1.

     Typically, what main economic factor(s) affect demand?

a.     Price is the overriding factor
b.     Advertising is the overriding factor.
c.     Multiple factors including price and income.
d.     Primarily growth in consumer income.
e.     Demographic and population shifts.
2.     If the price of a substitute good increases significantly, demand for the competing good will
Remain unchanged.
The effect is uncertain. It depends on the price elasticity of demand.
Decrease
Increase or decrease, depending on the difference between the two prices.
Increase

Question 3
1 / 1 pts
Which of the following pairs of goods are complements?
Coffee and sugar.
Coffee and tea.
Airline seats and train seats.
Hot dogs and hamburgers.
Coffee and soft drinks.

Question 4
1 / 1 pts
Which of the following demonstrates the law of demand?
Melissa buys fewer muffins at $0.75 per muffin than at $1 per muffin, other things equal.
Dave buys more donuts at $0.25 per donut than at $0.50 per donut, other things equal.
After Jon got a raise at work, he bought more pretzels at $1.50 per pretzel than he did before
Kendra buys fewer Snickers at $0.60 per Snickers after the price of Milky Ways falls to $0.50

Question 5
1 / 1 pts
When quantity demanded has increased at every price, it might be because
the price of a complementary good has decreased.
the costs incurred by sellers producing the good have decreased.
the number of buyers in the market has decreased
income has increased, and the good is an inferior good.
Question 6
1 / 1 pts
The University of Iowa was voted the #1 “party school” in 2013. The University of Iowa is located in Iowa C
decreases
remains constant, but we observe a movement upward and to the left along the demand curv
remains constant, but we observe a movement downward and to the right along the demand
increases.

Question 7
1 / 1 pts
An increase in quantity supplied
shifts the supply curve to the left.
shifts the supply curve to the right.
results in a movement upward and to the right along a fixed supply curve.
results in a movement downward and to the left along a fixed supply curve.

Question 8
1 / 1 pts
Which of the following demonstrates the law of supply?
When ketchup prices rose, ketchup sellers increased their quantity supplied of ketchup.
When car production technology improved, car producers increased their supply of cars.
When sweater producers expected sweater prices to rise in the near future, they decreased t
When leather became more expensive, belt producers decreased their supply of belts.

Question 9
1 / 1 pts
The supply curve for stand-up paddle boards
shifts when the price of stand-up paddle boards changes because the quantity supplied of st
axis of the graph.
does not shift when the price of stand-up paddle boards changes because the price of stand-
the graph.
shifts when the price of stand-up paddle boards changes because the price of stand-up padd
graph.
does not shift when the price of stand-up paddle boards changes because the price of stand-
of the graph.
Question 10
1 / 1 pts
Which of the following events would cause a movement downward and to the left along the supply curve fo
There is an advance in technology that reduces the cost of producing mangos.
The number of sellers of mangos decreases.
The price of fertilizer increases, and fertilizer is an input in the production of mangos.
The price of mangos falls.

Question 11
1 / 1 pts
Suppose an increase in the price of rubber coincides with an advance in the technology of tire production.
is unaffected, and the supply of tires decreases.
decreases, and the supply of tires increases.
is unaffected, and the supply of tires increases.
None of the given answers is necessarily correct.

Question 12
1 / 1 pts
Which of the following might cause the supply curve for an inferior good to shift to the right?
an improvement in production technology that makes production of the good more profitable
a decrease in consumer income
an increase in input prices
a decrease in the number of sellers in the market

Question 13
1 / 1 pts
If suppliers expect the price of their product to fall in the future, then they will
increase supply now.
decrease supply now.
increase supply in the future but not now.
decrease supply in the future but not now

Question 14
1 / 1 pts
Which of the following events could cause an increase in the supply of ceiling fans?
The number of sellers of ceiling fans increases.
There is an increase in the price of air conditioners, and consumers regard air conditioners a
There is an increase in the price of the motor that powers ceiling fans.
All of the given answers are correct.

Question 15
0 / 1 pts
Which of the following events must cause equilibrium quantity to fall?
demand increases and supply decreases
demand and supply both increase
demand and supply both decrease
demand decreases and supply increases
Question 19
8 / 9 pts

Suppose we are analyzing the market for hot chocolate. Graphically illustrate the impact each of the follow
a. Winter starts, and the weather turns sharply colder.
b. The price of tea, a substitute for hot chocolate, falls.
c. The price of cocoa beans decreases.
d. The price of whipped cream falls.
e. A better method of harvesting cocoa beans is introduced.
f. The Surgeon General of the U.S. announces that hot chocolate cures acne.
g. Protesting farmers dump millions of gallons of milk, causing the price of milk to rise.
h. Consumer income falls because of a recession, and hot chocolate is considered a normal good.
i. Producers expect the price of hot chocolate to increase next month.

Equilibrium price must decrease when demand

Correct! decreases and supply does not change, when demand does not change and supply increases
   increases and supply does not change, when demand does not change and supply decreases
decreases and supply does not change, when demand does not change and supply increases
increases and supply does not change, when demand does not change and supply decreases

Question 2
Suppose that demand for a good increase and, at the same time, supply of the good decreases. What wou
 Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.
Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous
Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous
Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

Question 3
1 / 1 pts
Which of the following sets of events must cause an increase in the price of a new house?
higher wages for carpenters, lower wood prices, decreases in consumer incomes, lower apart
higher wages for carpenters, higher wood prices, increases in consumer incomes, higher apar
lower wages for carpenters, higher wood prices, decreases in consumer incomes, higher apar
lower wages for carpenters, lower wood prices, increases in consumer incomes, higher apartm

