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ECO Price determination in Different Markets

Total questions: 100

Worksheet time: 2hrs 40mins

Name
Class
Date
1.

A demand curve is drawn on the assumption that

a)

quantity demanded always increases as price falls.

b)

changes in price do not influence supply.

c)

price elasticity of demand does not vary along the demand curve.

d)

factors affecting demand, other than price, remain constant.

2.

The cross elasticity of demand between goods X and Y is positive. This implies that they are

a)

normal goods

b)

substitute goods.

c)

goods in composite demand.

d)

complementary goods.

3.
a)

an increase in the quantity of frozen peas supplied.

b)

an increase in the price of frozen peas.

c)

a change in consumer preference for frozen peas.

d)

a decrease in the price of a substitute for frozen peas.

4.

An economy in which average incomes have fallen by 5% has also seen the demand for holidays overseas fall by 20%. Assuming that nothing else affecting holidays overseas has changed, it can be concluded that the income elasticity of demand for holidays overseas is

a)

+ 4.0

b)

− 4.0

c)

+ 0.25

d)

− 0.25

5.

In a typical demand schedule, quantity demanded

a)

varies directly with price.

b)

varies proportionately with price.

c)

is determined by the elasticity of demand.

d)

varies inversely with price

6.

All other things being equal, supply curves slope upwards from left to right because

a)

higher prices lead to higher costs.

b)

lower prices lead to higher output.

c)

lower prices lead to higher demand

d)

higher prices lead to higher profits

7.

A market is defined as being in equilibrium when

a)

there is maximum output at minimum cost.

b)

prices are at their lowest possible level.

c)

there is no tendency for the market price to change.

d)

consumer satisfaction is maximised.

8.

The price elasticity of demand for a good made by a firm is −0.6. If the firm raises the price of the good, its revenues will

a)

rise

b)

stay the same

c)

fall by more than 6 per cent.

d)

fall by less than 6 per cent.

9.

A product has a price elasticity of supply of +1.5. If its price falls from £10.00 to £8.00, its supply will

a)

decrease by 30%

b)

decrease by 40%.

c)

increase by 30%.

d)

increase by 40%.

10.
a)

the price of substitutes and a rise in raw material costs.

b)

interest rates and a rise in incomes.

c)

the wages paid to all workers.

d)

income tax and value added tax.

11.
EQ?
a)
10
b)
20
c)
30
d)
40
12.
A new company in town creating the same product as you would cause...
a)
the demand to shift to the right
b)
the demand to shift to the left
c)
the supply to shift to the right
d)
the supply to shift to the left
13.
The Law of Demand states that as quantity demanded decreases...
a)
wages decrease
b)
production increases
c)
price increases
d)
quality decreases
14.
A sharp rise in the price of Doritos may lead to an increase in the demand for
a)
salsa
b)
hamburgers
c)
Cheetos
d)
napkins
15.
What would cause the demand to move along the demand curve instead of shifting it right or left? 
a)
price
b)
income
c)
preferences
d)
expectations
16.
What will happen in relation to demand for swimsuits if the weather is sunny and beautiful? 
a)
the demand curve shifts to the left
b)
the demand curve becomes flatter
c)
the demand curve shifts to the right
d)
the demand curve becomes steeper
17.
Supply depends on the willingness and ability of 
a)
donors to contribute
b)
advertisers to promote
c)
producers to sell
d)
consumers to purchase
18.
According to the Law of Supply, what happens as price increases? 
a)
The quantity supplied increases
b)
The quantity supplied decreases
c)
The supply curve shifts to the left
d)
The supply curve shifts to the right
19.
Which of these would most likely increase the supply of Pizza Hut pizza? 
a)
a delivery trucker strike (who bring ingredients)
b)
a government excise tax
c)
a decrease in the price of cheese
d)
an increase in the supply of Runza hamburgers
20.
The degree to which the quantity demanded responds to changes in price is called
a)
elasticity
b)
revenue
c)
schedule
d)
utility
21.
Which of these best describes market equilibrium? 
a)
the price of Pepsi does not vary much from week to week 
b)
Pepsi production provides a good profit for the manufacturer
c)
everyone who wants Pepsi can easily afford to buy it 
d)
the amount of Pepsi for sale matches the amount that people want to buy
22.
Where supply and demand intersect
a)
equilibrium 
b)
elasticity
c)
demand curve
d)
supply curve
23.
What happens when a company purposely prices their products very low, in an attempt to get people to try them? 
a)
equilibrium
b)
price floor
c)
surplus
d)
shortage
24.
What event in the midwest would shift the supply curve for corn to the left? 
a)
an influx of new low-wage workers
b)
a thunderstorm with large hail
c)
evidence that corn improves athletic ability
d)
a study stating that corn causes heart disease
25.
When might it be time to produce less of a product? 
a)
when the cost of materials is cheaper
b)
when you can hire more skilled workers
c)
when a new company just like yours opens
d)
when consumers are only willing to pay a low price for your product
26.
What is the result of the government setting a price ceiling on apartments for rent? 
a)
apartments are available but too expensive
b)
people start dividing their homes in to apartments to rent
c)
people want to rent but struggle to find apartments
d)
construction jobs increase as more people build new apartments
27.
How many animals are demanded at $5?
a)
0
b)
20
c)
60
d)
90
28.
EP?
a)
$2
b)
$4
c)
$6
d)
$8
29.
a)
The green line is the equilibrium
b)
The green line is the supply curve
c)
The green line is a price ceiling
d)
The green line is a price floor
30.
Price ceilings create a(n)... 
a)
shortage
b)
surplus
c)
equilibrium
d)
shift in the supply curve
31.

