Economics

Topics: Supply and demand, Price point, Inverse demand function Pages: 6 (1985 words) Published: September 15, 2013
Economics for Managers 2e Paul Farnham

Test Bank Sample
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Test Bank Multiple Choice
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Assume there is a reduction in the shipments of petroleum products due to political tension in the Persian Gulf. In a market economy, which consumers would get the reduced supplies of gas? 1) _______ A) Wealthy consumers. B) Who gets the gasoline would be a random process. Those who arrive at the service station first will get the gasoline, regardless what its price is. C) The consumers who value gasoline the most and are able to pay for it. D) Lower income consumers. 2) All else constant, as more firms substitute alternative materials, e.g., plastic, for copper, the market price of copper would be expected to: 2) _______ A) increase. B) decrease. C) stay the same. D) cannot be determined with the information given. 3) All else constant, an increase in foreign imports would cause the supply of cameras in the United States to: 3) _______ A) decrease. B) increase. C) stay the same. D) cannot be determined with the information given. 4) A home theatre system and and an HD television would be considered an example of: 4) _______ A) complementary goods. B) inferior goods. C) substitute goods. D) giffen goods. 5) Assume declining profits in the market for Internet service force several firms in the area to drop out of the market. Which of the following best describes the effect of the reduction in the number of service providers and the subsequent adjustment of the market to the new equilibrium price and quantity? 5) _______

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A) Quantity supplied would decrease, creating excess demand at the initial equilibrium price. Demand would then decrease until quantity demanded and quantity supplied are once again equal. B) Supply would increase, creating excess demand at the initial equilibrium price. Price would then rise, causing quantity demanded to decrease and quantity supplied to increase until a new equilibrium is reached. C) Quantity supplied would decrease, creating excess supply at the initial equilibrium price. Demand would then decrease until quantity demanded and quantity supplied are once again equal. D) Supply would decrease, creating excess demand at the initial equilibrium price. Price would then rise, causing quantity demanded to decrease and quantity supplied to increase until a new equilibrium is reached. 6) Referring to the previous question, all else constant, a one unit increase in the price of good Y would cause the quantity demanded of good X to: 6) _______ A) decrease by 5 units. C) decrease by 2 units. B) decrease by 1 unit. D) increase by 2 units.

7) Assume the cost of certain inputs used to produce artificial Christmas trees increases and, at the same time, the economy moves into a recession, causing the incomes of consumers to decrease. Which of the following will happen to the equilibrium price and quantity of artificial Christmas trees? (Assume artificial Christmas trees are normal goods.) 7) _______ A) Quantity will decrease;...
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