AP Microeconomics-Unit 2:Teacher MCQ-2

Which of the following situations best illustrates the law of demand?

(A) As real incomes of United States citizens have decreased over the past year, the demand for housing has

also decreased.

(B) Recent decreases in the price of imported wine have led to an increase in the consumption of domestic

wine.

(C) In the past several months, as the price of compact disc players has decreased, the quantity of compact

disc players sold has increased

(D) The increase in the price of quality health foods has increased the revenues of firms producing these

goods.

(E)

As the demand for computers has increased, the number of workers in the computer industry has

increased.

answer C

Which of the following will cause the demand for a normal good to increase?

(A) A decrease in consumers' income

(B) A decrease in the price of a complementary good

(C) A decrease in the price of a substitute good

(D) A decrease in the price of the good

(E) A decrease in the number of consumers

answer B

In a perfectly competitive market, a change in which of the following could cause a shift in the supply curve?

(A) The incomes of consumers

(B) The number of buyers

(C) Technology

(D) The price of the product

(E) Tastes and preferences

answer C

Moving from left to right along a downward- sloping linear demand curve, price elasticity varies in which of the

following ways?

(A) First unit elastic, then inelastic throughout

(B) First unit elastic, then elastic throughout

(C) First inelastic, then unit elastic throughout

(D) First elastic, then unit elastic, and finally inelastic

(E) First inelastic, then unit elastic, and finally elastic

answer D

Suppose hot dogs and hamburgers are substitutes in consumption. If the supply of hot dogs decreases, which of the following will happen in the market for hamburgers?

(A) The supply curve for hamburgers will shift to the right.

(B) The supply curve for hamburgers will shift to the left.

(C) The demand curve for hamburgers will shift to the right.

(D) The demand curve for hamburgers will shift to the left.

(E) Both the demand curve and supply curve for hamburgers will shift to the left.

answer C

Which of the following will shift the supply curve for apples to the right?

(A) An increase in consumers' income

(B) An increase in the price of apples

(C) An increase in the wages of apple pickers

(D) A decrease in the rental price for apple harvesting equipment

(E) A decrease in the demand for oranges, a substitute in consumption

answer D

The graphs above show Mary's demand for hamburgers and Mark's demand for hamburgers. Suppose Mary and Mark are the only two consumers in the market. Which of the following is a point on the market demand curve for hamburgers?

(A)Price Quantity

$2 12

(B)Price Quantity

$4 7

(C)Price Quantity

$6 6

(D)Price Quantity

$8 4

(E)Price Quantity

$10 8

answer B

The demand curves X and Y are shown in the graph above. Which of the following offers the most accurate comparison of the price elasticities of demand curves X and Y at a price of $4?

(A)Demand Curve X Demand Curve Y

Perfectly elastic Perfectly inelastic

(B)Demand Curve X Demand Curve Y

Perfectly inelastic Perfectly elastic

(C)Demand Curve X Demand Curve Y

Perfectly inelastic Relatively elastic

(D)Demand Curve X Demand Curve Y

Relatively inelastic Perfectly elastic

(E)Demand Curve X Demand Curve Y

Relatively elastic Relatively inelastic

answer D

In the short run, a decrease in production costs of a product will shift

(A) both the demand curve and the supply curve to the right

(B) the demand curve to the left and the supply curve to the right

(C) only the supply curve to the right

(D) only the supply curve to the left

(E) only the demand curve to the left

answer C

If the increase in the price of one good decreases the demand for another, then the two goods are

(A) inferior goods

(B) luxury goods

(C) normal goods

(D) substitute goods

(E) complementary goods

answer D

Which of the following statements about the price elasticity of demand is true?

(A) When demand is price inelastic, total revenue will decrease as price increases.

(B) When demand is price elastic, an increase in price will increase total revenue.

(C) Demand tends to be more elastic in the short run compared to the long run.

(D) As more close substitutes become available, demand tends to be more price elastic.

