Economics Today and Tomorrow

Chapter 7: Demand and Supply

Demand and Supply

1
In a market economy, who decides when to exchange money for goods and services?
A)time-honored codes
B)individuals
C)government advisers
D)government leaders
2
According to the law of demand, ___________
A)as price goes down, demand goes down.
B)as price goes up, demand goes up.
C)quantity demanded and price have an inverse relationship.
D)quantity demanded and price have a direct relationship.
3
Being able to buy more clothes because the price of gasoline dropped is an example of ___________
A)the real income effect.
B)the law of voluntary exchange.
C)the law of diminishing marginal utility.
D)the substitution effect.
4
Which of the following pairs of items would NOT be substitutes for each other if the price of one increased dramatically?
A)fitness center membership, exercise bicycle
B)broccoli, pizza
C)home perms, salon hair styling
D)concert tickets, movie rentals
5
When you stop riding the roller coaster because its ticket price is no longer worth waiting in line for, you are exemplifying the ___________
A)act of voluntary exchange.
B)substitution effect.
C)law of diminishing returns.
D)law of diminishing marginal utility.
6
Which of the following statements does NOT describe a single demand curve?
A)It shows how changes in technology affect demand.
B)It shows the quantity demanded of a good or service at each possible price.
C)It shows an inverse relationship between price and quantity demanded.
D)It slopes downward from left to right.
7
Which of the following causes the demand curve to shift to the left?
A)a decrease in the price of a complementary good
B)a new fad
C)a decrease in income
D)an increase in population
8
Which of the following describes a product with inelastic demand?
A)A large increase in price has a large effect on quantity demanded.
B)A large increase in price has no effect on quantity demanded.
C)A small decrease in price greatly increases the quantity demanded.
D)A small increase in price greatly reduces the quantity demanded.
9
According to the law of supply, ___________
A)as price goes down, supply goes up.
B)as price goes up, supply goes down.
C)quantity supplied and price have an inverse relationship.
D)quantity supplied and price have a direct relationship.
10
Which of the following would NOT encourage a producer to enter a particular industry?
A)Profits are high.
B)The manufacturing process is efficient.
C)Production costs are low.
D)The price of the product is low.
11
Which of the following would appear upward-sloping from left to right?
A)supply curve
B)demand curve
C)supply schedule
D)demand schedule
12
Which of the following will cause the supply curve to shift to the left?
A)an improvement in technology
B)an increase in taxes
C)an increase in the number of firms in the industry
D)a reduction in the price of inputs
13
The level at which the quantity demanded and the quantity supplied are balanced is called the ___________
A)price floor.
B)rationing quota.
C)equilibrium price.
D)black market price.
14
If new technology lowers the production costs to manufacture CDs,
A)the demand curve moves left, and the equilibrium price falls.
B)the demand curve moves right, and the equilibrium price rises.
C)the supply curve moves right, and the equilibrium price rises.
D)the supply curve moves right, and the equilibrium price falls.
15
What results when the quantity demanded is greater than the quantity supplied?
A)a surplus
B)a shortage
C)a price ceiling
D)a price floor
16
Which of the following describes a price ceiling?
A)a government-set maximum price that results in a shortage
B)a government-set minimum price that results in a surplus
C)a nonmarket method of distributing goods and services
D)an illegal method of charging maximum prices for goods in short supply
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