AP Microeconomics-Unit 2:Teacher MCQ-4

Which of the following best describes the law of demand?

(A) The price of a good increases when the demand for the good increases.

(B) The price of a good decreases when the supply of the good decreases.

(C) When the price of a good increases, its demand decreases.

(D) When the price of a good decreases, its quantity demanded increases.

(E) Demand creates its own supply.

answer D

Which of the following explains why a decrease in the price of a normal good will lead to an increase in the quantity demanded of the good?

(A) A lower price will increase consumers' purchasing power.

(B) A lower price will increase consumers' marginal utility.

(C) A lower price will increase demand for the good.

(D) A lower price will increase demand for substitute goods.

(E) A lower price will decrease demand for complementary goods.

answer A

Which of the following is true in the elastic range of a firm's demand curve?

(A) The firm should expand output to increase economic profits.

(B) An increase in price will also lead to an increase in total cost.

(C) A decrease in price will likely lead to an increase in total revenue.

(D) Marginal revenue is negative.

(E) The firm is maximizing total revenue.

answer C

Which of the following statements about the market supply curve is true?

(A) An increase in input prices will shift the market supply curve to the right.

(B) At each price, a horizontal summation of the quantity supplied by each firm will yield the market supply curve.

(C) At each quantity supplied, a vertical summation of the price set by each firm will yield the market supply curve.

(D) A decrease in the price will shift the market supply curve to the left.

(E)The law of supply states that the market supply curve may shift right, shift left, or remain the same as the price increases.

answer B

Which of the following would cause the supply curve for notebook computers to shift to the right?

(A) An increase in the price of notebook computers

(B) An increase in the number of firms producing notebook computers

(C) An increase in the wages of workers in the notebook-computer industry

(D) A decrease in the price of notebook computers

(E) A decrease in the supply of notebook computers

answer B

Which of the following will tend to make the demand for a product more elastic?

(A) New firms which produce similar products enter the industry.

(B) A change in taste and preferences makes the product more desirable.

(C) The product is necessary for use with a complement.

(D) Production of the product is protected by a patent.

(E) Production cost of the product decreases.

answer A

One reason consumers typically increase the quantity of a good they purchase when the price of the good decreases

is that

(A) the marginal utility of the good increases

(B) consumers' purchasing power increases

(C) consumers increase their purchases of substitute items

(D) consumers increase their purchases of complementary items

(E) the demand for the good increases

answer B

Which of the following events will cause the demand curve for hamburgers to shift to the right?

(A) An increase in the price of pizza, a substitute for hamburgers

(B) An increase in the price of a french fries, a complement to hamburgers

(C) An increase in the price of hamburgers

(D) A decrease in the price of hamburgers

(E) A decrease in the cost of producing hamburgers

answer A

The absolute value of the price elasticity of demand for a good increases when

(A) the good has fewer substitutes

(B) the good becomes a necessity

(C) consumers spend greater portion of their budget on the good

(D) the price of an input used to produce the good increases

(E) the good must be purchased immediately

answer C

The demand curve for shoes is downward sloping, and the absolute value of the price elasticity of demand is . If the price of shoes increases by 3 percent, what will happen to the quantity of shoes demanded?

(A) It will decrease by 6%.

(B) It will decrease by 3%.

(C) It will decrease by 2%.

(D) It will increase by 6%.

(E) It will increase by 3%.

answer A

The postmaster general of a country decides to double the price of first-class stamps, expecting the action to cause

the revenues from sales of first-class stamps to double. What absolute value of price elasticity of demand is the postmaster general assuming in making the projection?

(A) 0

(B) Between 0 and 1

(C) 1

(D) Greater than 1

(E) Infinite

answer A

Katie's demand for chocolate bars is perfectly inelastic at a quantity of one per week. Maximiliano will consume

three chocolate bars per week when the price is ＄1, and he will consume four per week when the price is ＄0.50. Katie and Maximiliano are the only consumers of chocolate bars. Which of the following best describes the price elasticity of market demand beginning at the price of ＄0.50 and ending at the price of ＄1 ?

(A) Perfectly inelastic

(B) Inelastic

(C) Unit elastic

(D) Elastic

(E) Perfectly elastic

answer B

If the absolute value of the price elasticity of demand for Good X is 0.5, then a 10 percent decrease in the price of Good X will result in which of the following?

(A) A 5% decrease in the quantity demanded of Good X

(B) A 5% increase in the quantity demanded of Good X

(C) A 5% increase in revenues from the sale of Good X

(D) A 10% decrease in revenues from the sale of Good X

(E) A 10% increase in revenues from the sale of Good X

answer B

Which of the following must be true if the revenues of wheat farmers increase when the price of wheat increase?

(A) The supply of wheat is price elastic.

(B) The supply of wheat is income elastic.

(C) The supply of wheat is income inelastic.

(D) The demand for wheat is price elastic.

(E) The demand for wheat is price inelastic.

answer E

Which of the following will most likely happen in the market for good X if the price of good X decreases?

(A) The supply of good X will decrease.

(B) The demand for good X will increase.

(C) The quantity demanded for good X will increase.

(D) The demand will decrease and the supply will increase.

(E) The quantity supplied for good X will increase.

answer C

An increase in the supply of good X resulted in an increase in the price and quantity of good Y. It can be concluded

that good Y is

(A) an inferior good

(B) a luxury good

(C) a normal good

(D) a substitute for good X

(E) a complement for good X

answer E

Which of the following is true of the substitution effect of an increase in the price of a normal good?

(A) It works to offset the income effect.

(B) It works to reinforce the income effect.

(C) It is less than the income effect.

(D) It causes an increase in the quantity demanded of the good.

(E) It causes an increase in the demand for the good.

answer B

Assume that good X is a normal good. If the price of good X increases, what will happen?

(A) The substitution and income effects will both lead to more of good X being purchased.

(B) The substitution and income effects will both lead to less of good X being purchased.

(C) The substitution effect will lead to more of good X being purchased, while the income effect will lead to less of good X being purchased.

(D) The substitution effect will lead to less of good X being purchased, while the income effect will lead to more of good X being purchased.

(E) There will be no income effect because only the price of good X has changed.

answer B

Which of the following occurs as a result of the substitution effect of an increase in the price of a normal good?

(A) The demand for the good decreases.

(B) The demand for the complementary good increases.

(C) The demand for the good becomes more elastic.

(D) The quantity demanded of the substitute good decreases.

(E) The quantity demanded of the good decreases.

answer E

Which of the following statements relating to supply is true?

(A) An increase in an input price will lead to an increase in supply.

(B) An increase in the price of a good will lead to an increase in the supply of the good.

(C) A decrease in consumers' income will lead to a decrease in the supply of the good.

(D) A decrease in the price of a good will lead to a decrease in the quantity supplied of the good.

(E)A decrease in the price of a substitute good in production will lead to a decrease in the supply of another substitute good.

answer D

According to the law of demand, which of the following occurs when the price of a good increases?

(A) The demand for the good decreases.

(B) The quantity demanded of a substitute good decreases.

(C) The quantity demanded of a complementary good increases.

(D) The quantity demanded of the good increases.

(E) The quantity demanded of the good decreases.

answer E