Supply and demand , Quizzes of Microeconomics

Download Supply and demand and more Quizzes Microeconomics in PDF only on Docsity! 1 Unit 2. Supply and demand Quiz 1. A successful government TV advertisement campaign has achieved its goal to show that eating oatmeal reduces the risk of colon cancer. We should observe that A. the price of oatmeal falls; B. the price of oatmeal rises; C. the equilibrium quantity of oatmeal falls; D. the supply of oatmeal falls; E. the demand for oatmeal falls. The answer is B. Demand curve for oatmeal is going to shift outwards. 2. The demand curve for a good shows, for each quantity level, the buyers’ A. target price; B. minimum acceptable price; C. maximum acceptable price; D. average willingness to pay; E. none of the above. The answer is С. Buyers would be happy to pay a lower price, but they will not pay a higher price for each quantity of the good. 3. If a unique Picasso painting is offered for sale at an auction, which, if any, of the following correctly shows the supply curve for the painting? A. a vertical line; B. a horizontal line; C. a 45 degree line (a line that goes through the origin so that the angle between the line and either axis is 45 degrees); D. a downward-sloping line; E. it is impossible to determine the shape of the supply curve from the given information. The answer is A. There is just one painting, and the quantity supplied is independent of the price. 2 4. In the year 2007 the quantity supplied of gadgets was 1000 when the price was $3 per gadget. In the year 2008 the quantity supplied was 1400 when the price was $4 per gadget. With supply and demand curves of normal slopes, this phenomenon can be explained as follows: A. in 2008 the demand curve has shifted to the left and supply curve did not shift. B. in 2008 the supply curve shifted to the left and the demand curve did not shift. C. in 2008 the demand curve shifted to the right and the supply curve did not shift. D. in 2008 the supply curve shifted to the right and the demand curve did not shift. E. none of the above. The answer is C. In 2008 both price and quantity were higher than in 2007. In cannot happen unless the demand curve shifts to the right. 5. The competitive market for gasoline is currently in equilibrium. Which of the following would most likely increase the price of gasoline? A. A decrease in household income B. Improvement in gasoline production technology C. A decrease in the price of subway tickets and other public transportation D. An increase in the price of crude oil E. An increase in the price of car insurance The answer is D, since crude oil is an input is gasoline production. 6. A consequence of a binding price floor is: A. A persistent shortage of the good B. An increase in total welfare C. A persistent surplus of the good D. Elimination of deadweight loss E. An increase in quantity demanded and a decrease in quantity supplied