

32) Another name for a shortage is

A) excess quantity supplied.
B) excess quantity demanded.
C) equilibrium.
D) market clearing.

33) Economic analysis is used

A) only by instructors and students in economics to understand the world.
B) only by business people to raise profits.
C) only by policy makers to make policy decisions.
D) in all decision making.

34) Which statement most accurately describes economics?

A) Economics is the study of how people make money.
B) Economics is the study of how people make choices to satisfy their wants.
C) Economics is the study of social values a society should choose.
D) Economics is the study of how to eliminate scarcity.

35) In economic analysis, people's resources are

A) limited and their wants are unlimited.
B) unlimited and their wants are also unlimited.
C) limited and their wants are also limited.
D) unlimited and their wants are limited.

36) Economics is a part of the

A) social sciences.
B) natural sciences.
C) biological sciences.
D) organizational sciences.

37) Macroeconomics deals with ________ while microeconomics deals with ________.
A) choices important to people; choices not important to people
B) economywide choices; choices of individuals
C) choices that involve money; choices that does not involve money
D) choices of rich people; choices of poor people

38) What is the type of mechanism that answers the basic economic questions through a
decentralized decision-making process?
A) market system
B) dictatorship
C) command and control
D) mixed economic system

39) In a market system, ________ provide signals about whether resources are relatively scarce
or abundant.
A) prices
B) buyers alone
C) government officials
D) scientists
40) When the text refers to rational self-interest, it means
A) your looking out for what is best for you as an individual.
B) your focus on your own contributions to society.
C) behavior that makes society better off.
D) behavior that hurts other people.

41) A simplified representation of the real world that is used to explain economic phenomena is
a(n)
A) viewpoint.
B) model.
C) assumption.
D) implication.

42) "If event X occurs then event Y will follow" is a

A) positive statement.
B) normative statement.
C) non-testable statement.
D) statement lacking in logic.

43) "No individual should have less than $20,000 income in the United States in 2017" is an
example of
A) a normative statement.
B) a positive statement.
C) an illogical and refutable statement.
D) a truism.

44) Scarcity refers to

A) a shortage in a good or service.
B) the ability of society to consume all that it produces.
C) the inability of society to satisfy all human wants because of limited resources.
D) the inability of an individual to purchase a good or service due to her limited income.

45) In the production of goods and services, trade-offs exist because

A) not all production is efficient.
B) society has only a limited amount of productive resources.
C) we have abundant resources to choose from.
D) human wants and needs are limited at a particular point in time.

46) Which of the following are considered factors of production?

I. Land
II. Labor
III. Physical capital
IV. Entrepreneurship
A) I and II only
B) I and III only
C) I, II and III only
D) I, II, III and IV

47) Opportunity cost

A) can only be measured as a paid cost.
B) is always the value of the next best forgone opportunity.
C) does not exist since there are no receipts.
D) is always the lowest valued alternative.

48) Suppose you have three choices—go to a movie, read a book, or sleep. You choose to go to a
movie. The opportunity cost of the movie is
A) the value of the book not read.
B) the value of sleeping which you enjoy the least.
C) the value of the concert that you didn't attend.
D) the value of the activity that you would have selected if you hadn't gone to the movie.

49) Refer to the above figure. A farmer has 50 acres of land on which to grow wheat or beans.
An acre of land yields 400 bushels of beans or 800 bushels of wheat. Which of the following is a
possible combination of beans and wheat that can be grown, assuming the land is farmed
efficiently?
A) 30,000 bushels of each
B) 20,000 bushels of beans and 40,000 bushels of wheat
C) 5,000 bushels of beans and 5,000 bushels of wheat
D) 16,000 bushels of beans and 8,000 bushels of wheat

50) The production possibilities curve shows all possible combinations of

A) two goods that are desired by society.
B) two goods that can be efficiently produced with a given set of resources.
C) two goods that can be purchased given the prices of the goods.
D) two goods that two countries can trade with each other.