Jane Marielle G.

Diegor
BSA 2-24D

Multiple Choice Questions

1. A market:
a. Reflects upsloping demand and downsloping supply curves
b. Entails the exchange of goods, but not services.
c. Is an institution that brings together buyers and sellers.
d. Always requires face-to-face contact between buyer and seller.

2. The law of demand states that:

a. Price and quantity demanded are inversely related.
b. The larger the number of buyers in a market, the lower will be product price.
c. Price and quantity demanded are directly related.
d. Consumers will buy more of a product at high prices than at low prices.

3. Graphically, the market demand curve is:

a. Steeper than any individual demand curve that is part of it.
b. Greater than the sum of the individual demand curves.
c. The horizontal sum of individual demand curves.
d. The vertical sum of individual demand curves.

4. In presenting the idea of a demand curve economists presume that the most
important variable in determining the quantity demanded is:
a. The price of the product itself.
b. Consumer income.
c. The prices of related goods.
d. Consumer tastes.

5. The income and substitution effects account for:

a. The upward sloping supply curve.
b. The downward sloping demand curve.
c. Movements along a given supply curve.
d. The “other things equal” assumption.

6. When the price of a product rises, consumers shift their purchases to other products
whose prices are now relatively lower. This statement describes:
a. An inferior good.
b. The rationing function of prices.
c. The substitution effect.
d. The income effect.

7. In the past few years, the demand for donuts has greatly increased. This increase in
demand might best be explained by:
a. An increase in consumer income.
b. An increase in the price of a substitute good.
c. A change in consumer expectations.
d. A change in buyer tastes.

8. An economist of Globe Telecommunications predicts that, other things equal, a rise in

consumer incomes will increase the demand for cellular phones. This prediction is
based on the assumption that:
a. There are many products that are substitutes for cellular phones.
b. There are many products that are complementary to cellular phones.
c. There are few products that are substitutes for cellular phones.
d. Cellular phones are normal goods.

9. If consumers are willing to pay a higher price than previously for each level of output,
we can say that the following has occurred:
a. A decrease in demand.
b. An increase in demand.
c. A decrease in supply.
d. An increase in supply.

10. If producers must obtain higher prices that previously to produce various levels of
output, the following has occurred:
a. A decrease in demand.
b. An increase in demand.
c. A decrease in supply.
d. An increase in supply.

11. An improvement in production technology will:

a. Increase equilibrium price.
b. Shift the supply curve to the left.
c. Shift the supply curve to the right.
d. Shift the demand curve to the left.

12. The location of the supply curve of a product depends on:

a. The technology used to produce it.
b. The prices of resources used in its production.
c. The number of sellers in the market.
d. All of the above.

13. When the price of oil declines significantly, the price of gasoline also declines. The
latter occurs because of a(n):
a. Increase in the demand for gasoline.
b. Decrease in the demand for gasoline.
c. Increase in the supply of gasoline.
d. Decrease in the supply of gasoline.

14. An increase in the excise tax on cigarettes raises the price of cigarettes by shifting
the:
a. Demand curve for cigarettes rightward.
b. Demand curve for cigarettes leftward.
c. Supply curve for cigarettes rightward.
d. Supply curve for cigarettes leftward.
15. A government subsidy to the producers of a product:
a. Reduces product supply.
b. Increases product supply.
c. Reduces product demand.
d. Increases product demand.

True/False Questions

1. A change in the quantity demanded describes a movement along a given demand

curve in response to a change in the price of the good.
2. A change in demand shifts the entire demand curve. An increase in demand shifts the
demand curve to the left; a decrease shifts it to the right.
3. A change in the price of a substitute shifts the demand curve for the good in question.
The relationship is direct.
4. Changes in taste will not shift the demand curve. Changes in expected future prices
and income can shift the current demand curve.
5. Input prices, the prices of substitutes in production, expectations, the number of
suppliers, technology, regulation, taxes and subsidies, and weather can all lead to
changes in quantity supplied.
6. The supply of a good increases (decreases) if the price of one of its substitutes in
production falls (rises).
7. The important point about a market is what it doest – it facilitates trade.
8. An inverse, or negative, relationship is one where one variable changes in the
opposite direction from the other – if one increases, the other decreases.
9. Supply may also change because of changes in the legal and regulatory environment
in which firms operate.
10. When teenagers get their driver’s licenses, their increased mobility expands their
alternatives to baby-sitting substantially, raising the opportunity cost of baby-sitting. This
change decreases (shift left) the supply of baby-sitting services.

Fill in the blanks

1. A(n) market is the process of buyers and sellers exchange goods and services.
2. Buyers, as a group, determine the demand side of the market. Sellers, as a group,
determine the supply side of the market.
3. An increase in demand is represented by a rightward shift in the demand curve; a
decrease in demand is represented by a leftward shift in the demand curve.
4. The market supply curve is a graphical representation of the amount of goods and
services that suppliers are _________ and __________ to supply at various prices.
5. The supply of good increases if the price of one of its substitutes in production falls.
The supply of a good decrease if the price of one of its substitutes in production rises.
TECHNOPRENEUR EXERCISE (5 POINTS)

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