4) If skiing at Banff and skiing at Whistler are substitutes, an increase in the price of skiing at Banff will:

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1 ECON Chapter 3 Review Quiz One economic principle states that, ceteris paribus, the lower the price of a commodity the greater will be the quantity of the commodity consumers will wish to purchase. On the basis of this principle alone, it can be concluded that: a) if the price of mink coats falls, consumers will purchase more mink coats b) if the price of mink coats falls, there must have been a decrease in the demand for clothes made of fur c) if the price of mink coats falls and there are no important changes in the other factors affecting their demand, consumers will purchase more mink coats d) if more mink coats are purchased this month than last month, it is because the price of mink coats has fallen 2) A demand curve specifies quantity demanded: a) over an interval of time b) only if there is an adequate supply c) that people would like to be able to buy d) that people can afford to buy 3) A decrease in the quantity demanded: a) shifts the demand curve to the left b) shifts the demand curve to the right c) is a movement down along the demand curve d) is a movement up along the demand curve 4) If skiing at Banff and skiing at Whistler are substitutes, an increase in the price of skiing at Banff will: a) decrease demand for skiing at Whistler b) increase demand for skiing at Whistler c) decrease quantity demanded of skiing at Whistler d) increase quantity demanded of skiing at Whistler

2 5) When consumption of a good increases as peoples incomes increase it is a a) normal good b) substitute good c) inferior good d) complementry good 6) Which of the following is not among the determinants of demand? a) consumer incomes b) consumer expectations of future prices c) prices of substitute goods d) cost of resources 7) The reason for the law of demand is best explained in terms of: a) complementary goods b) substitutable goods c) law of increasing costs d) diminishing marginal utility 8) According to the law of supply: a) equilibrium quantity will increase when equilibrium price increases b) equilibrium quantity will decrease when equilibrium price increases c) the supply curve has a negative slope d) if other things remain the same, the quantity supplied increases whenever price increases 9) An "increase in supply" means:

3 a) a rightward shift of the supply curve b) a leftward shift of the supply curve c) a movement up along a given supply curve d) a movement down along a given supply curve 10) The supply curve of the firm slopes upward in the short run because: a) the increased production requires the use of inferior inputs b) hiring more inputs for the extra production requires the payment of higher input prices c) the increased technology to produce more output is expensive d) productive efficiency declines because certain productive resources cannot be expanded quickly 11) Which of the following would increase the supply of books? a) an increase in the demand for books b) an increase in the price of books c) an increase in the cost of paper d) a decrease in the wages paid to printers 2) This question is based on the following diagram. Given the original demand and supply curves are D and S: a) the equilibrium price and quantity were P and Q1 b) the equilibrium price and quantity were P and Q2

4 c) the equilibrium price and quantity were P1 and Q1 d) the equilibrium price and quantity were P and Q3 13) The determinants of supply include all of the following except a) the number of buyers b) the number of sellers c) the prices of factors d) technology 14) This question is based on the following diagram. The shift in the supply curve from S to S1 could be caused by: a) an increase in the price of the good b) a technological improvement in the production of the good c) a decrease in demand d) an increase in the cost of the resources used in the production of the good 15) A market is in equilibrium when: a) inventories of the good are not rising b) suppliers can sell all of the good they decide to produce at the prevailing price c) quantity demanded equals quantity supplied d) demanders can purchase all of the good they want at the prevailing price

5 Key: 1c 2a 3d 4b 5a 6d 7d 8d 9a 10d 11d 12d 13a 14d 15c

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