Which of these is NOT a characteristic of a monopolistically competitive firm?

a)

There are many sellers

b)

Firms sell differentiated products

c)

There is free entry and exit

d)

Prices are set by the buyer

32.

Which of these is the profit maximization equation of the monopolistically competitive firm in the short run?

a)

MR = MC

b)

MR = P

c)

MR < MC

d)

MR < P

33.

Which of these is the equation for economic profit?

a)

Variable cost + Fixed cost

b)

Marginal revenue - Marginal cost

c)

Accounting profit + Opportunity cost

d)

Revenue - Total costs

34.

When new firms enter the monopolistically competitive market, which of the following obtains a positive externality?

a)

Competitors

b)

Customers

c)

Government

d)

Suppliers

35.

Which of these CANNOT be used by the firm to signal their product's quality?

a)

Brand Name

b)

Costing

c)

Advertising

d)

Packaging

36.

Which of these is the production quantity that minimizes the average total costs of the firm?

a)

Efficient scale of the firm

b)

Minimum cost requirement

c)

Cost saving production

d)

Effective production rate

37.

Which of these describes the price of monopolistic competition?

a)

It is above marginal revenue

b)

It is above marginal cost

c)

It is below marginal revenue

d)

It is below marginal cost

38.

Which of these is NOT a possible effect of advertising?

a)

Promotes brand loyalty

b)

Incentive to maintain quality

c)

Lowers prices

d)

Stops product development

39.

How do increasing profits affect monopolistically competitive firms in the long run?

a)

Firms will exit the market

b)

Firms will develop fewer products

c)

Firms will enter the market

d)

Firms will increase costs

40.

To earn a profit in the short run, how should the monopolistically competitive firm set its price?

a)

equal to marginal costs

b)

equal to average costs

c)

above marginal costs

d)

above average costs

41.
There are high barriers to entry in the market in perfect competition.
a)
True
b)
False
42.
An oligopoly is a market dominated by just a few firms.
a)
True
b)
False
43.
How many firms are in a monopoly? 
a)
one
b)
two
c)
three
d)
unlimited
44.
A market structure in which a few large firms dominate a market
a)
Perfect Competition
b)
Monopolistic Competition
c)
Oligopoly
45.
Going to the Madison's Farmers Market to buy apples, you will find this type of market structure.
a)
Monopoly
b)
Perfect Competition
c)
Monopolistic Competition
d)
Oligopoly
46.
Since the airline industry is controlled by only a few very big companies, which type of market structure would best describe it.
a)
Monopoly
b)
Perfect Competition
c)
Monopolistic Competition
d)
Oligopoly
47.
Which of the following statements correctly identifies a difference between perfect competition and monopolistic competition? 
a)
In perfect competition there are no barriers to entry, but there are strong barriers in monopolistic competition. 
b)
In perfect competition there are many firms, but in monopolistic competition there are only a few firms. 
c)
In perfect competition the firms all sell products that are exactly the same, but in monopolistic competition each firm sells a slightly differentiated product. 
d)
In perfect competition there are few consumers, but in monopolistic competition there are many consumers. 
48.

