Test Bank For International Economics Thomas Pugel 17th Edition

Chapter 2 The Basic Theory Using Demand and Supply

1) If an individual consumes more of Good X when his/her income doubles, we can infer that

A) the individual is highly sensitive to changes in the price of Good X.

B) Good X is a normal good.

C) Good X is an inferior good.

D) the demand for Good X is perfectly inelastic.

2) Which of the following factors can lead to an increase in demand for coffee at Starbucks?

A) An increase in household income

B) An increase in the price of sugar

C) An increase in the price of coffee beans

D) A 10 percent decline in local population

3) If the price of a normal good is measured along the vertical axis and its quantity along the horizontal axis, an increase in the price of the good will lead to

A) a downward movement along the demand curve.

B) an upward movement along the demand curve.

C) a rightward shift of the demand curve.

D) a leftward shift of the demand curve.

4) Everything else remaining unchanged, when the price of a normal good increases, consumers probably

A) purchase more of the good.

B) purchase less of the good.

C) purchase the same amount of the good.

D) do not purchase any amount of the good.

5) Suppose Good X is a substitute for Good Y. Everything else remaining unchanged, an increase in the price of Good Y will lead to

A) an increase in demand for Good Y.

B) a decrease in demand for Good X.

C) an increase in demand for Good X.

D) a decrease in the price of Good X.

6) Which of the following events would lead to a decrease in demand for air travel?

A) A decrease in the number of people who are afraid to fly

B) A decrease in oil prices

C) A decrease in rail fares

D) An increase in income levels

7) Harry used to work in a launderette and earned $30 a day. After work, he normally had a chicken burger worth $5 at McDonalds. After his pay was lowered to $20 he would purchase a vegetable burger worth $3 instead of the $5 chicken burger. In this scenario, the vegetable burger is an example of a(n)

A) inferior good.

B) normal good.

C) complement good.

D) luxury good.

8) The value of price elasticity of demand is negative because it indicates

A) the inverse relationship between the price offered and the quantity demanded for the good.

B) that the value of the consumer surplus is negative for this good.

C) that the changes in quantity demanded are much less compared to the changes in price for this good.

D) the direct relationship between the price and consumer surplus from the good.

9) Which of the following will cause a rightward shift of the market supply curve?

A) An increase in the product price

B) A decrease in input prices

C) Change in consumers’ tastes

D) An increase in national income

10) Which of the following is a “unit-free” measure?

A) Consumer surplus when the demand curve is horizontal

B) Producer surplus when the supply curve is vertical

C) Market supply

D) Price elasticity of demand