PPSC Economics Topic 6 Economics Models

Question # 1

A Horizontal demand curve for a good could arise because consumers.

Are irrational A
Are not sensitive to price changes B
View this good as identical to another good C
Have no equivalent substitutes for this good D

Question # 2

Suppose the demand curve for a good shifts rightward, causing the equilibrium price to increase this increase in the price of the good results in.

A rightward shift of the supply curve A
An increase in quantity supplied B
A leftward shift of the supply curve C
A leftward movement along the supply curve D

Question # 3

It is appropriate to use the supply and demand model if in a market.

Everyone is a price taker with full information about the price and quantity of the good. A
Firms sell identical products B
Costs of trading are low C
All of the above D

Question # 4

Holding all other factors constant consumers demand more of a good the

Higher its price A
Lower its price B
Steeper the downward slope of the demand curve C
Steeper the upward slope of the demand curve D

Question # 5

If the price of automobile were to decrease substantially the demand curve for automobiles would most likely.

shift rightward A
Shift left eard B
Remain unchanged C
Become steeper D

Question # 6

Economists tend to judge a model based upon

the realty of its assumptions A
The accuracy of its predications B
Its simplicity C
Its complexity D

Question # 7

To determine the total demand for all consumers sum the quantity each consumer demands.

At a given price A
At all prices and then sum this amount across all consumers B
Both a and b will generate the same total demand C
None of the above D

Question # 8

If the price of automobiles were to increase substantially the demand curve for gasoline would most likely

Shift leftward A
Shift right ward B
Become flatter C
Become steeper D

Question # 9

The percentage change in the quantity demanded in response to a percentage change in the price is known as the.

slope of the demand curve A
Excess demand B
Price elasticity of demand C
All of the above D

Question # 10

If the price of automobiles were to decrease substantially the demand curve for public transpiration would most likely.

shift rightward A
Shift leftward B
Remain unchanged C
Remain unchanged while quantity demanded would change D

Question # 11

An increases in the demand curve for orange juice would be illustrated as a.

Leftward shift of the demand curve A
Right ward shift of the demand curve B
Movement up along the demand curve C
Movement down along the demand curve D

Question # 12

A competitive equilibrium is described by

A price only A
A quantity only B
The excess supply minus the exceess demand. C
A price and a quantity D

Question # 13

If a government imposed price celling causes the observed price in a market to be below the equilibrium price.

There will be excess demand A
There will be excess supply B
The curves will shift to make a new equilibrium at the regulated price C
None of the above D

Question # 14

A vertical demand curve results in.

No change in quantity when the supply curve shifts. A
No change in price when the supply curve shifts B
No change in the supply curve being possible C
No change in quantity when the demand curve shifts. D

Question # 15

The expression increase in quantity supplied is illustrated graphically as a.

Leftward shift in the supply curve A
Rightward shift in the supply curve B
Movement up long the supply curve C
Movement down along the supply curve D

Question # 16

Which of the following is an example of a normative statement.

Since this good is bad for you, you should not consume it. A
this good is bad for you B
If you consume this good you will get sick C
People usually get sick after consuming this good D

Question # 17

Equilibrium is defined as a situation in which.

Neither buyers nor sellers want to change their behavior A
No government regulations exist B
Demand curves are perfectly horizontal C
suppliers will supply and amount that buyers wish to buy D

Question # 18

If the demand curve for a good is horizontal and the price is positive then a leftward shift of the supply curve results in.

a price of zero A
An increase in price B
A decrease in price C
No change in price D

Question # 19

When two goods are substitutes a shock that raises the price of one good causes the price of the other goods to.

Remain unchanged A
Decrease B
Increase C
Change in an unpredictable manner D

Question # 20

If price is initially above the equilibrium level.

the supply curve will shift rightward A
The supply curve will shift letward B
Excess supply exists C
All firms can sell as much as they want D

Sr.#	Question	Answer
1	If the price of orange juice rises 10% and as a result the quantity demanded falls by 8% the price elastic of demand for orange juice is.	A. -1.25 B. Inelastic C. Both a and b D. Neither A nor B above
2	If a government imposed price celling causes the observed price in a market to be below the equilibrium price.	A. There will be excess demand B. There will be excess supply C. The curves will shift to make a new equilibrium at the regulated price D. None of the above
3	A competitive equilibrium is described by	A. A price only B. A quantity only C. The excess supply minus the exceess demand. D. A price and a quantity
4	Economists tend to judge a model based upon	A. the realty of its assumptions B. The accuracy of its predications C. Its simplicity D. Its complexity
5	The purpose of making assumptions in economic model building is to.	A. Force the model to yield the correct answer B. Minimize the amount of work an economist must do C. simplify the model while keeping important details. D. Express the relationship mathematically.
6	The expression increase in quantity supplied is illustrated graphically as a.	A. Leftward shift in the supply curve B. Rightward shift in the supply curve C. Movement up long the supply curve D. Movement down along the supply curve
7	It is appropriate to use the supply and demand model if in a market.	A. Everyone is a price taker with full information about the price and quantity of the good. B. Firms sell identical products C. Costs of trading are low D. All of the above
8	Holding all other factors constant consumers demand more of a good the	A. Higher its price B. Lower its price C. Steeper the downward slope of the demand curve D. Steeper the upward slope of the demand curve
9	If the price of automobiles were to increase substantially the demand curve for gasoline would most likely	A. Shift leftward B. Shift right ward C. Become flatter D. Become steeper
10	Consumers and firms are known as price takers only it	A. No market exists to determine the equilibrium price B. they can set the market price C. They cannot effect the market price D. Excess demand exists

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