A combination of companies that try to corner the market and act as a monopoly

a)

Trust

b)

Cartel

c)

Monopolistic Competition

d)

Conglomerate

49.

Corporations illegally working together to act as a monopoly

a)

Trust

b)

Cartel

c)

Monopolistic Competition

d)

Conglomerate

50.

Any competition for business that does not involve price (better location, better guarantee, up-scale, better quality etc.)

a)

Pure Competition

b)

Monopolistic Competition

c)

Oligopoly

d)

Non-Price Competition

51.

The above image is an example of...

a)

Pure Competition

b)

Monopolistic Competition

c)

Oligopoly

d)

Non-Price Competition

52.

The market for farm products is mostly pure competition

a)

True

b)

False

53.

Collusion is illegal (not legal) in the U.S.

a)

True

b)

False

54.

A car company merges with a seat belt maker and a tire company, it is called

a)

horizontal merger

b)

vertical merger

c)

horizontal conglomerate

d)

vertical drop

55.

DeBeers used to be the only supplier of diamonds. Which terms best describes this firm?

a)

Merger

b)

Monopolistic Competition

c)

Monopoly

d)

Oligopoly

56.

Although no matter which barber/hair stylist you chose, you will have shorter hair; most people have a preference to going to one stylist or barber over another. This is an MOST LIKELY to be because of

a)

Perfect Competition

b)

Non-Price Competition

c)

Beauty Contests

d)

Monopolistic Cartels

57.

The Law of Demand states that as price decreases...

a)

Quantity demanded decreases

b)

Quantity demanded increases

c)

Production increases

d)

Quality Decreases

58.

Supply depends on the willingness and ability of...

a)

consumers to purchase

b)

producers to sell

c)

donors to contribute

d)

advertisers to promote

59.

According to the law of supply, what happens as price increases?

a)

The quantity supplied increases

b)

The quantity supplied decreases

c)

The supply curve shifts to the left

d)

The supply curve shifts to the right

60.

The equilibrium price is the price at which...

a)

demand and supply curves intersect

b)

consumers start reducing demand

c)

producers’ total revenue is highest

d)

neither demand nor supply will shift

61.

In the summer picnic season, a sharp rise in the price of burgers may lead to an increase in the demand for the substitute good, _____.

a)

coleslaw

b)

chicken

c)

relish

d)

buns

62.

Which of the following will cause the demand to move along the demand curve rather than shifting it?

a)

preferences

b)

expectations

c)

price

d)

income

63.

Which of these would most likely increase the supply of soccer balls?

a)

a government tax on sporting goods

b)

a decrease in the price of raw materials

c)

an increase in the supply of tennis balls

d)

a transportation strike (truckers on strike)

64.

Which of these situations best illustrates market equilibrium?

a)

The amount of soap for sale matches the amount of soap that people want to buy.

b)

Everyone who wants or needs soap can easily afford to buy it

c)

Soap production ensures a good profit for the manufacturer

d)

The price of soap does not vary much from week to week

65.

What might result from setting a price ceiling on the price of rent for apartments?

a)

Houses are broken up into apartments to meet the demand.

b)

Construction jobs increase with the building of new apartment buildings.

c)

People can find apartments but cannot afford to rent them.

d)

More people want to rent apartments than the number of apartments available to rent.

66.

As price for a good or service goes up, how does that typically affect the quantity demanded?

a)

it increases

b)

it decreases

c)

it does not change

67.

As price for a good or service goes up, how does that typically affect the quantity supplied?

a)

it increases

b)

it decreases

c)

it does not change

68.

Which letter shows the area of a shortage?

a)

A

b)

B

c)

C

69.

Which letter shows the equilibrium?

a)

A

b)

B

c)

C

70.

Which letter shows the area of surplus?

a)

A

b)

B

c)

C

71.

A price ceiling...

a)

would be below the equilibrium

b)

would be at the equilibrium

c)

would be above the equilibrium

72.

