When the government places a tax on a good and all else is held constant, which of the following would most likely happen?

51.    When the government places a tax on a good and all else is held constant, which of the following would most likely happen?
a.    The overall consumption of the good decreases, assuming the good does not have a vertical demand curve.
b.    The price the buyer pays for the good decreases, assuming the good does not have a
horizontal demand curve.
c.    The supply curve shifts to the right.
d.    The government receives no tax revenue if the tax is more than 20%.
e.    The price and quantity adjust back to the competitive market equilibrium point.


ANS:    A    DIF:    Difficult    REF:    Shifts in the Supply Curve
TOP:    III.B.3.    MSC:    Evaluating

    52.    When the number of firms in a market decreases,
a.    the demand curve shifts to the left.
b.    the demand curve shifts to the right.
c.    the supply curve shifts to the right.
d.    the supply curve shifts to the left.
e.    both the supply and the demand curves shift to the left.


ANS:    D    DIF:    Easy    REF:    Shifts in the Supply Curve
TOP:    III.B.4.    MSC:    Remembering       

    53.    Which of the following situations would cause the
demand curve to shift to the right?
a.    a decrease in the number of consumers
b.    a decrease in the number of producers
c.    an increase in the price of a complement
d.    an increase in the price of a substitute
e.    a change in tastes and preferences


ANS:    D    DIF:    Easy    REF:    Shifts in the Supply Curve
TOP:    III.B.4.    MSC:    Understanding       

    54.    Firm A notices that Firm B is making a profit by producing footballs. There is nothing stopping Firm A from entering the football market, so it does. Holding all else constant, the number of firms in the market will:
a.    increase, causing demand to increase.
b.    increase. causing the supply to shift up.
c.    decrease, causing the supply to decrease.
d.    decrease, causing the supply to increase.
e.    increase, causing the supply to increase.


ANS:    E    DIF:    Medium    REF:    Shifts in the Supply Curve
TOP:    III.B.4.    MSC:    Applying

    55.    Old Navy stocks more Bermuda shorts during the summer months than in the winter months. The resulting shift in supply explains:
a.    the change in technology.
b.    the change in income.
c.    price expectations.
d.    the change in input cost.
e.    the number of firms in a market.


ANS:    C    DIF:    Medium    REF:    Shifts in the Supply Curve
TOP:    III.B.5.    MSC:    Understanding       

    56.    James specializes in college-level economics tutoring. He knows that, during the two weeks before finals, he can charge more for an hour of private tutoring. Expecting this price increase, James will:
a.    supply less tutoring now, shifting supply to the left.
b.    supply more tutoring now, shifting supply to the right.
c.    supply less tutoring now, shifting supply to the right.
d.    supply more tutoring now, shifting supply to the left.
e.    change the price of tutoring without any shift in supply.


ANS:    A    DIF:    Difficult    REF:    Shifts in the Supply Curve
TOP:    III.B.5.    MSC:    Applying

    57.    When the price of ground beef increases and all else is held constant, we would expect the supply of hamburgers to _________, causing the price to _________.
a.    decrease; increase
b.    decease; decrease
c.    stay the same; stay the same
d.    increase; increase
e.    increase; decrease


ANS:    A    DIF:    Medium    REF:    Shifts in the Supply Curve
TOP:    IV.D.4.    MSC:    Applying

    58.    Refer to the accompanying graph. If a tax is placed on a good and all else is held constant, we would assume that the supply curve would:



a.    shift from S1 to S3.
b.    remain at S1.
c.    shift from S1 to S2.
d.    shift from S2 to S1.
e.    shift from S2 to S3.


ANS:    C    DIF:    Medium    REF:    Shifts in the Supply Curve
TOP:    IV.D.4.    MSC:    Analyzing

    59.    If the price of Gatorade increases, the
a.    equilibrium price of Powerade will increase because of a shift in demand.
b.    equilibrium price of Powerade will increase because of a shift in supply.
c.    equilibrium price of Powerade will decrease because of a shift in demand.
d.    equilibrium quantity of Powerade will decrease because of a shift in supply.
e.    equilibrium quantity of Powerade will decrease because of a shift in demand.


ANS:    A    DIF:    Medium    REF:    Supply, Demand, and Equilibrium
TOP:    IV.    MSC:    Applying

    60.    Which of the quantity (Q) and price (P) combinations in the accompanying figure represents the market at competitive equilibrium?


a.    (15, $10)
b.    (15, $6)
c.    (22, $8)
d.    (30, $6)
e.    (30, $10)


ANS:    C    DIF:    Easy    REF:    Supply, Demand, and Equilibrium
TOP:    IV.A.    MSC:    Analyzing

    61.    Refer to the table below. The equilibrium price and quantity in this market is:
 
a.    $4.00 and 40 units.
b.    $4.00 and 80 units.
c.    $2.00 and 50 units.
d.    $2.00 and 60 units.
e.    $8.00 and 40 units.


