Econ1B03-qCh3 - 1 Chapter 3 Supply and Demand: Theory 1....

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1 Chapter 3 Supply and Demand: Theory 1. The law of demand states that price and quantity demanded are a. directly related, ceteris paribus . b. inversely related, ceteris paribus . c. independent. d. positively related, ceteris paribus . ANS: b 2. Which of the following illustrates the law of demand? a. Jeff buys more pens at $1 per pen than at $2 per pen, ceteris paribus . b. Sara buys more ice cream at $2 per half-gallon than at $1 per half gallon, ceteris paribus . c. Chris buys fewer trousers at $30 per pair than at $25 per pair, ceteris paribus . d. a, b, and c e. a and c ANS: e 3. At a price of $15, Marta buys 3 CD’s per month. When the price increases to $20, Marta buys 2 CD’s per month. Leah says that Marta’s demand for CD’s has decreased. Is Leah correct? a. Yes, Leah is correct. b. No, Leah is incorrect. Marta’s demand has increased. c. No, Leah is incorrect. Marta’s quantity demanded has decreased, but her demand has stayed the same. d. No, Leah is incorrect. Marta’s quantity demanded has increased, but her demand has stayed the same. e. No, Leah is incorrect. Marta’s quantity demanded has decreased and her demand has increased. ANS: c 4. A major reason for the law of demand is that a. one price changing requires at least one other price to change in the opposite direction. b. people substitute lower-priced goods for higher-priced goods. c. a higher price never reduces quantity demanded by enough to lower total revenue. d. people are willing to produce more units at a higher price. ANS: b 5. The price of pizzas rises, and Mei increases her monthly purchases of pizza. Therefore, the law of demand a. doesn’t hold for any good. b. doesn’t hold during a month. c. doesn’t hold for pizzas. d. doesn’t hold for Mei. e. none of the above ANS: e 64
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65 Chapter 3 6. A demand schedule is a listing of a. incomes and quantities demanded. b. costs and quantities demanded. c. prices and quantities demanded. d. assets and quantities demanded. ANS: c 7. If an increase in income results in an increase in the demand for chicken, then chicken is a. a neutral good. b. a luxury good. c. a normal good. d. an inferior good. ANS: c 8. If Max’s demand for hot dogs falls as his income rises, then hot dogs are a. a bad good. b. an inferior good. c. a preferential good. d. a normal good. e. a neutral good. ANS: b 9. A decrease in the number of buyers in an area will result in a a. movement up the demand curve. b. movement down the demand curve. c. leftward shift in the demand curve. d. rightward shift in the demand curve. ANS: c 10. If the demand curve for a good shifts leftward, a. quantity demanded is less at each price. b. quantity demanded remains constant at each price. c. quantity demanded is greater at each price. d. demand is greater at each price. ANS: a 11. If people begin to favor romance novels to a greater degree than previously, the demand curve for romance novels a. shifts rightward.
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