Question 4
0 / 1 pts
When a shortage exists in a market, sellers
   lower price, which increases quantity demanded and decreases quantity supplied until the sho
raise price, which increases quantity demanded and decreases quantity supplied until the sho
lower price, which decreases quantity demanded and increases quantity supplied until the sho
raise price, which decreases quantity demanded and increases quantity supplied until the sho

The
Question 5
demand
Table 1
schedule
below
pertains to
sandwiches
demanded Harry’s Darby’s Jake’s
per week. Quantity
Price Quantity Quantity
Demanded Demanded Demanded

$3 3 4 3
$5 1 2x
Refer to Table 1. Regarding Harry and Darby, whose demand for sandwiches conforms to the law of dem
Correct! both Harry’s and Darby’s
   neither Harry’s nor Darby’s
only Darby’s
only Harry’s

Question 6
1 / 1 pts
Table 1
The
demand
schedule
below
pertains to
sandwiches
demanded Harry’s Darby’s Jake’s
per week.
Price Quantity Quantity Quantity
Demanded Demanded Demanded

$3 3 4 3
$5 1 2x
Refer to Table 1: Regarding Harry and Darby, for whom are sandwiches a normal good?
   only for Darby
only for Harry
This cannot be determined from the given information.
for both Harry and Darby

Question 7
The
1 / 1 pts
demand
Table 1
schedule
below
pertains to
sandwiches
demanded Harry’s Darby’s Jake’s
per
Priceweek. Quantity Quantity Quantity
Demanded Demanded Demanded

$3 3 4 3
$5 1 2x
Refer to Table 1: 
Suppose Harry, Darby, and Jake are the only demanders of sandwiches and that the market demand viola
   greater than or equal to 10.
greater than or equal to 7.
greater than or equal to 5.
Correct! less than or equal to 5.
  

The
Question 8
demand
Table 1
schedule
below
pertains to
sandwiches
demanded Harry’s Darby’s Jake’s
per week. Quantity
Price Quantity Quantity
Demanded Demanded Demanded
 $3 3 4 3
$5 1 2x
Refer to Table 1: Suppose Harry, Darby, and Jake are the only demanders of sandwiches. Also suppose
• x = 2.
• The current price of a sandwich is $5.00.
• The market quantity supplied of sandwiches is 10.
• The law of supply applies to the supply of sandwiches.
Then there is a
   shortage of 5 sandwiches, and the price would be expected to rise from its current level of $5.
shortage of 5 sandwiches, and the price would be expected to fall from its current level of $5.0
surplus of 5 sandwiches, and the price would be expected to rise from its current level of $5.00
surplus of 5 sandwiches, and the price would be expected to fall from its current level of $5.00

The
Question 9
demand
Table 1
schedule
below
pertains to
sandwiches
demanded Harry’s Darby’s Jake’s
per week.
Price Quantity Quantity Quantity
Demanded Demanded Demanded

$3 3 4 3
$5 1 2x
Refer to Table 1: 
Suppose Harry, Darby, and Jake are the only demanders of sandwiches. Also suppose the following:
• x = 2.
• The current price of a sandwich is $3.00.
• The market quantity supplied of sandwiches is 4.
• The slope of the supply curve is 2.
Then there is currently a
Correct! shortage of 6 sandwiches, and the equilibrium price of a sandwich is $5.00.
   surplus of 6 sandwiches, and the equilibrium price of a sandwich is $5.00.
shortage of 6 sandwiches, and the equilibrium price of a sandwich is less than $3.00.
surplus of 6 sandwiches, and the equilibrium price of a sandwich is less than $3.00.

Question 10
The
1 / 1 pts
demand
Table 1
schedule
below
pertains to
sandwiches
demanded
per week.
 Harry’s Darby’s Jake’s
Price Quantity Quantity Quantity
Demanded Demanded Demanded

$3 3 4 3
$5 1 2x
Refer to Table 1: Suppose Harry, Darby, and Jake are the only demanders of sandwiches. Also suppose
• x = 2.
• The current price of a sandwich is $3.00.
• The market quantity supplied of sandwiches is 5.
• The slope of the supply curve is 1.
Then there is currently a
   shortage of 5 sandwiches, and the equilibrium price of a sandwich is $5.00.
surplus of 5 sandwiches, and the equilibrium price of a sandwich is $5.00.
shortage of 5 sandwiches, and the equilibrium price of a sandwich is between $3.00 and $5.00
   surplus of 5 sandwiches, and the equilibrium price of a sandwich is between $3.00 and $5.00.

Question 11
1 / 1 pts
What will happen to the equilibrium price and quantity of traditional camera film if traditional cameras beco
the cost of the resources needed to manufacture traditional film falls, and more firms decide to manufactur
Price will fall, and the effect on quantity is ambiguous.
Quantity will rise, and the effect on price is ambiguous.
Price will rise, and the effect on quantity is ambiguous.
Quantity will fall, and the effect on price is ambiguous.

Question 12
1 / 1 pts
Suppose buyers of coffee and sugar regard the two goods as complements. Then an increase in the price
   decrease in the equilibrium price of sugar and an increase in the equilibrium quantity of sugar.
increase in the equilibrium price of sugar and a decrease in the equilibrium quantity of sugar.
decrease in the demand for sugar and a decrease in the quantity supplied of sugar.
   decrease in the supply of sugar and a decrease in the quantity demanded of sugar.

Question 13
0 / 1 pts
Suppose the number of buyers in a market increases and a technological advancement occurs also. What
   Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous
Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.
Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous
Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.
Question 14
0 / 1 pts
What would happen to the equilibrium price and quantity of peanut butter if the price of peanuts went up, th
and health officials announced that eating peanut butter was good for you?
   Quantity will fall, and the effect on price is ambiguous.
Price will rise, and the effect on quantity is ambiguous.
Price will fall, and the effect on quantity is ambiguous.
Quantity will rise, and the effect on price is ambiguous.

