5. All else equal, with standardly shaped supply and demand curves, if the market demand curve
shifts to the left as the market supply curve moves to the right, we would expect:
A) the same price to prevail, with no change in quantity.
B) the same quantity to prevail.
C) price and quantity to fall.
D) price to fall while quantity may or may not change.
E)
quantity to fall while price may or may not change.
6. Suppose the price elasticity of demand for bread is 1.20. If the price of bread goes up by 10
percent, the quantity demanded will:
A) decrease by 12 percent and total revenues from bread will rise.
B) increase by 12 percent and total revenues from bread will fall.
C) decrease by 1.20 percent and total revenues from bread will fall.
D) increase by 1.20 percent and total revenues from bread will rise.
E) decrease by 12 percent and total revenues from bread will fall.
7. Assume an increase in soil fertility increases the supply of wheat. Noting that wheat is a basic
ingredient in the production of bread and that potatoes are a consumer substitute for bread, we
would expect the price of wheat to:
A) rise, the supply of bread to increase, and the demand for potatoes to increase.
B) fall, the supply of bread to decrease, and the demand for potatoes to increase.
C) rise, the supply of bread to decrease, and the demand for potatoes to decrease.
D) fall, the supply of bread to increase, and the demand for potatoes to decrease.
E) fall, the supply of bread to increase, and the demand for potatoes to increase.
8. If a legal ceiling price is set below the equilibrium price:
A) a shortage of the product will occur.
B) a surplus of the product will occur.
C) a black market may evolve, since there will be excess supply.
D) neither the equilibrium price nor equilibrium quantity will be affected.
E) market forces will drive the price down to its original equilibrium
9. The price of gas increases and consumers buy more gas than before, as their incomes are rising
as well. Concluding that there is a positive relationship between gasoline prices and the quantity
demanded would be an example of:
A) the post hoc fallacy.
B) the failure to hold other things constant.
C) the fallacy of composition.
D) a mixed market economy.
E) none of the above.
