Revision MCQ

1. Which changes would move the equilibrium in the diagram from point X to point Z?

• A. a decrease in demand with a decrease in supply

• B. a decrease in demand with an increase in supply

• C. an increase in demand with a decrease in supply

• D. an increase in demand with an increase in supply

2. When the price of shirts rises from $8 to $10, the demand for shirts falls from 1000 to 500. What is the value of the price elasticity of demand for shirts?

• A. greater than 1

• B. Unitary

• C. Less than 1

• D. Zero

3. What is an important role of a central bank?

• A. attempts to achieve price stability

• B. issues credit cards

• C. provides loans to producers

• D. provides savings accounts for consumers

4. Which price elasticity of demand (PED) would cause an increase in total revenue if the price of the good increased?

• A. perfectly elastic

• B. relatively elastic

• C. relatively inelastic

• D. unitary elastic

The diagram shows the supply curve for coffee.

The price of coffee increases from P1 to P2. How would this benefit firms in the coffee industry?

• A. A higher price gives firms the ability to increase profits.

• B. A higher price gives firms the incentive to reduce total fixed costs.

• C. A higher price will encourage consumers to buy more coffee increasing total revenue

• D. A higher price will encourage less firms to enter the market to supply coffee.

If the government imposes a tax on coffee, how would this affect the supply curve for coffee?

• D. The supply curve will become perfectly elastic.

• A. The supply curve will shift to the left, indicating a decrease in supply.

• B. The supply curve will shift to the right, indicating an increase in supply.

• C. The supply curve will remain unchanged.

5. What happens to the equilibrium price and quantity when there is an increase in demand for a product?

• C. Equilibrium price increases, quantity increases.

• B. Equilibrium price increases, quantity decreases.

• D. Equilibrium price remains the same, quantity increases.

• A. Equilibrium price decreases, quantity increases.

6. Which of the following factors would likely lead to a decrease in the demand for coffee?

• A. An increase in consumer income.

• B. A rise in the price of tea, a substitute good.

• D. A change in consumer preferences away from coffee.

• C. A decrease in the price of coffee.

9. What might be an external benefit of an increase in the number of university graduates in an economy?

• A. an increase in revenue for the universities from fee-paying students

• B. an increase in tax revenue from a more productive labour force

• C. an increase in graduate employment as a percentage of the working population

• D. an increase in wages for graduates

10. One of the functions of money is to act as a measure of value. What does this mean?

• A. Money allows people to borrow and lend.

• B. Money allows people to save their surplus income.

• C. Money is used to buy goods and services.

• D. Money is used to compare the worth of different goods and services.