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Test Bank For Price Theory and Applications - 9th - 2014 All Chapters - 9781285423524
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,Test Bank For Price Theory and ApplicationsChapter 1—Supply, Demand, and Equilibrium
Chapter 1—Supply, Demand, and Equilibrium
TRUE/FALSE
1. If the price of a good changes, the demand for the good changes.
ANS: F PTS: 1
2. When the quantity demanded by consumers goes up, we can be sure that there has been a rise in
demand.
ANS: F PTS: 1
3. A demand curve is drawn downward sloping to show that price and quantity demanded will move
in opposite directions as long as other relevant factors remain unchanged.
ANS: T PTS: 1
4. An increase in the price of compact discs would shift the demand curve for DVD players to the left.
ANS: T PTS: 1
5. An increase in the price of gasoline would shift the demand curve for gasoline to the left.
ANS: F PTS: 1
6. If the demand curve for a good is relatively flat, a small change in price results in a relatively
large change in quantity demanded.
ANS: T PTS: 1
7. If safer cars reduce a driver's chance of dying in an accident, then there will be fewer driver
fatalities.
ANS: F PTS: 1
8. If one wants to apply the theoretical side of economics by examining data, they use a family of
statistical techniques called econometrics.
ANS: T PTS: 1
9. A sales tax causes the demand curve to shift upwards by the amount of the tax.
ANS: F PTS: 1
10. As defined by economists, the supply of corn refers to the number of bushels of corn that farmers
bring to the market.
1
,Test Bank For Price Theory and Applications
Chapter 1—Supply, Demand, and Equilibrium
ANS: F PTS: 1
11. When the law of supply holds, an increase in the price of a product will cause producers to
increase the quantity they wish to sell.
ANS: T PTS: 1
12. A rise in supply is illustrated by a rightward shift in the supply curve.
ANS: T PTS: 1
13. The supply curve for a commodity will shift downward when an excise tax is imposed.
ANS: T PTS: 1
14. An increase in the price of wheat will cause a rise in the supply of wheat.
ANS: F PTS: 1
15. When the actual market price is below its equilibrium level, suppliers are satisfied but demanders
are not.
ANS: T PTS: 1
16. When suppliers are not satisfied, they lower their prices to attract more demanders.
ANS: T PTS: 1
17. If the demand for a good is high, then there will be a shortage of that good.
ANS: F PTS: 1
18. The equilibrium price of a good will rise in response to either a rise in demand or a fall in supply.
ANS: T PTS: 1
19. When a sales tax of 50¢ per carton is imposed on cigarettes, the equilibrium price drops by
precisely 50¢ per carton.
ANS: F PTS: 1
20. Suppliers of a commodity are better off whenever the legal incidence of a tax is shifted away from
the suppliers to the demanders.
ANS: F PTS: 1
21. If the legal incidence of a tax is entirely on suppliers, then the tax will have no economic effect on
demanders.
ANS: F PTS: 1
2
, Test Bank For Price Theory and Applications
Chapter 1—Supply, Demand, and Equilibrium
22. An excise tax of 20 cents on gasoline shifts demand down by exactly 20 cents.
ANS: F PTS: 1
23. When a sales tax of 20¢ per soda is imposed on soda consumption, the supply curve for soda shifts
down by precisely 20¢ per soda.
ANS: F PTS: 1
24. If a rise in supply and a rise in demand occur at the same time, then we know that the price must
also rise.
ANS: F PTS: 1
25. If a fall in supply and a rise in demand occur at the same time, then we know that the price must
also rise.
ANS: T PTS: 1
MULTIPLE CHOICE
1. When the price of a barrel of crude oil rises, what will be the immediate effect on the market for
home heating fuel produced from crude oil?
a. The demand for the fuel will fall.
b. The quantity demanded of fuel will rise.
c. The supply of fuel will fall.
d. The quantity supplied of fuel will fall.
ANS: C PTS: 1
2. If the supply of hotel rooms falls and all other relevant factors remain unchanged, then,
a. the demand for hotel rooms will fall.
b. the quantity demanded of hotel rooms will fall.
c. the demand for hotel rooms will rise.
d. the quantity demanded of hotel rooms will rise.
ANS: B PTS: 1
3. According to the law of demand, if other relevant factors remain unchanged, then a rise in the
price of a commodity will cause
a. a reduction in the equilibrium quantity.
b. excess supply.
c. suppliers to reduce their production in reaction to the lower demand.
d. a fall in the quantity demanded.
ANS: D PTS: 1
4. The observation that consumer purchases of walnuts decline as the price rises reflects:
a. a decrease in demand.
3
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