Chapter 5 Self-test questions

. A shortage occurs when:

Supply equals demand

Supply is greater than demand

Supply is less than demand

Supply is growing faster than demand

. A surplus occurs when:

Supply equals demand

Supply is greater than demand

Supply is less than demand

Supply is growing faster than demand

. Equilibrium occurs when:

Supply equals demand

Supply is greater than demand

Supply is less than demand

Supply is growing faster than demand

. When there is a shortage the price is likely to:

increase

decrease

stay stable

equal income

. When there is a surplus the price is likely to:

increase

decrease

stay stable

equal income

. When there is equilibrium the price is likely to:

increase

decrease

stay stable

equal income

. A shift in demand may be caused by all of the following factors except one. Which one?

population size

price of other factors

income

costs

. A shift in supply may be caused by all of the following factors except one. Which one?

number of suppliers

costs

marketing activities

production technology

. If the price is below equilibrium there is likely to be:

Excess supply

Excess demand

A surplus

Supply equal to demand

. Which of the following is likely to increase the equilibrium price and decrease the equilibrium quantity, assuming a downward sloping demand curve and upward sloping supply curve?

An increase in the price of a substitute

An increase in costs of production

A decrease in demand

An increase in productivity

. Which of the following could explain the movement from X to B?

An increase in costs

An increase in the price of a substitute

An increase in the price of a complement

An increase in productivity

. Which of the following could explain the movement from X to G for an inferior product?

An increase in the subsidy to producers

An increase in income

An improvement in production technology

An decrease in productivity

. Which of the following could explain the movement from X to C?

An increase in demand and supply

An increase in demand and fall in supply

A fall in demand and supply

A fall in demand and increase in supply

. Which of the following statements is true following the introduction of an indirect tax as shown below?

An indirect tax affects the demand curve

The incidence of the tax per unit on the consumer is 'ac'

The incidence of the tax per unit on the consumer is 'fc'

The incidence of the tax per unit on the consumer is 'af'

. A subsidy to producers will usually:

Reduce the equilibrium price and decrease the output

Reduce the equilibrium price and increase the output

Increase the equilibrium price and increase the output

Increase the equilibrium price and decrease the output

. An increase in demand, assuming an upward sloping supply curve, will:

Reduce the equilibrium price and decrease the output

Reduce the equilibrium price and increase the output

Increase the equilibrium price and increase the output

Increase the equilibrium price and decrease the output

. A decrease in demand assuming a downward sloping demand curve will:

Reduce the equilibrium price and decrease the output

Reduce the equilibrium price and increase the output

Increase the equilibrium price and increase the output

Increase the equilibrium price and decrease the output

. Which of the following could explain the movement from X to E?

An increase in indirect tax

An increase in the price of a substitute

A fall in income

An increase in productivity

Chapter 5 Self-test questions

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