CH 5 Practice Problems - MS. LOPICCOLO'S WEBSITE



AP Microeconomics Name:______________________________________

CH 5 Practice Problems Hour:____

Chapter 5: Using Supply and Demand

Practice Problems

1. European Union subsidizes its farmers. How do these subsidies make it difficult for farmers in developing economies to compete in the world farm market? The subsidies 

A. set a price ceiling for EU farm goods, keeping prices below the market equilibrium, lowering the price developing country farmers can receive for their produce.

B. shift the supply of EU farm goods to the right, lowering world prices of farm goods and the price developing country farmers can receive for their produce.

C. function as a tariff, causing imports from developing countries to become artificially expensive, thus denying European consumers the benefits of cheap imported food.

D. create ethical problems for Europeans who want to buy farm products from developing countries since the subsidies are raising the price of developing country produce.

 

2. Which of the following would be the most likely effect of a 75 percent tax on punitive awards by juries? 

A. An increase in the number of lawsuits asking for punitive damages.

B. A decrease in the number of cases settled out of court.

C. An increase in the incentive for plaintiffs to pursue legal action against individuals or businesses who have caused injury due to gross negligence.

D. An increase in pre-trial settlements since plaintiffs are willing to accept lower settlement amounts that are not taxed.

3. Suppose the price of tomatoes dramatically increases. Which of the following could cause this change? 

A. Hurricanes during the late summer damage the Florida crop, shifting supply left.

B. A reduction in tariffs of tomatoes from Central American, shifting supply right.

C. A news report stating that a pesticide used on tomatoes might cause cancer, shifting the demand to the right.

D. Advertising for catsup increases demand for catsup, shifting the demand curve to the left.

4. Online music stores such as Apple's iTunes provide an alternative to buying CDs. The introduction of online music stores has shifted: 

A. the supply curve of CDs to the right.

B. the supply curve of CDs to the left.

C. the demand curve of CDs to the right.

D. the demand curve of CDs to the left.

5. Refer to the graphs below.

 [pic] 

Floods in the U.S. Midwest reduce the U.S. corn crop. Which graph depicts the effect of the floods on the U.S. corn market? 

A. I

B. II

C. III

D. IV

 

6. An increase in price and an indeterminate change in quantity are consistent with a: 

A. leftward shift in demand and no shift in supply.

B. leftward shift in supply and no shift in demand.

C. rightward shift in supply and a leftward shift in demand.

D. leftward shift in supply and a rightward shift in demand.

7. An increase in quantity and an indeterminate change in price are consistent with a: 

A. leftward shift in demand and supply.

B. rightward shift in supply and demand.

C. rightward shift in supply, keeping demand constant.

D. rightward shift in demand, keeping supply constant.

8. A decrease in price and an indeterminate change in quantity are consistent with a: 

A. leftward shift in demand and no shift in supply.

B. leftward shift in supply and no shift in demand.

C. rightward shift in supply and a leftward shift in demand.

D. leftward shift in supply and a rightward shift in demand.

9. A decrease in quantity and price are consistent with a: 

A. leftward shift in demand keeping supply constant.

B. leftward shift in supply keeping demand constant.

C. rightward shift in supply and demand.

D. rightward shift in demand and a leftward shift in supply.

 

10. Refer to the graphs below.

 [pic] 

Americans nationwide have been complying with recycling regulations with unexpected zeal. The effect on the market for recycled paper is best shown by which graph? 

A. I

B. II

C. III

D. IV

 

11. After several years of slow economic growth, world demand for petroleum began to rise rapidly in the 1990s. Much of the increase in demand was met by additional supplies from sources outside OPEC. OPEC during this time was unable to restrain output among members in its effort to lift oil prices. What best describes these events? 

A. The rise in demand shifted the demand for oil to the right. OPEC actions shifted the demand for oil back to the left.

B. The rise in demand shifted the demand for oil to the right. As price rose, supply of oil also rose.

C. The rise in demand shifted the demand for oil to the right. As price rose, quantity of oil supplied rose.

D. The rise in demand reflects a movement down along the demand curve as supply shifted to the right when suppliers produced more oil.

