Example Multiple Choice Questions – The Allocation of Resources

Section One: Multiple Choice

1) Which of the following might cause an increase in demand for bread?

A a fall in the cost of producing bread

B a fall in the price of an alternative to bread
C a newspaper report that eating bread is healthy
D a rise in price of a complement to bread

2) What is a decrease in advertising likely to cause?

A a fall in demand
B the demand curve to shift downwards to the left
C the demand curve to shift upwards to the right
D the supply curve to shift downwards to the left

3) A supply curve for a commodity is drawn to show how quantity supplied varies with

A government taxes.
B income.
C tastes.
D the price of the commodity.

4) What is most likely to cause a shift in the supply curve for oil?

A an increase in purchases of cars

B an increase in the price of oil
C a rise in consumer incomes
D the discovery of new oilfields
5) The diagram shows the demand for and the supply of bicycles. D1 and S1 are the original demand and
supply curves and X is the original equilibrium position. Which point shows the new equilibrium position
after the granting of a subsidy to bicycle producers?

S2

P S1

S3

D X

C B

D2

D1

D3

6) A market is said to be in equilibrium when at the current market price:

A the number of consumers is equal to the number of sellers

B the amount which consumers want to buy just equals the amount which sellers want to sell

C the elasticity of demand is equal to the elasticity of supply

D demand exceeds supply in the short and long run

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7) The price of a good is temporarily above the market equilibrium price.

What must happen for the market to be brought back to equilibrium?

quantity demanded quantity supplied

A rises rises

B rises falls

C falls rises

D falls falls

8) For what would price elasticity of demand be used?

A calculating current disposable income

B calculating the rate of price inflation

C estimating changes in a company’s cost

D identifying changes in consumer spending patterns

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9) A product has a price elasticity of demand that is greater than one. What will happen to total revenue if
the price of the product is reduced by 3%?

A It will fall by more than 3%.

B It will fall to zero.

C It will be unchanged.

D It will rise.

10) A product has a totally inelastic price elasticity of demand. What will happen to total revenue if the price
of the product falls by 25%?

A It will fall by 25%.

B It will fall to zero.

C It will remain unchanged.

D It will rise by 25%.

11) To calculate the percentage change in the quantity supplied of a good following a change in
it’s price, the price elasticity of supply should be

A divided by the percentage change in price

B divided by the percentage change in quantity.
C multiplied by the percentage change in price.
D multiplied by the percentage change in quantity.

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12) The diagram below shows the demand curve for a product.
 What could cause a movement along the curve?

A a change in tastes

B a fall in the price of the product

C an increase in income

D a successful advertising campaign for chocolate

13) What would not cause a shift in the demand curve for a good?

A a change in incomes

B a change in the price of a substitute good

C a change in the price of a good

D a change in the tastes of consumers

14) A demand curve for a product shows the relationship between its price and

A cost of production

B population changes

C the income of the consumer

D the quantity of the product consumed

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15) A supply curve shows the relationship between the quantity supplied and
 A company profits.

B the demand for the product.

C the output of the product.

D the price of the product.

16) What is likely to increase the supply of fish brought to market?

A a decrease in the number of fishing vessels (ships) operating

B the imposition of a quota on the import of fish

C the imposition of a sales tax on fish

D a decrease in the cost of building fishing vessels

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17) The supply curve S1 shows the supply of shirts, which are sold at price P1. What will be the effect if a
government imposes a tax on shirts?

A Supply will shift from S1 to S2.

B Supply will shift from S1 to S3.

C Demand will extend from Q1 to Q3.

D The price will remain at P1.

S2 S1 S3

P2

P1

P3

Q2 Q1 Q3 Q

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18) The diagram shows the market for white sugar which is in equilibrium at X. A report is published stating
that brown sugar is healthier to eat than white sugar. What will be the new equilibrium position for white
sugar?

A B

D C

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19) The diagram shows the demand for and the supply of bicycles. D1 and S1 are the original demand and
supply curves and X is the original equilibrium position. Which point shows the new equilibrium position
after the granting of a subsidy to bicycle producers?

S2

P S1

S3

D X

C B

D2

D1

D3

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20) The price of a good is temporarily below the market equilibrium price.

What must happen for the market to be brought back to equilibrium?

quantity demanded quantity supplied

A rises rises

B rises falls

C falls rises

D falls falls

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