ANS:    A    DIF:    Easy    REF:    Supply, Demand, and Equilibrium
TOP:    IV.A.    MSC:    Analyzing

    62.    Refer to the table below. If the price of this good is $2.00, there would be a _________ of _________ units.
 
a.    shortage; 20
b.    surplus; 50
c.    shortage; 30
d.    surplus; 30
e.    surplus; 20


ANS:    C    DIF:    Medium    REF:    Supply, Demand, and Equilibrium
TOP:    IV.B.    MSC:    Analyzing

    63.    A shortage occurs whenever:
a.    the quantity supplied is greater than the quantity demanded.
b.    the price is above the equilibrium quantity.
c.    the quantity supplied is less than the quantity demanded.
d.    the government places a binding price floor.
e.    the government places a nonbinding price ceiling.


ANS:    C    DIF:    Easy    REF:    Supply, Demand, and Equilibrium
TOP:    IV.C.    MSC:    Remembering       

    64.    When the price is _________ the equilibrium price, we would expect there to be a _________, causing the market to put _________ pressure on the price until it went back to the equilibrium price.
a.    above; surplus; upward
b.    above; shortage; downward
c.    below; surplus; upward
d.    below; shortage; downward
e.    above; surplus; downward


ANS:    E    DIF:    Difficult    REF:    Supply, Demand, and Equilibrium
TOP:    IV.C.    MSC:    Applying

    65.    According to the accompanying figure, if the price is $10, there is a:


a.    shortage of 15 units.
b.    surplus of 15 units.
c.    shortage of 30 units.
d.    surplus of 30 units.
e.    surplus of 22 units.


ANS:    B    DIF:    Medium    REF:    Supply, Demand, and Equilibrium
TOP:    IV.C.    MSC:    Analyzing

    66.    When the demand curve shifts to the right and the supply curve is held constant,
a.    the equilibrium price and quantity decrease.
b.    the equilibrium price increases, and the equilibrium quantity decreases.
c.    the equilibrium price decreases, and the equilibrium quantity increases.
d.    the equilibrium price and quantity increase.
e.    you see a movement along the demand curve.


ANS:    D    DIF:    Medium    REF:    Supply, Demand, and Equilibrium
TOP:    IV.D.1.    MSC:    Understanding       

    67.    The equilibrium price of peanut butter is $5. A study comes out that says the fat in peanut butter is good for your heart. Holding all other factors constant, which of the following scenarios could happen?
a.    The price of peanut butter increases to $7 because of a supply shift.
b.    The price of peanut butter decreases to $4 because of a supply shift.
c.    The price of peanut butter decreases to $4 because of a demand shift.
d.    The price of peanut butter increases to $7 because of a demand shift.
e.    The price of peanut butter increases to $7 because of a demand AND a supply shift.


ANS:    D    DIF:    Medium    REF:    Supply, Demand, and Equilibrium
TOP:    IV.D.1.    MSC:    Applying

    68.    Some studies have shown that eating chocolate before a test can increase brain activity, thereby causing students to score higher on exams. When these findings were announced, the
price and quantity sold of chocolate increased in college towns. One reason for this could have been that the:
a.    producers increased their supply of chocolate.
b.    consumers increased their demand for chocolate.
c.    producers increased their supply of chocolate and consumers increased their demand for chocolate.
d.    producers decreased their supply of chocolate.
e.    consumers decreased their demand of chocolate.


ANS:    B    DIF:    Medium    REF:    Supply, Demand, and Equilibrium
TOP:    IV.D.1.    MSC:    Applying

    69.    The economists at JET Consulting consider Campbell’s Soup to be an inferior good. During a recession, when the income in the economy is decreasing, economists at JET Consulting would expect the demand curve for Campbell’s Soup to _________, causing the equilibrium price to _________ and the equilibrium quantity to _________.
a.    shift to the left; decrease; decrease.
b.    shift to the left; increase; increase.
c.    shift to the right; decrease; increase.
d.    shift to the right; increase; decrease.
e.    shift to the right; increase; increase.


ANS:    E    DIF:    Difficult    REF:    Supply, Demand, and Equilibrium
TOP:    IV.D.1.    MSC:    Applying

    70.    In the first few months of 2012, the price of gasoline increased by approximately 15%. Because of this increase, we would expect the _________ curve in the market for hybrid cars to _________.
a.    demand; shift to the right
b.    demand; make no movement
c.    supply; shift to the left
d.    demand; shift to the left
e.    supply; shift to the right


ANS:    A    DIF:    Difficult    REF:    Supply, Demand, and Equilibrium
TOP:    IV.D.1.    MSC:    Applying