ECON 2030 – 2026 ACTUAL EXAM PREP SAMPLE TEST
QUESTIONS AND ANSWERS - SUPPLY AND DEMAND Louisiana
State University
1 When gasoline prices rose in the early 2000s, the demand for SUVs fell. An economist would
predict that SUV prices would decline or at least not rise as quickly.
True
2
Given a downward sloping demand curve, a tax on the supply of a good will result in an increase
in equilibrium price that is less than the amount of the tax.
True
3
Which of the following would be the most likely effect of a 75 percent tax on punitive
awards by juries?
A) An increase in the number of lawsuits asking for punitive damages
B) A decrease in the number of cases settled out of court
C) An increase in the incentive for plaintiffs to pursue legal action against individuals or
businesses who have caused injury due to gross negligence
D) An increase in pretrial settlements since plaintiffs are willing to accept lower settlement
amounts that are not taxed
An increase in pretrial settlements since plaintiffs are willing to accept lower settlement amounts
that are not taxed
4
When the person who chooses how much to purchase doesn't have to bear the full cost, the
quantity demanded tends to be higher.
True
5
When a hurricane destroys a significant portion of an apple crop:
A) apple prices rise, and quantity sold rises.
B) apple prices decline, and quantity sold falls.
C) apple prices rise, and quantity sold falls.
D) apple prices decline, and quantity sold rises.
apple prices rise, and quantity sold falls.
6
The U.S. Postal Service printed 150,000 sheets of a stamp depicting Bill Pickett, but
recalled them when the USPS realized the image on the stamp was Bill's brother, Ben,
instead. They were unable to recall 183 sheets that had already been sold. The effect of this
recall was to:
,A) drastically reduce the demand for the stamps, causing their equilibrium price to fall.
B) have no effect on either supply of or demand for the Bill Pickett stamps because there is no
market for them.
C) drastically reduce the supply of the Bill Pickett stamps, causing their equilibrium price to rise.
D)drastically reduce the supply of the Bill Pickett stamps, causing their equilibrium price to fall.
drastically reduce the supply of the Bill Pickett stamps, causing their equilibrium price to rise.
7
Suppose a recent and widely circulated medical article reports new benefits of exercise.
Simultaneously, the price of the parts needed to make bikes falls. What is the likely effect
on the equilibrium price and quantity of exercise bikes sold?
A) Price of exercise bikes decreases and quantity sold remains the same.
B) Price of exercise bikes increases and quantity sold also increases.
C) Price of exercise bikes remains the same and quantity sold increases.
D) The change in price is ambiguous, but the quantity sold increases.
The change in price is ambiguous, but the quantity sold increases.
8
Suppose the price of tomatoes dramatically increases. Which of the following could cause
this change?
A) Hurricanes during the late summer damage the Florida crop, shifting supply left
B) A reduction in tariffs of tomatoes from Central American, shifting supply right
C) A news report stating that a pesticide used on tomatoes might cause cancer, shifting the
demand to the right
D) Advertising for ketchup increases demand for ketchup, shifting the demand curve to the left
Hurricanes during the late summer damage the Florida crop, shifting supply left
9
A price floor causes excess demand, resulting in the need to ration by some means other than
price.
False
10
Online music stores such as Apple's iTunes provide an alternative to buying CDs. The
introduction of online music stores has shifted:
A) the supply curve of CDs to the right.
B) the supply curve of CDs to the left.
C) the demand curve of CDs to the right.
D) the demand curve of CDs to the left.
the demand curve of CDs to the left.
,11
Tariffs increase equilibrium price and quantity.
False
12
Refer to the following graphs.
Fl
oods in the U.S. Midwest reduce the U.S. corn crop. Which graph depicts the effect of the
floods on the U.S. corn market?
A) I
B)II
C)III
D)IV
IV
13
, Trade sanctions imposed on Iraq that limited Iraq's production of oil after the 1990 Gulf War on
the oil market are best shown graphically with a price ceiling below equilibrium price.
False
14
The effect of successful compliance with recycling regulation by homeowners on the market for
recycled paper along with a concurrent rise in demand for products made with recycled paper is
best shown by a shift to the right in the supply of and demand for recyclable paper and a certain
drop in its price.
False
15
The Katrina disaster in New Orleans decreased the ability of oil companies to purify crude
oil into gasoline. This caused the:
A) supply curve for gasoline to shift inward.
B) supply curve for gasoline to shift outward.
C) quantity of gasoline demanded to move out along the demand curve.
D) quantity of gasoline supplied to move in along the supply curve.
supply curve for gasoline to shift inward.
16
The standard supply/demand framework:
A) can be modified to explain real-world events.
B) cannot be modified to explain real-world events.
C) should not be modified to explain real-world events.
D) explains real-world events with no need for modification.
can be modified to explain real-world events.
17
The U.S. imposes substantial taxes on cigarettes but not on loose tobacco. When the tax on
cigarettes went into effect, the demand for home cigarette rolling machines most likely:
A) decreased, causing the price of cigarette rolling machines to fall and the quantity of machines
purchased to fall.
B) decreased, causing the price of cigarette rolling machines to rise and the quantity of machines
purchased to fall.
C) increased, causing the price of cigarette rolling machines to rise and the quantity of machines
purchased to rise.
D) increased, causing the price of cigarette rolling machines to rise and the quantity of machines
purchased to fall.
increased, causing the price of cigarette rolling machines to rise and the quantity of machines
purchased to rise.
