The demand curve for a resource may shift because of
D Rationale: All of the above.
Consumer surplus is:
A Rationale: Consumer surplus is the excess between what consumers are prepared to pay for a
good or service and the prevailing market price they have to pay to purchase it.
If the absolute value of the price elasticity of demand for dry white wine is greater than one, a decrease
in the price of all wine would result in:
D Rationale: Assuming a normal good, a decrease in price results in a greater quantity being
demanded. Given that demand is price elastic, the increase in quantity will be proportionally
greater than the price fall.
If both the supply and the demand for a good increase, the
market price will
(c) The requirement is to predict the market price
based on an increase in both supply and demand. The correct
answer is (c) because without additional information about the
extent of the change, the effect on price is not determinable.
Answer (a), (b), and (d) are incorrect because the price elasticity
of the demand or supply function does not provide enough information
to determine the effect.
A supply curve illustrates the relationship between
(a) The requirement is to describe the relationship
shown by a supply curve. A supply curve illustrates the quantity
supplied at varying prices at a point in time. Therefore, the correct
answer is (a). Answers (b) and (c) are incorrect because
they deal with demand. Answer (d) is incorrect because it deals
with demand-supply equilibrium.
As a business owner you have determined that the demand
for your product is inelastic. Based upon this assessment you
(a) The requirement is to apply the concept of priceelasticity
of demand. If demand is inelastic an increase in price
will increase total revenue. Answer (a) is correct because it accurately
states this rule. Answer (b) is incorrect because if demand
is inelastic the quantity demanded will not be affected significantly
by a change in price. Answer (c) is incorrect because if the
quantity demanded is not significantly affected by an increase in
price, total revenue will increase. Answer (d) is incorrect because
an increase in price may, or may not, increase competition.
Which one of the following has an inverse relationship with
the demand for money?
(c) The requirement is to identify the item that has an
inverse relationship with the demand for money. The correct
answer is (c) because as interest rates increase the demand for
money decreases. Answers (a), (b), and (d) are incorrect because
they do not have an inverse relationship with the demand
An improvement in technology that in turn leads to improved
worker productivity would most likely result in
(a) The requirement is to describe the effect of an improvement
in technology that leads to increased worker productivity.
If the cost of producing a good declines, more will be supplied
at a given price. Therefore, the supply curve will shift to the
right and answer (a) is correct. Answer (b) is incorrect because a
shift to the left would result in decreased supplies. Answer (c) is
incorrect because price would not increase, and answer (d) is
incorrect because wages would not necessarily increase.
Which of the following market features is likely to cause a
surplus of a particular product?
(b) The requirement is to identify the market feature
that is likely to cause a surplus of a particular product. Answer
(b) is correct because a price floor, if it is above the equilibrium
price, will cause excess production and a surplus. Answer
(a) is incorrect because a monopoly market is likely to be
characterized by underproduction of the product. Answer (c) is
incorrect because a price ceiling, if it is below the equilibrium
price, will cause underproduction and shortages. Answer (d) is
incorrect because in a perfect market with no intervention demand
and supply will be equal.
A decrease in the price of a complementary good will
(d) The requirement is to describe the effect on demand
for a good if a complementary good decreases in price. If the
price of a complementary good decreases, demand for the joint
commodity will increase. This is due to the fact that the total
cost of using the two products decreases. If demand for a product
increases the demand curve will shift to the right. Therefore,
answer (d) is correct. Answer (a) is incorrect because a shift in
the demand curve to the left depicts a decrease in demand. Answers
(b) and (c) deal with supply and are not relevant.