 

  [pic] 

 

12. Refer to the graph above. An increase in foreign demand for U.S. assets would cause a shift from: 

A. S1 to S2.

B. S2 to S1.

C. D1 to D2.

D. D2 to D1.

13. Refer to the graph above. A decrease in U.S. demand for European bonds would cause a shift from: 

A. S1 to S2.

B. S2 to S1.

C. D1 to D2.

D. D2 to D1.

 

14. An effective price ceiling is best defined as a price: 

A. imposed by government below equilibrium price.

B. imposed by government above equilibrium price.

C. higher than any consumer is willing to pay.

D. lower than any supplier is willing to sell.

15. An increase in the Federal minimum wage to $7.25 per hour from $6.25 per hour, assuming that $7.25 is an effective price floor and that all other things remain constant, will: 

A. reduce the number of unemployed.

B. increase the number of unemployed.

C. shift the supply of labor to the right.

D. shift the demand of labor to the right.

16. Suppose the equilibrium price of oranges is $0.79, but government takes steps to prevent the price from exceeding $0.60. The likely result will be a: 

A. lower equilibrium price for oranges as the supply curve for oranges shifts to the right.

B. higher equilibrium price for oranges as the demand curve for oranges shifts to the right.

C. shortage of oranges as the price ceiling keeps the market from reaching equilibrium.

D. surplus of oranges as the price ceiling keeps the market from reaching equilibrium.

17. Refer to the graph below.

 [pic] 

Which price will create the greatest shortage? 

A. P0

B. P1

C. P2

D. P3

 

18. Which price ceiling will cause the greatest excess demand?

 [pic]  

A. $1

B. $2

C. $3

D. $4

 

19. Refer to the graph below.

 [pic] 

A government-imposed price floor of $2 will result in: 

A. neither excess supply nor excess demand since it is binding.

B. neither excess supply nor excess demand since it is not binding.

C. an excess demand of 2.

D. an excess supply of 2.

 

20. If the government imposes an excise tax on a good equal to $5 per unit and the demand curve for this good is vertical, the supply of this good will shift: 

A. upward and the price will increase by $5.

B. upward and the price will increase by less than $5.

C. downward and the price will decrease by $5.

D. downward and the price will decrease by less than $5.

21. When a country imposes a tariff: 

A. the domestic price of the imported good falls.

B. domestic consumption of the imported good falls.

C. domestic production of the good falls.

D. domestic production of the good is unchanged.

22. If the United States imposes tariffs on steel imports, 

A. the demand for steel shifts to the left and lowers its market price.

B. the supply of steel shifts to the right and lowers its market price.

C. the supply of the imported steel shifts to the left and raises its market price.

D. the demand for steel shifts to the left and raises its market price.

23. If government were to issue a fixed number of licenses to produce a good or provide a service, this would likely: 

A. lower the price of the good or service to consumers.

B. lower the wage received by those who have licenses.

C. increase the wage received by those who have licenses.

D. increase the demand for goods.

  [pic] 

 

24. Refer to the graph above. A quantity restriction of QR will: 

A. reduce quantity supplied to Q2.

B. reduce quantity supplied to QR.

C. have no effect on quantity supplied.

D. create excess demand represented by Q2 - QR.

25. Refer to the graph above. A quantity restriction of QR will: 

A. raise market price to P0.

B. maintain a market price of P1.

C. lower market price to P2.

D. have no effect in the market depicted.

  [pic] 

 

26. Refer to the graph above that depicts a third-party payer market for prescription drugs. If the co-payment is $2 per pill, what will be the quantity demanded? 

A. 15

B. 30

C. 45

D. 60

27. Refer to the graph above that depicts a third-party payer market for prescription drugs. What happens to expenditures by consumers in this market if a $2 co-pay is established compared to a free-market equilibrium? 

A. Expenditures fall by $30

B. Expenditures rise by $90

C. Expenditures fall by $120

D. Expenditures remain at $150

28. In a third-party payer system: 

A. total expenditures generally fall.

B. total expenditures generally rise.

C. quantity demanded generally falls.

D. quantity supplied generally falls.

 

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download