Question 15
1 / 1 pts
Saddle shoes are not popular right now, so very few are being produced. If saddle shoes become popular,
Correct! The demand curve for saddle shoes will shift right, which will create a shortage at the current p
   The supply curve for saddle shoes will shift right, which will create a surplus at the current pric
The demand curve for saddle shoes will shift right, which will create a surplus at the current pr
The supply curve for saddle shoes will shift right, which will create a shortage at the current pr
  
Question 16
Fill in the table below, showing whether equilibrium price and equilibrium quantity go up, go down, stay the
An
No Change A Decrease
Increase in
in Supply in Supply
Supply

No Change
in Demand

An
Increase in
Demand

A Decrease
in Demand

You are in charge of the local city-owned aquatic center. You need to increase the revenue generated by t
   both the mayor and the city manager think that demand is inelastic
both the mayor and the city manager think that demand is elastic.
the mayor thinks demand is inelastic, and the city manager thinks demand is elastic.
   the mayor thinks demand is elastic, and the city manager thinks demand is inelastic.
Question 2
1 / 1 pts
The value of the price elasticity of demand for a good will be relatively large when
Correct! the good is a luxury rather than a necessity.
   there are no good substitutes available for the good.
the time period in question is relatively short.
All of the given options are correct.

Question 3
1 / 1 pts
Suppose that gasoline prices increase dramatically this month. Lola commutes 100 miles to work each we
   the availability of substitutes in determining the price elasticity of demand.
the time horizon in determining the price elasticity of demand.
the definition of a market in determining the price elasticity of demand.
a necessity versus a luxury in determining the price elasticity of demand.

Question 4
1 / 1 pts
Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 2. W
   The quantity of the good demanded decreases by 0.05 percent.
The quantity of the good demanded decreases from 200 to 100
The quantity of the good demanded decreases from 250 to 150
   The quantity of the good demanded decreases by 0.2 percent.

Question 5
1 / 1 pts
When the price of an eBook is $15.00, the quantity demanded is 400 eBooks per day. When the price falls
   perfectly inelastic
elastic
inelastic
Correct! unit elastic

Question 6
1 / 1 pts
Suppose that quantity demand rises by 10% as a result of a 15% decrease in price. The price elasticity of
   inelastic and equal to 1.50.
elastic and equal to 1.50.
inelastic and equal to 0.67.
   elastic and equal to 0.67.

Question 7
1 / 1 pts
For a particular good, a 5 percent increase in price causes a 2 percent decrease in quantity demanded. W
   There are many close substitutes for this good.
The market for the good is broadly defined.
The relevant time horizon is long.
The good is a luxury.

Question 8
1 / 1 pts
When demand is elastic, an increase in price will cause
   no change in total revenue but a decrease in quantity demanded.
no change in total revenue but an increase in quantity demanded.
an increase in total revenue.
   a decrease in total revenue.

Question 9
1 / 1 pts
When the price of good A is $50, the quantity demanded of good A is 500 units. When the price of good A
   1.50, and an increase in price will result in an increase in total revenue for good A.
1.50, and an increase in price will result in a decrease in total revenue for good A.
0.67, and an increase in price will result in an increase in total revenue for good A.
0.67, and an increase in price will result in a decrease in total revenue for good A.

Question 10
1 / 1 pts
Suppose that when the price of ginger ale is $2 per bottle, firms can sell 4 million bottles. When the price o
   The demand for ginger ale is income inelastic, so an increase in the price of ginger ale will inc
The demand for ginger ale is price inelastic, so an increase in the price of ginger ale will increa
The demand for ginger ale is price elastic, so an increase in the price of ginger ale will decrea
   The demand for ginger ale is income elastic, so an increase in the price of ginger ale will incre

Question 11
1 / 1 pts
If the price elasticity of demand for aluminum foil is 1.45, then a 2.4% decrease in the price of aluminum fo
   1.66%, and aluminum foil sellers' total revenue will increase as a result.
3.48%, and aluminum foil sellers' total revenue will increase as a result.
1.66%, and aluminum foil sellers' total revenue will decrease as a result.
Correct! 3.48%, and aluminum foil sellers' total revenue will decrease as a result.

Question 12
1 / 1 pts
Suppose you are in charge of setting prices at a local ice cream shop. The business needs to increase its
   increase the price of bottled water also sold at the ice cream shop because its price elasticity o
 increase the price of ice cream.
decrease the cost of operating the ice cream shop.
   decrease the price of ice cream.

Question 13
Refer to Figure 1. Suppose this demand curve is a straight, downward-sloping line all the way from the ho
  
0 < P1 < P2 < $10.
$10 < P1 < P2 < $20.
None of the given options is correct.
P1 > $20.

Question 14
1 / 1 pts

Refer to Figure 1. If price increases from $10 to $20, total revenue will
  
decrease by $320, so demand must be elastic in this price range.
decrease by $120, so demand must be elastic in this price range.
   increase by $320, so demand must be inelastic in this price range.
increase by $120, so demand must be inelastic in this price range.

Question 15
1 / 1 pts
At price of $1.30 per pound, a local apple orchard is willing to supply 150 pounds of apples per day. At a p
Correct!
   0.875
1.14.
1
   0.5

Question 16
1 / 1 pts
An increase in the price of cheese crackers from $2.25 to $2.45 per box causes suppliers of cheese cracke
   inelastic, and the price elasticity of supply is 1.74.
inelastic, and the price elasticity of supply is 0.57.
elastic, and the price elasticity of supply is 1.74.
   elastic, and the price elasticity of supply is 0.57.

