Additional Sample Test Questions from Chapter 3


1. "A reduction in gasoline prices caused the demand to increase. The lower prices led to an increase in demand for large cars, causing their price to rise." This statement
a. is essentially correct.
b. contains one error the lower gasoline prices would cause a reduction in demand for large cars, not an increase.
c. contains one error the lower gasoline prices would increase the quantity demanded by consumers, not the demand.
d. contains two errors the lower gasoline prices would cause the quantity demanded (rather than demand) to increase, and the lower gasoline price would reduce (rather than increase) the demand for large cars.

2. "If gasoline sales were taxed, the price of gasoline would rise. Consequently, the quantity demanded of gasoline would decline. As a result of the higher gasoline prices, the demand for fuel-efficient automobiles would increase." This statement is
a. essentially correct.
b. incorrect; the high gasoline prices would cause the demand for gasoline, not the quantity demanded, to fall.
c. incorrect; the statement confuses a change in demand with a shift in supply.
d. incorrect; demand and quantity demanded are confused for both gasoline and fuel-efficient cars.

3. "As the price of gasoline rose, consumers decreased their quantity demanded. In addition, the demand for compact cars increased, causing their price to rise." This statement
a. is essentially correct.
b. contains one error the quantity demanded, not the demand for compact cars, increased.
c. contains two errors demand and quantity demanded are confused twice.
d. contains one error demand, not quantity demanded, for gasoline decreased.

4. "If gasoline sales were taxed, the price of gasoline would rise. Consequently, the demand for gasoline would decline. As a result of the higher gasoline prices, the demand for fuel-efficient automobiles would increase." This statement is
a. essentially correct.
b. incorrect; the high gasoline prices would cause the quantity demanded of gasoline, not the demand, to fall.
c. incorrect; the statement confuses a change in demand with a shift in supply.
d. incorrect; demand is confused with quantity demanded for both gasoline and fuel-efficient cars.

5. If the supply of apples decreases, which of the following will generally occur in a market setting?
a. Demand for apples will decrease.
b. The quantity demanded will increase.
c. The costs of apple producers will decrease.
d. The price of apples will increase.

6. If the supply of a good decreases, which of the following will generally occur in a market setting?
a. The price of the good will decrease.
b. Demand will decrease.
c. The quantity demanded will increase.
d. The quantity demanded will decrease.

7. "Lower fuel oil prices in 1986 led to a reduction in demand and lower prices of solar heating units. At the lower price, producers of solar heating units reduced the quantity supplied." This statement is
a. false; lower fuel oil prices would increase the demand for and price of solar heating units.
b. false; producers of solar units would expand production rather than reduce output if the price of the units fell.
c. false; if the demand for solar units fell, the supply of the units would decrease but not the quantity supplied.
d. essentially correct.

8. If the demand for a good increases, which of the following will generally occur in a market setting?
a. The price of the good will decrease.
b. The supply of the good will increase.
c. The quantity supplied will increase.
d. Producer profits will fall.

9. If the demand for a good decreases, which of the following will generally occur in a market setting?
a. The price of the good will increase.
b. The supply of the good will decrease.
c. The quantity supplied will decrease.
d. Producer profits will rise.

10. In a market economy, an increase in demand will generally cause the equilibrium
a. price to fall.
b. quantity supplied to increase.
c. quantity demanded to fall.
d. number of firms in the market to decline.

11. A decrease in demand will
a. reduce supply.
b. increase the quantity traded in the market.
c. cause higher prices, although quantity traded in the market will decline.
d. lead to a reduction in the quantity supplied.