Microeconomics, Module 1: "Supply, Demand, and Equilibrium"
Illustrative Test Questions
(The attached PDF file has better formatting.)
Updated: May 23, 2005
Question 1.1: Law of Demand
All but which of the following are true regarding the law of demand?
The law of demand says that when price rises, the quantity demanded falls.
The law of demand implies that demand curves slope downward.
A change in the price of wine leads to a change in the demand for wine.
The law of demand implies that goods have decreasing marginal utility.
All of A, B, C, and D are true.
Answer 1.1: C
A change in the price of wine leads to a change in the quantity demanded of wine; the demand for wine – that is, the demand curve for wine – stays the same.
Jacob: Choice E in many of these questions is all of A, B, C, and D are true or none of A, B, C, or D is true. Is this the type of question we should expect on the final exam?
Rachel: The final exam gives five distinct choices; the exam questions do not say "all of the above" or "none of the above."
Question 1.2: Laws of Supply and Demand
All but which of the following are true regarding supply and demand?
If demand falls, the demand curve shifts downwards.
A sales tax is paid by the seller (supplier, producer) to the government.
The law of supply says that as price rises, producers supply more of the good.
The law of supply implies that supply curves are upward sloping.
All of A, B, C, and D are true.
Answer 1.2: B
In Landsburg’s textbook, a sales tax is paid by the consumer to the government.
Question 1.3: Sales and Excise Taxes
All but which of the following are true regarding sales and excise taxes?
An excise tax is paid to the government by sellers.
The economic incidence of a sales tax is usually shared between the buyers and the sellers.
If the demand curve is vertical, the economic incidence of an sales tax is completely on the consumers.
If the demand curve is vertical, the economic incidence of an excise tax is completely on the sellers.
All of A, B, C, and D are true.
Answer 1.3: D