Question 17
1 / 1 pts
Suppose the price elasticity of supply for minivans is 0.3 in the short run and 1.2 in the long run. If an incre
   4.2% in the short run and 16.7% in the long run.
16.7% in the short run and 4.2% in the long run.
1.5% in the short run and 6% in the long run.
   6% in the short run and 1.5% in the long run.

Question 18
1 / 1 pts
A key determinant of the price elasticity of supply is the
Correct! length of the time period.
   extent to which buyers alter their quantities demanded in response to changes in their income
extent to which buyers alter their quantities demanded in response to changes in prices.
number of close substitutes for the good in question.
  
Question 19
0 / 1 pts
Which of the following statements about agriculture in the U.S. is correct?
   Technological improvements typically increase both supply and revenue for individual farmers
Technological improvements that increased supply, coupled with inelastic demand for foodstu
All of the given options are correct
Because technological improvements increase the supply of a product for which demand is ine

Question 20
1 / 1 pts
A drug interdiction program that successfully reduces the supply of illegal drugs in the United States likely
   lower the price, increase the quantity, increase total revenues, and increase crime.
raise the price, increase the quantity, decrease total revenues, and increase crime.
raise the price, reduce the quantity, increase total revenues, and increase crime.
   raise the price, reduce the quantity, decrease total revenues, and decrease crime

You have responsibility for economic policy in the country of Freedonia. Recently, the neighboring country
Apparently, all three advisors have studied economics, but their views on positive economics are different.
Charles
Otto
You AnswerGeorge
  
Question 2
1 / 1 pts
One economist has argued that rent control is "the best way to destroy a city, other than bombing." Why w
   He fears that rent control will benefit landlords at the expense of tenants, increasing inequality
He fears that rent controls will cause a construction boom, which will make the city crowded an
He fears that low rents will cause low-income people to move into the city, reducing the quality
   He fears that rent control will eliminate the incentive to maintain buildings, leading to a deterio
Question 3
1 / 1 pts
Rent control policies tend to cause
   relatively larger shortages in the short run than in the long run because supply and demand te
relatively smaller shortages in the short run than in the long run because supply and demand t
relatively larger shortages in the short run than in the long run because supply and demand te
   relatively smaller shortages in the short run than in the long run because supply and demand t

Question 4
1 / 1 pts
Unlike minimum wage laws, wage subsidies
   help only wealthy workers.
discourage firms from hiring the working poor.
cause unemployment.
   raise the living standards of the working poor without creating unemployment.

Question 5
1 / 1 pts
A tax on the sellers of coffee will increase the price of coffee paid by buyers,
   increase the effective price of coffee received by sellers, and increase the equilibrium quantity
decrease the effective price of coffee received by sellers, and increase the equilibrium quantity
increase the effective price of coffee received by sellers, and decrease the equilibrium quantity
   decrease the effective price of coffee received by sellers, and decrease the equilibrium quanti

Question 6
1 / 1 pts
Suppose there is currently a tax of $50 per ticket on airline tickets. Sellers of airline tickets are required to p
Correct! supply curve will shift downward by $20, and the price paid by buyers will decrease by less tha
   demand curve will shift upward by $20, and the effective price received by sellers will increase
demand curve will shift upward by $20, and the effective price received by sellers will increase
supply curve will shift downward by $20, and the price paid by buyers will decrease by $20.
  
Question 7
1 / 1 pts
Suppose buyers of fountain drinks are required to send $0.50 to the government for every fountain drink th
   Forty percent of the burden of the tax falls on sellers.
The price paid by buyers is $0.30 per drink more than it was before the tax.
All of the given options are correct.
   This tax causes the demand curve for fountain drinks to shift downward by $0.50 at each quan

Question 8
How is the burden of a tax divided?
(i)    When the tax is levied on the sellers, the sellers bear a higher proportion of the tax burden.
(ii)    When the tax is levied on the buyers, the buyers bear a higher proportion of the tax burden.
(iii)    Regardless of whether the tax is levied on the buyers or the sellers, the buyers and sellers bear an e
(iv)    Regardless of whether the tax is levied on the buyers or the sellers, the buyers and sellers bear som
   (i) and (ii) only
(iv) only
(i), (ii), and (iii) only
Correct! (i), (ii), and (iv) only
  
Question 13
1 / 1 pts
The price paid by buyers in a market will decrease if the government
   increases a binding price ceiling in that market.
decreases a tax on the good sold in that market.
All of the given options are correct.
Correct! increases a binding price floor in that market.
  
Question 14
1 / 1 pts
The price received by sellers in a market will decrease if the government
   imposes a binding price floor in that market.
decreases a tax on the good sold in that market.
decreases a binding price ceiling in that market.
   increases a binding price floor in that market.

Question 15
1 / 1 pts
Suppose that in a particular market, the supply curve is highly elastic and the demand curve is highly inela
Correct! buyers will bear a greater burden of the tax than the sellers.
   buyers and sellers will not share the burden equally, but it is impossible to determine who will
buyers and sellers are likely to share the burden of the tax equally.
sellers will bear a greater burden of the tax than the buyers.
  