A price floor...

a)

would be below the equilibrium

b)

would be at the equilibrium

c)

would be above the equilibrium

73.

A price ceiling typically creates...

a)

a shortage

b)

a surplus

c)

equilibrium

74.

A price floor typically creates...

a)

a shortage

b)

a surplus

c)

equilibrium

75.

What is a black market?

a)

The term for when business is good and profitable.

b)

The term for when business is losing money.

c)

When goods and services are exchanged illegally.

76.

Which of the following are examples of price controls? Check all that apply.

a)

shortage

b)

price floor

c)

rationing

d)

price ceiling

77.

Which of these is most likely to happen to demand for clothes in a clothing store when blizzards keep customers at home?

a)

The demand curve becomes steeper

b)

The demand curve shifts to the right

c)

The demand curve becomes flatter

d)

The demand curve shifts to the left

78.

The value of multiplier depends on

a)

investment

b)

income

c)

Marginal Propensity to consume

d)

Average Propensity to consume

79.

Who is the author of the book The general Theory of Employment and Money

a)

Ricardo

b)

J.M Keynes

c)

J.B Ray

d)

Adam Smith

80.

Which of the following can be negative ?

a)

APC

b)

APS

c)

MPC

d)

MPS

81.

Consumption Function is the Functional Relation between

a)

Income and saving

b)

Price level and consumption

c)

Income and consumption

d)

ALL OF THE ABOVE

82.

Value of Investment Multiplier directly related to MPC but inversely related with

a)

APC

b)

MPS

c)

APS

d)

NONE OF THESE

83.

What will be the value of Multiplier if MPC = 0.75 ?

a)

4

b)

5

c)

2

d)

3

84.

If value of Investment Multiplier can be more then 5 if

a)

MPC-MPS-0.5

b)

MPC<=0.8

c)

MPC>=0.8

d)

MPS<0.2

85.

When Income is Zero, Then saving will be

a)

0

b)

-ve

c)

+ve

d)

None of these

86.

Whose value can be greater than I ?

a)

APC

b)

MPC

c)

MPS

d)

NONE OF THESE

87.

What will be the value of Multiplier if MPC=MPS ?

a)

0

b)

1

c)

2

d)

none of the these

88.

What is the relationship between Multiplier and MPC ?

a)

POSITIVE

b)

NEGATIVE

c)

NOT RELATED

d)

EQUAL MPC

89.

Aggregate supply is equal to

a)

National Income

b)

Consumption + Savings

c)

Both A and B

d)

Aggregate Demand

90.

Theory of Determination of income and Employment is based on

a)

Ex-ante

b)

Ex-Post

c)

Both A and B

d)

None of the above

91.

AD=

a)

C+I

b)

C x I

c)

C + S

d)

C/Y

92.

What can be the Maximum value of Multiplier

a)

infinite

b)

10

c)

1

d)

0

93.

If consumption function is 100 + 0.8Y then What will be the MPS ?

a)

100

b)

-100

c)

0.8

d)

0.2

94.

Investment That changes with the change in income is called

a)

Autonomous Investment

b)

Induced Investment

c)

Net Investment

d)

Gross Investment

95.

Value of Investment Multiplier can be more than 5 , if

a)

MPC=MPS =0.5

b)

MPC<=0.8

c)

PMC>=0.8

d)

MPS<0.2

96.

If the MPC > MPS The value of Multiplier will be

a)

greater than 2

b)

Less than 2

c)

Equal to 2

d)

Equal to 5

97.

AS curve Starts from

a)

The origin point

b)

below the origin point

c)

above the origin point

d)

none of these

98.
If the price of baseball games decrease, the demand for peanuts and crackerjack will decrease.
a)
True
b)
False
99.
A decrease in demand will result in...
a)
an increase in equilibrium price and a decrease in equilibrium quantity.
b)
a decrease in equilibrium price and a decrease in equilibrium quantity.
c)
an increase in equilibrium price and quantity.
d)
a decrease in equilibrium price and quantity. 
100.
A ___ ___ keeps prices form going any higher and causes a ___.
a)
price ceiling; shortage
b)
price ceiling; surplus
c)
price floor; shortage
d)
price floor; surplus

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