XII-7. Reading Evaluation

(1)
[1] Because oil production was restricted by international cartels, global petroleum supplies plummeted. [2] Consequently, gasoline prices at the pump doubled within a single quarter.
According to the text, what caused gasoline prices to double?

A) Increased consumer demand for travel

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B) International cartels restricting oil production

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C) A sudden surplus of crude oil refineries

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D) Lower taxes on retail fuel sales

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(2)
[1] When consumer incomes rise during an economic boom, the demand for luxury goods increases. [2] Therefore, luxury watch manufacturers expand their production lines.
What is the direct effect of rising consumer incomes on luxury watch manufacturers?

A) They decrease inventory levels

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B) They reduce advertising expenditures

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C) They expand their production lines

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D) They lower product prices

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(3)
[1] A technological breakthrough in solar panel manufacturing reduced production costs by half. [2] As a result, residential installations increased exponentially across suburban neighborhoods.
Why did residential solar panel installations increase?

A) Government bans on fossil fuels

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B) Decreased production costs from technology

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C) Higher electricity utility rates

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D) Severe weather climate events

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(4)
[1] Rent control laws limit the maximum price landlords can charge tenants. [2] Because landlords find lower profits unappealing, they often convert apartment buildings into commercial offices, leading to a severe housing shortage.
What is the ultimate effect of rent control laws described in the text?

A) An increase in affordable housing

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B) A severe housing shortage

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C) Higher profits for residential landlords

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D) Faster construction of apartment complexes

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(5)
[1] When a firm holds a complete monopoly over a rare mineral, it faces no direct market competition. [2] Thus, the firm can artificially restrict supply to drive prices upward.
What allows the monopoly firm to drive prices upward?

A) Total absence of market competition

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B) Government price ceiling regulations

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C) High levels of consumer complaints

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D) Excessive production surpluses

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(6)
[1] Bad weather destroyed the annual strawberry harvest, causing immediate scarcity. [2] Consequently, local bakeries raised the prices of strawberry pastries.
What caused local bakeries to raise pastry prices?

A) Increased consumer desire for fruit

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B) Destruction of the strawberry harvest

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C) Higher minimum wages for bakers

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D) Lower utility costs for storefronts

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(7)
[1] Minimum wage legislation raises the hourly pay floor for entry-level workers. [2] Some economic models suggest that higher labor costs lead employers to reduce total hiring.
According to economic models, what is an effect of raising minimum wage?

A) Increased corporate hiring budgets

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B) Reduced total hiring by employers

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C) Elimination of all production costs

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D) Lower consumer price inflation

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(8)
[1] Consumers anticipate that smartphone prices will drop significantly during next month’s holiday sales. [2] Therefore, current weekly sales figures have declined as buyers postpone purchases.
Why have current weekly smartphone sales declined?

A) Factories stopped producing new phones

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B) Consumers are waiting for future lower prices

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C) Retail stores are closed for inventory

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D) Income levels have dropped nationwide

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(9)
[1] A heavy tax imposed on imported steel protects domestic steel mills from foreign competition. [2] As a result, domestic manufacturers can maintain higher profit margins.
What is the cause of domestic steel manufacturers maintaining higher profit margins?

A) Foreign steel imports increasing

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B) Heavy taxes on imported steel

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C) Lower consumer demand for metal

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D) Decreased domestic labor wages

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(10)
[1] When interest rates are lowered by the central bank, borrowing becomes cheaper for businesses. [2] Consequently, firms invest heavily in new capital equipment and plant expansions.
What is the effect of lower central bank interest rates?

A) Decreased business capital investment

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B) Cheaper borrowing and increased business investment

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C) Higher savings account returns

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D) Reduction in industrial output

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(11)
[1] A sudden surge in popularity for organic cotton clothing caused retail buyers to purchase record volumes. [2] Because farm supply was fixed in the short term, wholesale cotton prices skyrocketed.
What caused wholesale cotton prices to skyrocket?

A) Fixed short-term farm supply meeting a surge in demand

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B) Overproduction of synthetic fibers

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C) Lower consumer interest in organic fashion

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D) Reduced shipping costs globally

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(12)
[1] Governments placed strict quotas on fish harvesting to prevent marine depletion. [2] Thus, the market availability of cod declined, causing seafood markets to experience higher costs.
Why did seafood markets experience higher costs?

A) Overfishing caused a massive surplus

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B) Strict harvesting quotas reduced cod availability

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C) Consumers stopped eating fish entirely

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D) Fish restaurants went out of business

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(13)
[1] Inflation erodes the purchasing power of fiat currency over time. [2] As a result, workers demand higher nominal wages to maintain their real standard of living.
What is the effect of inflation on workers’ wage demands?

A) Workers accept lower pay rates

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B) Workers demand higher nominal wages

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C) Workers stop working completely

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D) Workers save less money in banks

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(14)
[1] Ticket prices for commercial airlines were cut in half due to intense budget airline competition. [2] Consequently, train and bus passenger numbers dropped as travelers switched to flying.
What caused train and bus passenger numbers to drop?

A) Decreased railway safety standards

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B) Cheaper airline ticket prices attracting travelers

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C) Higher fuel taxes on public transit

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D) Closure of train stations nationwide

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(15)
[1] A major port strike halted cargo shipping containers from entering the country for weeks. [2] Therefore, retail stores faced severe inventory stockouts ahead of the holiday season.
What led to the retail store stockouts?

A) A major port shipping strike

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B) Excessive factory manufacturing output

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C) Lower consumer shopping budgets

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D) Decreased shipping container sizes

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(16)
[1] When a product is determined to have harmful health side effects, public warning campaigns ensue. [2] Because consumer confidence collapses, the demand curve shifts sharply downward.
What causes the demand curve to shift downward in this scenario?

A) An increase in production efficiency

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B) Collapse of consumer confidence due to health warnings

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C) Lower raw material costs for factories

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D) Government subsidies for alternative goods

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(17)
[1] Subsidies provided by the government to domestic corn farmers lowered operational expenses. [2] As a result, farmers increased corn output, driving market prices down.
What was the effect of government subsidies on corn prices?

A) Prices increased drastically

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B) Prices were driven down due to increased output

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C) Prices remained completely unaffected

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D) Prices fluctuated randomly every day

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(18)
[1] High inflation rates prompted the central bank to raise interest rates aggressively. [2] Thus, mortgage refinancing activity slowed down significantly across the housing market.
Why did mortgage refinancing slow down?

A) Central banks lowered borrowing costs

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B) Central banks raised interest rates aggressively

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C) Housing construction companies went bankrupt

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D) Homebuyers purchased more expensive houses

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(19)
[1] Automation and robotics were introduced into automobile assembly lines, cutting labor requirements. [2] Consequently, production efficiency rose while unit manufacturing costs fell.
What resulted from the introduction of assembly line automation?

A) Lower production efficiency and higher costs

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B) Higher efficiency and falling unit manufacturing costs

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C) Increased reliance on manual labor

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D) Complete shutdown of factories

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(20)
[1] A devastating viral infection decimated livestock populations across several major cattle-raising regions. [2] Because beef supply shrank rapidly, vegetarian food alternatives saw a sudden spike in market demand.
What caused the sudden spike in demand for vegetarian alternatives?

A) Shrinking beef supply due to livestock disease

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B) Lower prices for beef products

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C) Government bans on vegetable farming

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D) Increased consumer preference for red meat

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XII-7. Reading Evaluation

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