Question 16
1 / 1 pts
Suppose that in a particular market, the demand curve is highly elastic, and the supply curve is highly inela
   buyers and sellers are likely to share the burden of the tax equally.
buyers and sellers will not share the burden equally, but it is impossible to determine who will
buyers will bear a greater burden of the tax than the sellers.
   sellers will bear a greater burden of the tax than the buyers.
Question 17
1 / 1 pts
Assume the demand for cigarettes is relatively inelastic, and the supply of cigarettes is relatively elastic. W
   most of the burden of the tax to fall on sellers of cigarettes, regardless of whether buyers or se
a large percentage of smokers to quit smoking in response to the tax.
the distribution of the tax burden between buyers and sellers of cigarettes to depend on wheth
   most of the burden of the tax to fall on buyers of cigarettes, regardless of whether buyers or se

Question 18
0 / 1 pts
If the government removes a binding price ceiling from a market, then the price received by sellers will
   decrease, and the quantity sold in the market will increase.
decrease, and the quantity sold in the market will decrease
increase, and the quantity sold in the market will increase.
   increase, and the quantity sold in the market will decrease.

Question 19
1 / 1 pts
Suppose the government has imposed a price floor on the market for soybeans. Which of the following eve
   The number of farmers selling soybeans decreases.
Consumers' income increases, and soybeans are a normal good.
Farmers use improved, draught-resistant seeds, which lowers the cost of growing soybeans
   The number of consumers buying soybeans increases.

Question 20
1 / 1 pts
A binding minimum wage
   has no effect on the quantity of labor demanded or the quantity of labor supplied.
alters both the quantity demanded and quantity supplied of labor.
causes only temporary unemployment because the market will adjust and eliminate any tempo
Correct! affects only the quantity of labor demanded; it does not affect the quantity of labor supplied.

Question 21
5 / 1 pts
Suppose demand for a product is given by the equation:
QD= 120 - 4P
and supply for the product is given by the equation: 
QS = 4P
a. What are the equilibrium price and equilibrium quantity in the market for this product?
b. Suppose the government sets a price ceiling at $12 for this product. Is this price ceiling binding, and wha
c. Suppose the government sets a price ceiling at $17 for this product. Is this price ceiling binding, and wha
d. Suppose the government sets a price floor at $13 for this product. Is this price floor binding, and what w
e. Suppose the government sets a price floor at $13 for this product. Initially, is this price floor binding? Su
Would the $13 price floor be binding after the shift in the demand curve? If so, what is the size of the result

1.  If the price of ice cream rose to $30 per gallon, consumers would purchase fewer gallons of ice cream than if the p
a.  law of supply.
b.  law of demand.
c.  difference between normal and inferior goods.
d.  difference between substitute and complement goods.

2.  You lose your job and, as a result, you buy fewer iTunes music downloads. This shows that you consider iTunes m
a.  luxury good.
b.  inferior good.
c.  normal good.
d.  complementary good.

3.  Which of the following events could shift the demand curve for gasoline to the left?
a.  The income of gasoline buyers rises, and gasoline is a normal good.
b.  The income of gasoline buyers falls, and gasoline is an inferior good.
c.  Public service announcements run on television encourage people to walk or ride bicycles instead of driving
d.  The price of gasoline rises.

4.  Which of the following events would cause a movement upward and to the right along the supply curve for mango
a.  The number of sellers of mangos increases.
b.  There is an advance in technology that reduces the cost of producing mangos.
c.  The price of fertilizer decreases, and fertilizer is an input in the production of mangos.
d.  The price of mangos rises.

5.  Workers at a bicycle assembly plant currently earn the mandatory minimum wage. If the federal government increa

Introductory Microeconomics

a.  demand for bicycle assembly workers will increase.

b.  supply of bicycles will shift to the right.
c.  supply of bicycles will shift to the left.
d.  firm must increase output to maintain profit levels.
6.  Suppose roses are currently selling for $40 per dozen, but the equilibrium price of roses is $30 per dozen. We wou
a.  shortage to exist and the market price of roses to increase.
b.  shortage to exist and the market price of roses to decrease.
c.  surplus to exist and the market price of roses to increase.
d.  surplus to exist and the market price of roses to decrease.

7.  Which of the following events must result in a lower price in the market for Snickers?
a.  Demand for Snickers increases, and supply of Snickers decreases.
b.  Demand for Snickers and supply of Snickers both decrease.
c.  Demand for Snickers decreases, and supply of Snickers increases.
d.  Demand for Snickers and supply of Snickers both increase

8.  Suppose the number of buyers in a market decreases and a technological advancement occurs also. What would we
a.  Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous.
b.  Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.
c.  Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous.
d.  None of the above is correct.

9.  If scientists discover that steamed milk, which is used to make lattés, prevents heart attacks, what would happen to
a.  Both the equilibrium price and quantity would increase.
b.  Both the equilibrium price and quantity would decrease.
c.  The equilibrium price would increase, and the equilibrium quantity would decrease.
d.  The equilibrium price would decrease, and the equilibrium quantity would increase.

10.  What would happen to the equilibrium price and quantity of lattés if coffee shops began using a machine that redu
a.  Both the equilibrium price and quantity would increase.

b.  Both the equilibrium price and quantity would decrease.

c.  The equilibrium price would increase, and the effect on equilibrium quantity would be ambiguous.
d.  The equilibrium quantity would increase, and the effect on equilibrium price would be ambiguous.

11.  If Faith attends college, it will take her four years, during which time she will earn no income. She will pay $50,0
$67,000 if, over the four years, she could earn
a.  $12,000 instead of attending college.
b.  $14,000 instead of attending college.
c.  $16,000 instead of attending college.
d.  $18,000 instead of attending college.
12.  Suppose your college institutes a new policy requiring you to pay for a permit to park your car in a campus parkin
a.  The cost of the parking permit is not part of the opportunity cost of attending college if you would not have
b.  The cost of the parking permit is part of the opportunity cost of attending college if you would not have to p
c.  Only half of the cost of the parking permit is part of the opportunity cost of attending college.
d.  The cost of the parking permit is not part of the opportunity cost of attending college under any circumstanc

13.  Which of the following statements is correct?

a.  The demand for flat-screen computer monitors is more elastic than the demand for monitors in general.
b.  The demand for grandfather clocks is more elastic than the demand for clocks in general.
c.  The demand for cardboard is more elastic over a long period of time than over a short period of time.
d.  All of the above are correct.

