Department of Economics
University of Lethbridge
Econ 1010A
Practice Questions – Chapter 4
B
A
Quantity per unit of time
Price per unit
Price per unit
Use the following to answer question 1:
D
C
Quantity per unit of time
1. Refer to the graph above. Assume the graph reflects demand in the bacon market.
Which arrow best captures the impact of increased consumer concern about cholesterol?
A) A.
B) B.
C) C.
D) D.
2. When the wage rate paid to labour is above equilibrium
A) the supply of labour increases.
B) the demand for labour decreases.
C) the number of workers seeking jobs exceeds the number of jobs available.
D) the number of jobs available exceeds the number of workers seeking jobs.
3. Suppose that initially, supply is given by the equation Qs = 4P - 16. If, as a result of
higher production costs, the quantity supplied decreases by 4 at every price, the new
supply equation would be
A) Qs = 8P - 16.
B) Qs = P - 16.
C) Qs = 4P - 20.
D) Qs = 4P - 12.
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4. According to the law of supply
A) supply curves slope upward.
B) supply curves slope downward.
C) price and quantity supplied are negatively related.
D) price and quantity supplied are inversely related.
Use the following to answer question 5:
Price
(per litre)
$1
$2
$3
$4
Quantity demanded
(litres per week)
2000
1500
1000
500
Quantity Supplied
(litres per week)
1000
1500
2000
2500
5. Suppose the above supply and demand table reflects the supply and demand for milk per
week. At a price of $1
A) there is a surplus of 500 litres per week.
B) there is a surplus of 1000 litres per week.
C) there is a shortage of 2500 litres per week.
D) there is a shortage of 1000 litres per week.
6. Which of the following pairs of equations describes the supply and demand curves
given in the accompanying supply and demand table?
A)
B)
C)
D)
Price
Quantity Supplied
Quantity Demanded
0
0
3
1
0
2
2
1
1
3
2
0
4
3
0
5
4
0
Qs = 1; Qd = 1 -3P, respectively.
Qs = P; Qd = 3 - 3P, respectively.
Qs = P + 1; Qd = 3 - P, respectively.
Qs = P - 1; Qd = 3 - P, respectively.
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7. If a major magazine contained a review of a restaurant saying it was the best in
Winnipeg, which of the following would most likely happen?
A) Demand would drop.
B) Demand would increase.
C) Quantity demanded would increase.
D) Quantity demanded would drop.
8. If the price of air conditioners falls, there will be
A) an increase in demand for air conditioners.
B) an increase in the quantity demanded of air conditioners.
C) an increase in the quality demanded of air conditioners.
D) a shift in the demand for air conditioners.
9. Which of the following would best explain a decrease in the supply of squash?
A) An increase in the price of other vegetables.
B) An increase in the price of squash.
C) A decrease in the price of squash.
D) A decrease in the cost of growing squash.
10. The law of supply states that, other things constant, there is
A) an inverse relation between price and the quantity supplied.
B) an inverse relation between price and supply.
C) a direct relation between price and the quantity supplied.
D) a direct relation between price and supply.
11. The supply of leather jackets would be expected to increase as a result of
A) a decrease in the cost of producing leather jackets.
B) an increase in the price of leather jackets.
C) an increase in the popularity of leather jackets.
D) the expectation that the price of leather jackets will rise in the future.
12. The law of supply states that
A) quantity supplied increases as price increases, other things constant.
B) quantity supplied decreases as price increases, other things constant.
C) more of a good will be supplied the higher its price, other things changing
proportionately.
D) less of a good will be supplied the higher its price, other things changing
proportionately.
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13. Consider a market for fish whose market demand and market supply for fish is specified
as Qd = 300 - 2.5 P and Qs = - 20 + 1.5 P respectively. The equilibrium price and
quantity is
A) $40 and 200 respectively.
B) $80 and 100 respectively.
C) $100 and 80 respectively.
D) $100 and 130 respectively.
14. According to the law of supply, it takes an increase in the __________ of a product,
other things constant, to motivate firms to increase their quantity supplied of that
product.
A) production cost
B) opportunity cost
C) price
D) supply
Use the following to answer question 15:
S0
Price of cassettes
$5.00
S1
$4.00
$3.00
$2.00
$1.00
$0.00
0 1 2 3 4 5 6 7 8 9 10
Quantity of cassettes per week
15. Refer to the graph above. If the quantity supplied increases from 2 to 4 when the price
of cassettes increases from $2.00 to $4.00, the response by producers would be shown
by
A) a shift from S0 to S1.
B) a shift from S1 to S0.
C) a movement upward and to the right along S0.
D) a movement upward and to the right along S1.
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16. Honey and jam are substitute products. If the price of honey increases
A) the demand for honey will increase.
B) the demand for honey will decrease.
C) the demand for jam will increase, causing the price of jam to increase as well.
D) the demand for jam will decrease, causing the price of jam to fall.
