Name: 
 

Chapters 4 and 5 Practice Questions



Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
 

1. 

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.
 

2. 

A movement along the supply curve might be caused by a change in
a.
technology.
b.
input prices.
c.
expectations about future prices.
d.
the price of the good or service.
 
 
Figure 4-7
chapters_4_and_5_pr_files/i0040000.jpg
 

3. 

Refer to Figure 4-7. At the equilibrium price,
a.
200 units would be supplied and demanded.
b.
400 units would be supplied and demanded.
c.
600 units would be supplied and demanded.
d.
600 units would be supplied, but only 200 would be demanded.
 
 
Figure 4-10
chapters_4_and_5_pr_files/i0060000.jpg
 

4. 

Refer to Figure 4-10. Which of the four graphs represents the market for cars after new technology was installed on assembly lines?
a.
A
b.
B
c.
C
d.
D
 

5. 

Refer to Figure 4-10. Which of the four graphs represents the market for pizza delivery in a college town in September?
a.
A
b.
B
c.
C
d.
D
 

6. 

Refer to Figure 4-10. Which of the four graphs shown illustrates an increase in quantity supplied?
a.
A.
b.
B.
c.
C.
d.
D.
 

7. 

Refer to Figure 4-10. Which of the four graphs represents the market for peanut butter after a major hurricane hits the peanut-growing south?
a.
A
b.
B
c.
C
d.
D
 

8. 

There are very few, if any, good substitutes for motor oil. Therefore,
a.
the supply of motor oil would tend to be price elastic.
b.
the demand for motor oil would tend to be price elastic.
c.
the demand for motor oil would tend to be price inelastic.
d.
the demand for motor oil would tend to be income elastic.
 

9. 

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.
b.
law of supply.
c.
actions of an irrational consumer.
d.
law of demand.
 

10. 

If, at the current price, there is a shortage of a good,
a.
sellers are producing more than buyers wish to buy.
b.
the market must be in equilibrium.
c.
the price is below the equilibrium price.
d.
quantity demanded equals quantity supplied.
 

11. 

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.
 

12. 

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.
 

13. 

Workers at a bicycle assembly plant currently make minimum wage. If the federal government increases the minimum wage by $1.00 an hour it is likely that the
a.
demand for bicycle assembly workers will increase.
b.
supply of bicycles will shift to the right.
c.
supply of bicycles will shift to the left.
d.
firm must increase output to maintain profit levels.
 

14. 

Demand is said to be elastic if
a.
the price of the good responds substantially to changes in demand.
b.
demand shifts substantially when the price of the good changes.
c.
buyers do not respond much to changes in the price of the good.
d.
the quantity demanded responds substantially to changes in the price of the good.
 
 
Figure 5-1
chapters_4_and_5_pr_files/i0180000.jpg
 

15. 

Refer to Figure 5-1. The section of the demand curve labeled C represents the
a.
elastic section of the demand curve.
b.
perfectly elastic section of the demand curve.
c.
unit elastic section of the demand curve.
d.
inelastic section of the demand curve.
 

16. 

Refer to Figure 5-1. The section of the demand curve labeled A represents the
a.
elastic section of the demand curve.
b.
inelastic section of the demand curve.
c.
unit elastic section of the demand curve.
d.
perfectly elastic section of the demand curve.
 

17. 

An example of substitute goods would be
a.
butter and margarine.
b.
tennis balls and tennis rackets.
c.
televisions and tractors.
d.
peanut butter and jelly.
 

18. 

When the price of bubble gum is $0.50, the quantity demanded is 400 packs per day. When the price falls to $0.40, the quantity demanded increases to 600. Given this information and using the midpoint method, you know that the demand for bubble gum is
a.
inelastic.
b.
elastic.
c.
unit elastic.
d.
perfectly inelastic.
 

19. 

A perfectly elastic demand implies that
a.
buyers will not respond to any change in price.
b.
any rise in price above that represented by the demand curve will result in no output demanded.
c.
price and quantity demanded respond proportionally.
d.
price will rise by an infinite amount when there is a change in quantity demanded.
 

20. 

An early frost in the vineyards of Napa Valley would cause
a.
an increase in the demand for wine, increasing price.
b.
an increase in the supply of wine, decreasing price.
c.
a decrease in the demand for wine, decreasing price.
d.
a decrease in the supply of wine, increasing price.
 

21. 

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.
c.
your demand for peanut butter falls as you look for a substitute good.
d.
you decide to give up peanut butter completely.
 

22. 

A legal maximum price at which a good can be sold is a price
a.
floor.
b.
stabilization.
c.
support.
d.
ceiling.
 

23. 

Suppose that when the price of corn is $2 per bushel, farmers can sell 10 million bushels. When the price of corn is $3 per bushel, farmers can sell 8 million bushels. Which of the following statements is true?
a.
The demand for corn is income inelastic, and so an increase in the price of corn will increase the income of corn farmers.
b.
The demand for corn is income elastic, and so an increase in the price of corn will increase the income of corn farmers.
c.
The demand for corn is price inelastic, and so an increase in the price of corn will increase the income of corn farmers.
d.
The demand for corn is price elastic, and so an increase in the price of corn will increase the income of corn farmers.
 
 
Figure 5-2
chapters_4_and_5_pr_files/i0280000.jpg
 

24. 

Refer to Figure 5-2. The elasticity of demand from point A to point B, using the midpoint method would be
a.
1.
b.
1.5.
c.
2.
d.
2.5.
 

25. 

The price elasticity of demand measures how responsive
a.
buyers are to a change in income.
b.
sellers are to a change in price.
c.
buyers are to a change in price.
d.
sellers are to a change in buyers' incomes.
 

26. 

Economists compute the price elasticity of demand as the
a.
percentage change in the price divided by the percentage change in quantity demanded.
b.
change in quantity demanded divided by the change in the price.
c.
percentage change in the quantity demanded divided by the percentage change in price.
d.
percentage change in the quantity demanded divided by the percentage change in income.
 



 
Check Your Work     Reset Help