1. The Latin expression ceteris paribus means

a. having made all other necessary changes.

b. holding constant all other variables.

c. assuming all households have similar incomes.

d. given the level of income in the economy.

2. A variable measured in terms of money is called a ____________________.

a. real variable

b. nominal variable

c. macroeconomic variable

d. microeconomic variable

3. Which of the following is true about the importance of money in economics?

a. Money is important in both macroeconomics and microeconomics.

b. Money is important in macroeconomics but not microeconomics.

c. Money is important in microeconomics but not macroeconomics.

d. Money is not important in either microeconomics or macroeconomics.

4. What is the difference between normative and positive economics?

a. Positive economics is descriptive and predictive; normative economics is prescriptive.

b. Positive economics highlights the positive aspects of the economy; normative economics highlights the average features.

c. Positive economics studies the actions of individuals; normative economics studies the actions of households.

d. Positive economics is an applied social science; normative economics is a theoretical social science.

5. The slope of the demand curve is negative because

a. the quantity of a good demanded decreases as income declines.

b. the quantity of a good demanded increases as income declines.

c. the quantity of a good demanded increases as the price declines.

d. the quantity of a good demanded decreases as the price declines.

6. What is the result of an increase in the price of bread, a normal good?

a. The demand curve shifts to the right.

b. The demand curve shifts to the left.

c. The quantity demanded increases.

d. The quantity demanded decreases.

7. What is the effect on demand for bread when the price of bagels, a substitute for bread, rises?

a. The demand curve for bread shifts to the right.

b. The demand curve for bread shifts to the left.

c. The quantity of bread demanded increases.

d. The quantity of bread demanded decreases.

8. Which of the following would cause the supply curve for bread to shift inward?

a. An increase in the price of bread

b. An increase in the price of bagels

c. A decrease in the price of bread

d. An increase in the price of flour

9. An improvement in technology shifts the supply curve outward because

a. at every price, firms find producing the good to be more profitable.

b. the price of the good increases.

c. at every price, firms find producing the good to be less profitable.

d. the price of the good decreases.

10. Which of the following factors does not affect how much bread a baker is willing to produce?

a. The price of bread

b. The demand for bread

c. The cost of inputs

d. Technology

11. How do expectations of prices affect how much of a good producers are willing to sell?

a. Expectations of prices affect only demand, not supply.

b. Actual prices, not expectations of prices, affect supply.

c. If producers expect prices to fall in the future, they supply less at every price.

d. If producers expect prices to rise in the future, they supply less at every price.

12. When the price of a good is above equilibrium level,

a. the quantity demanded exceeds the quantity supplied.

b. the quantity supplied exceeds the quantity demanded.

c. the supply curve shifts to the left.

d. the supply curve shifts to the right.

13. If demand for bread increases at every price, the equilibrium price of bread will

a. fall.

b. rise.

c. remain unchanged.

d. depend on income.

14. If the demand for bread declines, then

a. at the original equilibrium price, there is excess demand.

b. at the original equilibrium price, there is excess supply.

c. the supply curve shifts to the right.

d. the supply curve shifts to the left.

15. Peanut butter and jelly are complementary goods. When the price of peanut butter rises, the demand for jelly ________ and the price of jelly ________.

a. rises; falls

b. rises; rises

c. falls; rises

d. falls; falls

16. The measure of elasticity that economists use is

a. always a positive number.

b. always a negative number.

c. positive when demand is elastic and negative when demand is inelastic.

d. negative when demand is elastic and positive when demand is inelastic.

17. Graphically how would an increase in income affect the demand for hamburgers?

a. The slope of the demand curve would increase.

b. The slope of the demand curve would decrease.

c. The demand curve would shift outward, parallel to the original demand curve.

d. The demand curve would shift inward, parallel to the original demand curve.

18. Given the equation P = $6.00 - $.40Q, where P is the price of the good and Q is the quantity of the good demanded, how many units will this consumer demand if the price is $3.60?

a. 1.44 units

b. 3 units

c. 3.6 units

d. 6 units

19. Which of the following is true about unit elasticity?

a. Revenues remain unchanged when the price changes.

b. Elasticity of demand increases as one moves down the demand curve.

c. Elasticity of demand decreases as one moves down the demand curve.

d. The elasticity of demand is greater than one at every point along the demand curve.

20. Which of the following could be a determinant of the quantity demanded of a good?

a. The price of the good

b. The price of related goods

c. income

d. Expectations about the future price of the product

e. All of the above