(E) As a good becomes viewed as a necessity, demand becomes more price elastic.

answer D

Ice cream is a normal good. Ice cream and hot fudge are complementary goods, while ice cream and gelato are

substitute goods. Which of the following could lead to an increase in the equilibrium price and an indeterminate

change in the equilibrium quantity of ice cream?

(A) Consumer incomes rise, and the price of hot fudge increases.

(B) Bacteria in ice cream facilities leads to a number of consumers being hospitalized, and increased dairy

production leads to lower input costs for ice cream.

(C) The price of gelato increases, and new technology increases efficiency of ice cream production.

(D) A new study indicates that ice cream is associated with improved bone health, and a leading ice cream producer declares bankruptcy.

(E)A newly popular diet includes avoiding dairy products, and the government begins to subsidize ice cream production.

answer D

If a severe drought destroys a significant portion of the peanut crop and peanut farmers' revenues increase, which of

the following is true over the observed range of prices?

(A) The demand for peanuts must be unit price elastic.

(B) The demand for peanuts must be price elastic.

(C) The demand for peanuts must be unit price inelastic.

(D) The supply of peanuts must be price inelastic.

(E) The supply of peanuts must be price elastic.

answer C

Which of the following relationships among the price elasticity of demand, change in price, and change in total

revenue is consistent?

(A)Price Elasticity of Demand : Elastic

Change in Price:Increase

Change in Total Revenue:Increase

(B)Price Elasticity of Demand : Elastic

Change in Price:Decrease

Change in Total Revenue:Decrease

(C)Price Elasticity of Demand : Unit Elastic

Change in Price:Decrease

Change in Total Revenue:Decrease

(D)Price Elasticity of Demand : Inelastic

Change in Price:Decrease

Change in Total Revenue:Increase

(E)Price Elasticity of Demand : Inelastic

Change in Price:Decrease

Change in Total Revenue:Decrease

answer E

Assume that the price of orange juice increases by 40 percent following a crop failure. If the quantity demanded falls by 10 percent, which of the following is true?

(A) The demand for orange juice is elastic.

(B) The price of grapefruit juice, a substitute good, will fall.

(C) The absolute value of the price elasticity of demand for orange juice is 4.

(D) The absolute value of the price elasticity of demand for orange juice is 0.25.

(E) The absolute value of the price elasticity of demand for orange juice is 10.

answer D

The price elasticity of demand for a product is 0.5. If the price of the product increases by 20 percent, which of the following will occur?

(A) The quantity demanded of the good will increase by 10%.

(B) The quantity demanded of the good will increase by 20%.

(C) The quantity demanded of the good will increase by 40%.

(D) The quantity demanded of the good will decrease by 10%.

(E) The quantity demanded of the good will decrease by 40%.

answer D

Which of the following combinations is most likely to result in the demand for a product being highly price inelastic?

(A) The product has few close substitutes and represents a small percentage of a consumer's income.

(B) The product has few close substitutes and represents a large percentage of a consumer's income.

(C) The product has many close substitutes and represents a small percentage of a consumer's income.

(D) The product has many close substitutes and represents a moderate percentage of a consumer's income.

(E) The product has many close substitutes and represents a large percentage of a consumer's income.

answer A

Which of the following would shift the short-run supply curve for strawberries?

(A) A decrease in the consumption of strawberries

(B) An increase in the price of strawberries

(C) A strike by all farmworkers

(D) An increase in household incomes

(E) An announcement of a study that shows the health benefits of eating strawberries

answer C

In the figure above, at which of the given points is demand most elastic?

(A) X

(B) Y

(C) Z

(D) The elasticity is the same for all points.

(E) The relative elasticity cannot be determined with the given information.

answer C

For an inferior good, an increase in consumer income will cause

(A) the demand curve to shift to the left

(B) the demand curve to shift to the right

(C) the short-run supply curve to shift to the right

(D) the long-run supply curve to shift to the right

(E) new firms to enter the market in the long run

answer A

For a normal good, the income effect of a price change refers to the change in the consumption of the good that occurs because of the change in

(A) consumers' purchasing power

(B) the demand for a substitute good

(C) the supply of the good

(D) relative price

(E) marginal utility

answer A