QUESTIONS AND ANSWERS - SUPPLY AND DEMAND Louisiana
State University
1 When gasoline prices rose in the early 2000s, the demand for SUVs fell. An economist would
predict that SUV prices would decline or at least not rise as quickly.
True
2
Given a downward sloping demand curve, a tax on the supply of a good will result in an increase
in equilibrium price that is less than the amount of the tax.
True
3
Which of the following would be the most likely effect of a 75 percent tax on punitive
awards by juries?
A) An increase in the number of lawsuits asking for punitive damages
B) A decrease in the number of cases settled out of court
C) An increase in the incentive for plaintiffs to pursue legal action against individuals or
businesses who have caused injury due to gross negligence
D) An increase in pretrial settlements since plaintiffs are willing to accept lower settlement
amounts that are not taxed
An increase in pretrial settlements since plaintiffs are willing to accept lower settlement amounts
that are not taxed
4
When the person who chooses how much to purchase doesn't have to bear the full cost, the
quantity demanded tends to be higher.
True
5
When a hurricane destroys a significant portion of an apple crop:
A) apple prices rise, and quantity sold rises.
B) apple prices decline, and quantity sold falls.
C) apple prices rise, and quantity sold falls.
D) apple prices decline, and quantity sold rises.
apple prices rise, and quantity sold falls.
6
The U.S. Postal Service printed 150,000 sheets of a stamp depicting Bill Pickett, but
recalled them when the USPS realized the image on the stamp was Bill's brother, Ben,
instead. They were unable to recall 183 sheets that had already been sold. The effect of this
recall was to:
,A) drastically reduce the demand for the stamps, causing their equilibrium price to fall.
B) have no effect on either supply of or demand for the Bill Pickett stamps because there is no
market for them.
C) drastically reduce the supply of the Bill Pickett stamps, causing their equilibrium price to rise.
D)drastically reduce the supply of the Bill Pickett stamps, causing their equilibrium price to fall.
drastically reduce the supply of the Bill Pickett stamps, causing their equilibrium price to rise.
7
Suppose a recent and widely circulated medical article reports new benefits of exercise.
Simultaneously, the price of the parts needed to make bikes falls. What is the likely effect
on the equilibrium price and quantity of exercise bikes sold?
A) Price of exercise bikes decreases and quantity sold remains the same.
B) Price of exercise bikes increases and quantity sold also increases.
C) Price of exercise bikes remains the same and quantity sold increases.
D) The change in price is ambiguous, but the quantity sold increases.
The change in price is ambiguous, but the quantity sold increases.
8
Suppose the price of tomatoes dramatically increases. Which of the following could cause
this change?
A) Hurricanes during the late summer damage the Florida crop, shifting supply left
B) A reduction in tariffs of tomatoes from Central American, shifting supply right
C) A news report stating that a pesticide used on tomatoes might cause cancer, shifting the
demand to the right
D) Advertising for ketchup increases demand for ketchup, shifting the demand curve to the left
Hurricanes during the late summer damage the Florida crop, shifting supply left
9
A price floor causes excess demand, resulting in the need to ration by some means other than
price.
False
10
Online music stores such as Apple's iTunes provide an alternative to buying CDs. The
introduction of online music stores has shifted:
A) the supply curve of CDs to the right.
B) the supply curve of CDs to the left.
C) the demand curve of CDs to the right.
D) the demand curve of CDs to the left.
the demand curve of CDs to the left.
,11
Tariffs increase equilibrium price and quantity.
False
12
Refer to the following graphs.
Fl
oods in the U.S. Midwest reduce the U.S. corn crop. Which graph depicts the effect of the
floods on the U.S. corn market?
A) I
B)II
C)III
D)IV
IV
13
, Trade sanctions imposed on Iraq that limited Iraq's production of oil after the 1990 Gulf War on
the oil market are best shown graphically with a price ceiling below equilibrium price.
False
14
The effect of successful compliance with recycling regulation by homeowners on the market for
recycled paper along with a concurrent rise in demand for products made with recycled paper is
best shown by a shift to the right in the supply of and demand for recyclable paper and a certain
drop in its price.
False
15
The Katrina disaster in New Orleans decreased the ability of oil companies to purify crude
oil into gasoline. This caused the:
A) supply curve for gasoline to shift inward.
B) supply curve for gasoline to shift outward.
C) quantity of gasoline demanded to move out along the demand curve.
D) quantity of gasoline supplied to move in along the supply curve.
supply curve for gasoline to shift inward.
16
The standard supply/demand framework:
A) can be modified to explain real-world events.
B) cannot be modified to explain real-world events.
C) should not be modified to explain real-world events.
D) explains real-world events with no need for modification.
can be modified to explain real-world events.
17
The U.S. imposes substantial taxes on cigarettes but not on loose tobacco. When the tax on
cigarettes went into effect, the demand for home cigarette rolling machines most likely:
A) decreased, causing the price of cigarette rolling machines to fall and the quantity of machines
purchased to fall.
B) decreased, causing the price of cigarette rolling machines to rise and the quantity of machines
purchased to fall.
C) increased, causing the price of cigarette rolling machines to rise and the quantity of machines
purchased to rise.
D) increased, causing the price of cigarette rolling machines to rise and the quantity of machines
purchased to fall.
increased, causing the price of cigarette rolling machines to rise and the quantity of machines
purchased to rise.