14.  Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and, as a result, the quantity o
a. 0.35.
b. 0.43.
c. 2.33.
d. 2.89.

Introductory Microeconomics

15.  If the price elasticity of demand for a good is 0.3, then a 20 percent decrease in price results in a
a.  0.015 percent increase in the quantity demanded.
b.  0.6 percent increase in the quantity demanded.
c.  6 percent increase in the quantity demanded.
d.  66 percent increase in the quantity demanded.

16.  You have just been hired as a business consultant to determine what pricing policy would be appropriate to increa
a.  increase the price of every loaf of bread in the store.
b.  look for ways to cut costs and increase profit for the bakery.
c.  determine the price elasticity of demand for the bakery's products.
d.  determine the price elasticity of supply for the bakery’s products.

17.  A t-shirt maker would be willing to supply 75 t-shirts per day at a price of $18.00 each. At a price of $20.00, the t
a.  0.37, and supply is elastic.
b.  0.37, and supply is inelastic.
c.  2.71, and supply is elastic.
 d.  2.71, and supply is inelastic.

18.  Suppose a market has the demand function Qd=20-0.5P. At which of the following prices will total revenue be ma
a. $10
b. $20
c. $30
d. $40

19.  If an increase in income results in a decrease in the quantity demanded of a good, then for that good, the
a.  cross-price elasticity of demand is negative.
b.  price elasticity of demand is elastic.
c.  income elasticity of demand is negative.
d.  income elasticity of demand is positive.

20.  A nonbinding price ceiling

(i)             causes a surplus.
(ii)           causes a shortage.

(iii)          is set at a price above the equilibrium price.

(iv)          is set at a price below the equilibrium price.
a.  (i) only
b.  (iii) only
c.  (i) and (iii) only
d.  (ii) and (iv) only

21.  When OPEC raised the price of crude oil in the 2022, it caused the
a.  demand for gasoline to increase.
b.  demand for gasoline to decrease.
c.  supply of gasoline to increase.
d.  supply of gasoline to decrease.

22.  Assuming education results in a positive externality, which of the following statements is correct?
a.  The social cost of producing education exceeds the private cost of producing education.
b.  The positive externality can be depicted on a graph by the vertical distance between the supply curve and the
c.  The socially optimal quantity of education will exceed the market equilibrium quantity of education.
d.  All of the above are correct.
23.  Suppose that electricity producers create a negative externality equal to $5 per unit. Further suppose that the gove
a.  They are equal.
b.  The after-tax equilibrium quantity is greater than the socially optimal quantity.
c.  The after-tax equilibrium quantity is less than the socially optimal quantity.
d.  There is not enough information to answer the question.

24.  Which of the following is not a characteristic of a public good?

a.  It is not excludable.
b.  It is not diminished or depreciated as additional people consume the good.
c.  Its benefits cannot be withheld from anyone.
d.  Because it is a free good, there is no opportunity cost.

25.  The Tragedy of the Commons can be corrected by

a.  conducting a cost-benefit analysis.
b.  assigning property rights to individuals.

Introductory Microeconomics

c.  providing government subsidies for the resource.

d.  making certain everyone in the economy has access to the resource.

B. Problem solving and Questions (8 points)

1.  Suppose you manage a baseball stadium. To pay the salary for a star player, you would like to increase the total rev
 the competing good will

two prices.

uffin, other things equal.

nut, other things equal.
per pretzel than he did before his raise.
e of Milky Ways falls to $0.50 per Milky Way.
y of Iowa is located in Iowa City. At the end of August each year, the market demand for beer in Iowa City

he left along the demand curve.

o the right along the demand curve.

ply curve.
upply curve.

tity supplied of ketchup.

ased their supply of cars.
near future, they decreased their current supply of sweaters.
ed their supply of belts.

se the quantity supplied of stand-up paddle boards is measured on the horizontal

es because the price of stand-up paddle boards is measured on the vertical axis of

se the price of stand-up paddle boards is measured on the vertical axis of the

es because the price of stand-up paddle boards is measured on the horizontal axis
left along the supply curve for mangos?
ucing mangos.

roduction of mangos.

echnology of tire production. As a result of these two events, the demand for tires

ift to the right?

n of the good more profitable
mers regard air conditioners and ceiling fans as substitutes.

the impact each of the following would have on demand or supply. Also show how equilibrium price and equilibrium

milk to rise.
sidered a normal good.

change and supply increases, and when demand decreases and supply increases simultaneously.
change and supply decreases, and when demand decreases and supply increases simultaneously.
change and supply increases, and when demand increases and supply decreases simultaneously.
change and supply decreases, and when demand increases and supply decreases simultaneously.

e good decreases. What would happen in the market for the good?
uantity would be ambiguous.
m price would be ambiguous
quantity would be ambiguous.
m price would be ambiguous.

new house?
nsumer incomes, lower apartment rents, decreases in population and expectations of lower house prices in the future
nsumer incomes, higher apartment rents, increases in population, and expectations of higher house prices in the futu
nsumer incomes, higher apartment rents, decreases in population and expectations of higher house prices in the futu
sumer incomes, higher apartment rents, increases in population and expectations of higher house prices in the future

quantity supplied until the shortage is eliminated.

quantity supplied until the shortage is eliminated.
quantity supplied until the shortage is eliminated.
quantity supplied until the shortage is eliminated.

s conforms to the law of demand?

ormal good?

that the market demand violates the law of demand. Then, in the table, the value of x must be
f sandwiches. Also suppose the following:

e from its current level of $5.00.

l from its current level of $5.00.
from its current level of $5.00.
from its current level of $5.00.

o suppose the following:

h is $5.00.

h is less than $3.00.

is less than $3.00.
 f sandwiches. Also suppose the following:

h is $5.00.

h is between $3.00 and $5.00.

is between $3.00 and $5.00.

m if traditional cameras become more expensive, digital cameras become cheaper,

e firms decide to manufacture traditional film?

