Multiple-Choice Questions (With Key Terms & Examples)

What is meant by voluntary exchange in a market?

• Buyers are forced to buy products by sellers

• The government sets all prices

• Buyers and sellers trade freely based on mutual agreement

• Sellers must get permission before setting prices

What does the demand curve show?

• How much sellers want to sell at different prices

• The total cost of producing a product

• The quantity of a good consumers are willing and able to buy at different prices

• The amount of taxes added to a product

Why is the demand curve downward sloping?

• Because demand increases as price increases

• Because there is a direct relationship between price and demand

• Because there is an inverse relationship between price and quantity demanded

• Because consumers prefer cheaper goods

A movement along the demand curve is caused by:

• A change in consumer income

• A change in the price of the product itself

• A change in preferences

• A change in the price of a substitute good

If consumer income increases, what is likely to happen to the demand curve for a normal good?

• It shifts to the left

• It shifts to the right

• It stays the same

• There is a movement down the demand curve

A rightward shift in the demand curve for bicycles may be caused by:

• A. A fall in the price of bicycles

• B. An increase in the price of petrol

• C. A rise in the price of bicycles

• D. A decrease in population

If the price of coffee increases, what will likely happen to the demand for tea (a substitute)?

• Demand for tea will increase (shift right)

• Demand for tea will decrease (shift left)

• No change in tea demand

• There will be a contraction in tea demand

If the price of smartphones decreases, what happens to the demand for phone cases (a complementary good)?

• Demand for phone cases shifts left

• Demand for phone cases shifts right

• Demand for phone cases contracts

• No change in demand

What does the supply curve show?

• How much buyers want to purchase at each price

• The relationship between price and quantity supplied by producers

• The profit made by producers at each price

• The number of sellers in a market

Why is the supply curve upward sloping?

• Because higher prices encourage producers to supply more

• Because lower prices increase supply

• Because buyers demand more at higher prices

• Because government controls supply