SAMPLE TEST - CHAPTER 19 

1. Which one of the following would most likely increase the demand for coffee?
a. a decrease in consumer income
b. a decrease in the price of coffee
c. an increase in the price of tea, a close substitute
d. a drought in the coffee-producing regions of Brazil

2. A 10 percent increase in the price of sugar reduces sugar consumption by about 5 percent. The increase causes households to
a. spend more on sugar.
b. spend less on sugar.
c. spend the same amount on sugar.
d. consume more goods like coffee and tea that are complements of sugar.

3. If the price of gasoline fell, the market demand curve for automobile tires, a complement, would
a. shift to the right.
b. shift to the left.
c. remain stationary.
d. become more elastic.

4. When economists say the demand for a product has increased, they mean that the
a. demand curve for the product has shifted to the left.
b. price of the product has fallen, and consequently consumers are buying more of the product.
c. cost of producing the product has increased.
d. amount of the product that consumers are willing to purchase at various prices has increased.

5. "I like ice cream, but after eating homemade ice cream last night, I want to have something else for dessert today." This statement most clearly reflects
a. the budget constraint.
b. consumer irrationality.
c. the second law of demand: price elasticity increases with time.
d. the law of diminishing marginal utility.

6. People can travel within Washington, D.C., via the Metro subway system or by taxi. Suppose that taxi fares increase by 20 percent, while the subway fares remain constant. As the result of the higher taxi fares, the total revenue derived from subway fares __________, while the total revenue derived from taxi fares _____________. (Fill in the blanks).
a. will decrease; may either increase or decrease
b. will increase; may either increase or decrease
c. may either increase or decrease; will increase
d. may either increase or decrease; will decrease

7. If Sarah's income rises from $2,000 to $2,400 per month and, as a result, she purchases 40 percent more designer clothing, then her income elasticity for designer clothing is
a. 0.5.
b. 1.0.
c. 2.0.
d. Not enough information is given to answer this question.

8. If the price of apples rises from 50 cents to $1.50 and quantity demanded falls from 1000 to 900, then we can conclude that the price elasticity for apples is:
a. -20
b. inelastic
c. elastic
d. both a and c are correct.

9. If the price of gasoline goes up and Dan now buys fewer candy bars because he has to spend more on gas, this would best be explained by the
a. substitution effect
b. income effect
c. highly elastic demand for gasoline
d. any of the above are possible explanations

10. Which of the following would increase the likelihood that consumers might purchase a product?
a. lower product price
b. improved quality
c. successful advertising
d. All of the above are correct.