Then an increase in the price of coffee will cause a(n)

equilibrium quantity of sugar.
quilibrium quantity of sugar.
supplied of sugar.
emanded of sugar.

vancement occurs also. What would we expect to happen in the market?

quantity would be ambiguous.
m price would be ambiguous.
m price would be ambiguous.
uantity would be ambiguous.
e price of peanuts went up, the price of jelly fell, fewer firms decided to produce peanut butter,

addle shoes become popular, then how will this affect the market for saddle shoes?
ate a shortage at the current price. Price will increase, which will decrease quantity demanded and increase quantity
e a surplus at the current price. Price will decrease, which will increase quantity demanded and decrease quantity su
ate a surplus at the current price. Price will decrease, which will increase quantity demanded and decrease quantity s
e a shortage at the current price. Price will increase, which will decrease quantity demanded and increase quantity su

ntity go up, go down, stay the same, or change ambiguously (4,5 points for 9 answers, 0,5 point per each answer)

e the revenue generated by the aquatic center to meet expenses. The mayor advises you to increase the price of a d

s demand is elastic.
demand is inelastic.
es 100 miles to work each weekday. Over the next few months, Lola drives less on the weekends to try to save mone

uted to be approximately 2. Which of the following events is consistent with a 0.1 percent increase in the price of the

per day. When the price falls to $10.00, the quantity demanded increases to 700. Given this information and using th

price. The price elasticity of demand for this good is

ase in quantity demanded. Which of the following statements is most likely applicable to this good?

ts. When the price of good A rises to $70, the quantity demanded of good A falls to 400 units. Using the midpoint me
venue for good A.
enue for good A.
venue for good A.
enue for good A.

lion bottles. When the price of ginger ale is $3 per bottle, firms can sell 2 million bottles. Which of the following statem
the price of ginger ale will increase the total revenue of ginger ale producers.
e price of ginger ale will increase the total revenue of ginger ale producers.
price of ginger ale will decrease the total revenue of ginger ale producers.
e price of ginger ale will increase the total revenue of ginger ale producers.

se in the price of aluminum foil will increase the quantity demanded of aluminum foil by

siness needs to increase its total revenue, and your job is on the line. You evaluate the data and determine that the
p because its price elasticity of demand is 1.2.
ng line all the way from the horizontal intercept to the vertical intercept. We choose two prices,  P1 and P2, and the cor

nds of apples per day. At a price of $1.50 per pound, the orchard is willing to supply 170 pounds of apples per day. U

es suppliers of cheese crackers to increase their quantity supplied from 125 boxes per minute to 145 boxes per minu

1.2 in the long run. If an increase in the demand for minivans causes the price of minivans to increase by 5%, then th
se to changes in their incomes.
se to changes in prices.

evenue for individual farmers.

inelastic demand for foodstuffs, explain why the number of farmers has decreased dramatically over the last century

oduct for which demand is inelastic, an individual farmer would be better off not adopting the new technology.

gs in the United States likely will

nd increase crime.
nd increase crime.
increase crime.
d decrease crime

ntly, the neighboring country of Sylvania has cut off all exports of oranges to Freedonia. George, who is one of your
itive economics are different.

other than bombing." Why would an economist say this?

tenants, increasing inequality in the city.
will make the city crowded and more polluted.
o the city, reducing the quality of life for other people.
buildings, leading to a deterioration of the city.
 cause supply and demand tend to be more elastic in the short run than in the long run.
ecause supply and demand tend to be more elastic in the short run than in the long run.
cause supply and demand tend to be more inelastic in the short run than in the long run.
ecause supply and demand tend to be more inelastic in the short run than in the long run.

employment.

ease the equilibrium quantity of coffee.

rease the equilibrium quantity of coffee.
rease the equilibrium quantity of coffee.
crease the equilibrium quantity of coffee.

airline tickets are required to pay the tax to the government. If the tax is reduced from $50 per ticket to $30 per ticket,
yers will decrease by less than $20.
ceived by sellers will increase by $20.
ceived by sellers will increase by less than $20.
yers will decrease by $20.

ent for every fountain drink they buy. Further, suppose this tax causes the effective price received by sellers of founta

re the tax.

wnward by $0.50 at each quantity.

 of the tax burden.
n of the tax burden.
buyers and sellers bear an equal proportion of the tax burden.
buyers and sellers bear some proportion of the tax burden.

demand curve is highly inelastic. If a tax is imposed in this market, then the

ossible to determine who will bear the greater burden of the tax without more information.

he supply curve is highly inelastic. If a tax is imposed in this market, then the

ossible to determine who will bear the greater burden of the tax without more information.
arettes is relatively elastic. When cigarettes are taxed, we would expect
dless of whether buyers or sellers of cigarettes are required to pay the tax to the government.

igarettes to depend on whether buyers or sellers of cigarettes are required to pay the tax to the government.
dless of whether buyers or sellers of cigarettes are required to pay the tax to the government.

ce received by sellers will

ns. Which of the following events could transform the price floor from one that is not binding into one that is binding?

e cost of growing soybeans

f labor supplied.

djust and eliminate any temporary surplus of workers.

quantity of labor supplied.

s product?
price ceiling binding, and what will be the size of the shortage/surplus in this market?
price ceiling binding, and what will be the size of the shortage/surplus in this market?
ice floor binding, and what will be the size of the shortage/surplus in this market?
s this price floor binding? Suppose that for some reason demands were to decrease to  QD= 80 - 4P
, what is the size of the resulting shortage/surplus?

allons of ice cream than if the price were $4 per gallon. If the price of chocolate sauce fell to $0.50 per can, consumers would pu

hows that you consider iTunes music downloads to be a(n)

r ride bicycles instead of driving cars.

ong the supply curve for mangos?