17. According to the law of demand an increase in the price of gasoline will
A) increase the quantity demanded of gasoline, other things constant.
B) decrease the quantity demanded of gasoline, other things constant.
C) increase the demand for gasoline.
D) decrease the demand for gasoline.
Use the following to answer question 18:
S0
Price of cassettes
$5.00
S1
$4.00
$3.00
$2.00
$1.00
$0.00
0 1 2 3 4 5 6 7 8 9 10
Quantity of cassettes per week
18. Refer to the graph above. Suppose that at a price of $5.00, firm A is willing and able to
supply 4 units and firm B is willing and able to supply 4 units. Which of the following
statements is then true?
A) Curve S0 shows the quantity supplied of firm A and firm B combined.
B) Curve S1 shows the quantity supplied of firm A and firm B combined.
C) The addition of firm B to the market causes a movement upward and to the right
along S0.
D) The addition of firm B to the market causes a movement upward and to the right
along S1.
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19. If there is excess demand in the market, we can expect that
A) prices will rise because some suppliers will find it in their interest to set higher
prices.
B) prices will fall because suppliers will find it in their interest to increase supply.
C) prices will rise because firms will exploit consumers by decreasing supply.
D) the supply curve will shift to the right to restore equilibrium.
20. The distinction between demand and the quantity demanded is best made by saying that
A) demand is represented graphically by a curve and quantity demanded as a point on
that curve.
B) the quantity demanded is represented graphically by a curve and demand as a point
on that curve.
C) the quantity demanded is in a direct relation with prices, whereas demand is in an
inverse relation.
D) the quantity demanded is in an inverse relation with prices, whereas demand is in a
direct relation.
Use the following to answer question 21:
Price of cassettes
$6.00
$5.00
$4.00
$3.00
$2.00
$1.00
De m and for
cas s e tte s
E
G
D
C
F
B
A
$0.00
0 1 2 3 4 5 6 7 8 9 10
Quantity of cassettes per week
21. Refer to the graph above. The quantity demanded when price is $4.00 per week is
A) 2 cassettes per week.
B) 4 cassettes per week.
C) 6 cassettes per week.
D) 8 cassettes per week.
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22. If the law requires apartment building owners to lower rent, the law of supply predicts
that, other things constant
A) the supply of apartment units will shift leftward.
B) the supply of apartment units will shift rightward.
C) the quantity of apartment units supplied will rise.
D) the quantity of apartment units supplied will fall.
23. The explanation for the law of demand involves
A) suppliers' ability to substitute inputs.
B) consumers' ability to substitute different goods.
C) the government's ability to set prices.
D) the market's ability to equate supply and demand.
24. In the 1990s Canadian baby boomers began to put away more and more savings for
retirement. What is the effect of this event on equilibrium price and quantity of
financial assets?
A) Price rises and quantity also rises.
B) Price rises and quantity falls.
C) Price falls and quantity rises.
D) Price falls and quantity also falls.
25. Which of the following is not held constant as you move along the demand curve?
A) the price of that good.
B) the price of other goods.
C) the incomes of consumers.
D) the preferences of consumers for the good.
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S1
S2
Price
Price
Use the following to answer question 26:
S2
S1
D1
D1
Quantity
S2
S1
D1
(c)
(b)
Quantity
Price
Price
(a)
D2
D2
S1
S2
D1
D2
Quantity
D2
Quantity
(d)
26. Refer to the graphs above. The consequences of improved technology combined with an
increase in the number of consumers can best be illustrated by:
A) Graph A.
B) Graph B.
C) Graph C.
D) Graph D.
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B
A
Quantity of cassettes
per week
Price of each cassette
Price of each cassette
Use the following to answer question 27:
C
D
D0
D1
Quantity of cassettes
per week
27. Refer to the graph above. The effect of an increase in the price of cassettes is best shown
by arrow
A) A
B) B
C) C
D) D
28. Suppose that initially, demand is given by the equation Qd = 48 - 4P. If, as a result of an
increase in income, the quantity demanded increases by 12 at every price, the new
demand equation would be
A) Qd = 60 - 4P.
B) Qd = 36 - 4P.
C) Qd = 48 - 16P.
D) Qd = 48 - 8P.
29. In 1991 the U.S. Congress imposed a 10 percent luxury tax paid by producers. Because
of the uproar from consumers, the tax was repealed in 1993. What was the effect of the
two events on equilibrium price and quantity of luxury boats?
A) Price rises and then falls; quantity sold also rises and then falls.
B) Price rises and then falls; quantity sold falls and then rises.
C) Price falls and then rises; quantity sold rises and then falls.
D) Price falls and then rises; quantity sold also falls and then rises.
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30. The law of demand states that, other things constant, there is
A) an inverse relation between price and the quantity demanded.
B) an inverse relation between price and demand.
C) a direct relation between price and the quantity demanded.
D) a direct relation between price and demand.
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