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With the baby boomer generation hitting the retirement age, waiting lists to get into nursing homes are on the rise. In this situation, we could reasonably expect the demand for geriatric care to:


A) increase due to the number of buyers increasing.
B) decrease due to the number of buyers increasing.
C) increase due to expectations of future prices.
D) decrease due to expectations of future prices.

E) A) and C)
F) B) and D)

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For almost all goods, the:


A) lower the price goes, the higher the quantity demanded.
B) higher the price goes, the more luxurious it is.
C) lower the price goes, the higher demand is.
D) higher the price goes, the higher the quantity demanded.

E) None of the above
F) All of the above

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Suppose the advancement of computers has decreased the productivity of a paper mill. This will likely cause _______ the supply curve for paper.


A) a rightward shift of
B) a leftward shift of
C) a shift straight up of
D) a movement along

E) A) and B)
F) All of the above

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Which of the following is the best example of a standardized good?


A) Corn
B) A handbag
C) An autographed baseball
D) Breakfast cereal

E) All of the above
F) B) and D)

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A department store announces that its annual tent sale is happening next week. What affect will this have on your current demand for a coat from that department store?


A) Your demand will increase because of an income constraint.
B) Your demand will increase because of your expectations about the price of the coat next week.
C) Your demand will decrease because of an income constraint.
D) Your demand will decrease because of your expectations about the price of the coat next week.

E) A) and D)
F) A) and B)

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The city of Burlington experiences very high temperatures each summer and very low temperatures each winter. We would expect the demand for ice cream to:


A) increase constantly.
B) decrease each summer and increase each winter.
C) increase each summer and decrease each winter.
D) decrease constantly.

E) A) and B)
F) C) and D)

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Members who shop at a warehouse store, such as Sam's Club or Costco, pay very low prices on the goods and services they buy. Do these sorts of customers incur transaction costs?


A) Yes, because they must be members to shop at the store.
B) No, because they pay prices that are lower than at any other location.
C) Yes, because they must buy a product in bulk.
D) No, because they can return purchases for any reason.

E) B) and C)
F) C) and D)

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What happens to the demand curve when a non-price determinant of demand changes?


A) The demand curve shifts to the left or to the right.
B) There is a movement along the demand curve.
C) The consumer moves to a different price point.
D) The demand curve does not change when a non-price determinant of demand changes.

E) B) and C)
F) None of the above

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The table shown depicts the demand and supply schedules of a good. At a price of $0.50, quantity demanded: A) exceeds quantity supplied, and a shortage (excess demand) exists. B) is less than quantity supplied, and a shortage (excess demand) exists. C) exceeds quantity supplied, and a surplus (excess supply) exists. D) is less than quantity supplied, and a surplus (excess supply) exists. The table shown depicts the demand and supply schedules of a good. At a price of $0.50, quantity demanded:


A) exceeds quantity supplied, and a shortage (excess demand) exists.
B) is less than quantity supplied, and a shortage (excess demand) exists.
C) exceeds quantity supplied, and a surplus (excess supply) exists.
D) is less than quantity supplied, and a surplus (excess supply) exists.

E) B) and C)
F) C) and D)

Correct Answer

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Oliver just brought home a new kitten. We could expect Oliver's demand for:


A) cat toys, a complementary good, to increase.
B) cat toys, a complementary good, to decrease.
C) dog toys, a substitute good, to increase.
D) dog toys, a substitute good, to decrease.

E) B) and C)
F) A) and D)

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Assume the market in the graph shown was originally at equilibrium where demand (D) and supply (S) intersect. However, something causes the demand to shift to D<sub>2</sub>. What could have caused such a shift? A) The good became more popular with consumers. B) Consumers expected the price of the good to drop in the near future. C) The good became cheaper to produce. D) Substitutes for this good became less expensive. Assume the market in the graph shown was originally at equilibrium where demand (D) and supply (S) intersect. However, something causes the demand to shift to D2. What could have caused such a shift?


A) The good became more popular with consumers.
B) Consumers expected the price of the good to drop in the near future.
C) The good became cheaper to produce.
D) Substitutes for this good became less expensive.

E) A) and D)
F) B) and C)

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In the market shown in the graph, the equilibrium price is: A) $5. B) $10. C) $15. D) $20. In the market shown in the graph, the equilibrium price is:


A) $5.
B) $10.
C) $15.
D) $20.

E) B) and D)
F) C) and D)

Correct Answer

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Consider a market that is in equilibrium. If the market experiences both a decrease in demand and a decrease in supply:


A) the equilibrium price and quantity will fall.
B) the equilibrium quantity will fall, but the change in the equilibrium price cannot be predicted.
C) the equilibrium price will fall, but the change in the equilibrium quantity cannot be predicted.
D) the equilibrium price and quantity will rise.

E) None of the above
F) A) and B)

Correct Answer

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Suppose the price of dog collars has decreased and all other variables have remained constant. This change can be shown graphically as a:


A) shift in the demand curve to the right.
B) shift in the demand curve to the left.
C) movement along the demand curve to the right.
D) movement along the demand curve to the left.

E) A) and C)
F) C) and D)

Correct Answer

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We say that goods are complements when they:


A) serve similar-enough purposes that a consumer might purchase one in place of the other.
B) are consumed together, so that purchasing one will make a consumer more likely to purchase the other.
C) can replace something consumers typically purchase at a significantly lower price.
D) change a consumer's preferences for a good or service.

E) A) and B)
F) A) and C)

Correct Answer

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Suppose a tornado levels hundreds of homes. As rebuilding begins, how might you analyze the effect this would have on the market for lumber?


A) The demand for lumber would increase, increasing both the equilibrium price and quantity.
B) The supply of lumber would increase, decreasing the equilibrium price and increasing the equilibrium quantity.
C) The demand for lumber would increase, decreasing the equilibrium price and increasing the equilibrium quantity.
D) The supply of lumber would decrease, increasing the equilibrium price and decreasing the equilibrium quantity.

E) A) and B)
F) A) and C)

Correct Answer

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Consider the market for potato chips, which is currently in equilibrium. Now, suppose that two events happen simultaneously: (1) a new technology is invented that allows potato chip makers to produce potato chips at a lower cost and (2) the price of pretzels (a substitute in consumption) rises. What effect might these events have on the market for cupcakes?Supply will increase.Demand will increase.The change in equilibrium price cannot be determined.The change in equilibrium quantity cannot be determined.


A) I, II, and III only
B) II and III only
C) I and IV only
D) I, II, and IV only

E) None of the above
F) All of the above

Correct Answer

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The law of demand describes the:


A) inverse relationship between price and quantity demanded.
B) direct relationship between price and quantity demanded.
C) inverse relationship between income and quantity demanded.
D) direct relationship between income and quantity demanded.

E) B) and C)
F) A) and B)

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Ceteris paribus is:


A) the Latin term for "all other things being the same."
B) only necessary for the definition of the law of demand.
C) often used by economists to isolate the effect of a multiple changes that are important.
D) the Latin term for "as things change only consider these changes".

E) A) and B)
F) A) and C)

Correct Answer

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Which of the following describes one reason the supply of cell phones has increased?


A) More cell phone towers have been built.
B) Better technology allows cell phones to be produced for less money.
C) Consumer preference for cell phones has increased.
D) Consumers expect that land lines will cease to exist in the near future.

E) A) and D)
F) A) and C)

Correct Answer

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