If the federal government increases the minimum wage by $1.00 per hour, then it is likely that the
 roses is $30 per dozen. We would expect a

ment occurs also. What would we expect to happen in the market?

ould be ambiguous.
ould be ambiguous.
ould be ambiguous.

t attacks, what would happen to the equilibrium price and quantity of lattés?

began using a machine that reduced the amount of labor necessary to produce steamed milk, which is used to make lattés, and sc

would be ambiguous.
e would be ambiguous.

n no income. She will pay $50,000 for tuition, $12,000 for room and board, and $5,000 for books. If she spends the four years wo
park your car in a campus parking lot.
g college if you would not have to pay for parking otherwise.
llege if you would not have to pay for parking otherwise.
attending college.
g college under any circumstances.

nd for monitors in general.

ks in general.
er a short period of time.

75 and, as a result, the quantity of bags demanded increases from 600 to 800. Using the midpoint method, the price elasticity of d

n price results in a

y would be appropriate to increase the total revenue of a bakery. The first step you would take would be to

each. At a price of $20.00, the t-shirt maker would be willing to supply 100 t-shirts. Using the midpoint method, the price elastic
g prices will total revenue be maximized?

then for that good, the

atements is correct?
g education.
between the supply curve and the social-cost curve.
m quantity of education.
it. Further suppose that the government imposes a $5 per-unit tax on the producers. What is the relationship between the after-tax

ould like to increase the total revenue from ticket sales. Should you increase or decrease the price of a ticket to increase revenue?
r beer in Iowa City
librium price and equilibrium quantity would change (9 points)

ultaneously.
ultaneously.
ultaneously.
ultaneously.
 wer house prices in the future
higher house prices in the future
higher house prices in the future
her house prices in the future
anded and increase quantity supplied. The new market equilibrium will be at a higher price and higher quantity.
ded and decrease quantity supplied. The new market equilibrium will be at a lower price and higher quantity.
nded and decrease quantity supplied. The new market equilibrium will be at a lower price and higher quantity.
nded and increase quantity supplied. The new market equilibrium will be at a higher price and higher quantity.

0,5 point per each answer)

ou to increase the price of a day pass. The city manager recommends reducing the price of a day pass. You realize t
weekends to try to save money. Within the year, she sells her home and purchases one only 10 miles from her place

nt increase in the price of the good?

n this information and using the midpoint method, we know that the demand for eBooks is
this good?

units. Using the midpoint method, the price elasticity of demand for good A is

Which of the following statements is true?

data and determine that the price elasticity of demand for ice cream at your shop is 1.8. You should
prices,  P1 and P2, and the corresponding quantities demanded, Q1 and Q2, for the purpose of calculating the price ela

0 pounds of apples per day. Using the midpoint method, the price elasticity of supply is about

minute to 145 boxes per minute. Using the midpoint method, supply is

ns to increase by 5%, then the quantity supplied of minivans will increase by about
matically over the last century.

g the new technology.

. George, who is one of your advisors, says that the best way to avoid a shortage of oranges is to take no action at a
50 per ticket to $30 per ticket, then the

e received by sellers of fountain drinks to fall by $0.20 per drink. Which of the following statements is correct?
x to the government.

ding into one that is binding?

 QD= 80 - 4P

50 per can, consumers would purchase more chocolate sauce than if the price were $5 per can. These relationships illustrate the
ich is used to make lattés, and scientists discovered that coffee prevents heart attacks?

s. If she spends the four years working rather than attending college, she will pay $18,000 for room and board, pay no intuition, a
 t method, the price elasticity of demand for frozen chicken nuggets in the given price range is

midpoint method, the price elasticity of supply for t-shirts is about

elationship between the after-tax equilibrium quantity and the socially optimal quantity of electricity to be produced?

e of a ticket to increase revenue? Explain. (discuss both situation)

ice and higher quantity.
and higher quantity.
e and higher quantity.
e and higher quantity.

e of a day pass. You realize that:  

only 10 miles from her place of employment. These examples illustrate the importance of
. You should
se of calculating the price elasticity of demand. Also suppose P2 > P1. In which of the following cases could we poss
nges is to take no action at all. Charles, another one of your advisors, argues that without a binding price floor, a sho
statements is correct?
hese relationships illustrate the
om and board, pay no intuition, and buy no books. Based on this information, Faith’s economic cost of attending college would b
city to be produced?
llowing cases could we possibly find that (i) demand is elastic and (ii) a decrease in price from  P1 to P2 causes a dec
ut a binding price floor, a shortage will certainly develop. Otto, a third advisor, suggests that you should impose a bin
ost of attending college would be
ce from  P1 to P2 causes a decrease in total revenue?
that you should impose a binding price ceiling in order to avoid a shortage of oranges. Which of your three advisors
Which of your three advisors is most likely to have studied economics?