practice quiz 1

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Louisiana State University *

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201

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Economics

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Apr 3, 2024

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Quiz 1: Supply and Demand Analysis 1. What happens to equilibrium price and quantity when there is an increase in demand? a) Equilibrium price increases, equilibrium quantity increases b) Equilibrium price decreases, equilibrium quantity increases c) Equilibrium price increases, equilibrium quantity decreases d) Equilibrium price decreases, equilibrium quantity decreases 2. If there is a surplus in the market, what adjustment occurs to reach a new equilibrium? a) Price decreases, quantity demanded decreases b) Price decreases, quantity supplied decreases c) Price increases, quantity demanded increases d) Price increases, quantity supplied decreases 3. Define elasticity of demand. a) The percentage change in quantity demanded divided by the percentage change in price b) The absolute change in quantity demanded divided by the absolute change in price c) The percentage change in price divided by the percentage change in quantity demanded d) The absolute change in price divided by the absolute change in quantity demanded 4. What factors can shift the supply curve? a) Changes in technology and production costs b) Changes in consumer preferences and income c) Changes in government regulations and taxes d) Changes in the prices of related goods 5. Describe a situation where price ceilings might be implemented by the government. a) To prevent prices from falling too low b) To prevent prices from rising too high c) To encourage producers to increase production d) To encourage consumers to decrease consumption 6. How does a decrease in the price of a complement affect the demand curve? a) Shifts the demand curve to the right b) Shifts the demand curve to the left c) Moves along the demand curve to a lower quantity demanded d) Moves along the demand curve to a higher quantity demanded 7. What is the impact of a tax on producers in a market with perfectly elastic demand? a) Producers bear the entire burden of the tax b) Consumers bear the entire burden of the tax c) Both producers and consumers share the burden of the tax equally d) There is no impact on producers due to perfectly elastic demand 8. In the long run, how do firms respond to economic profits in a perfectly competitive market? a) Exit the market b) Enter the market c) Increase production d) Decrease production 9. What is the difference between a normal good and an inferior good? a) Normal goods have downward-sloping demand curves, while inferior goods have upward-sloping demand curves b) Normal goods have elastic demand, while inferior goods have inelastic demand c) Normal goods are necessities, while inferior goods are luxuries d) Normal goods are demanded more as income increases, while inferior goods are demanded less as income increases

10. How does a decrease in the price of a substitute affect the demand curve? a) Shifts the demand curve to the right b) Shifts the demand curve to the left c) Moves along the demand curve to a lower quantity demanded d) Moves along the demand curve to a higher quantity demanded

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