Economics - Unit 2

A price ceiling on a good often results in black market or underground transactions of the good. True False

True

A reputable scientist asserts in a major scientific publication that drinking orange juice will increase your life span. What can we expect the new equilibrium point to be in the orange juice market? a. Increase in price, increase in quantity demanded b. Increase in price, decrease in quantity demanded c. Decrease in price, decrease in quantity demanded d. Decrease in price, increase in quantity demanded e. None of the Above

a. Increase in price, increase in quantity demanded

To be binding, a price ceiling must be set at a price: a. Lower than the equilibrium price b. At which quantity supplied exceeds quantity demanded c. Higher than the equilibrium price d. At which quantity demanded exceeds quantity supplied e. That is agreed upon as "fair" by both the consumers and the producers of the good

a. Lower than the equilibrium price

In the local market for hot tea, what would happen if Tango's Tea and Billy's Bag tea shops go out of business? a. The Demand Curve shifts to the left b. The Supply Curve shifts to the left c. Both the Demand and Supply Curve shift to the left d. The Demand Curve shifts to the left e. The Supply Curve shifts to the right

b. The Supply Curve shifts to the left

Suppose most people only drink orange juice with vodka. What will be the result in the orange juice market if a law banning alcohol passes? a. Increase in price, increase in quantity demanded b. Increase in price, decrease in quantity demanded c. Increase in price, constant quantity demanded d. Decrease in price, decrease in quantity demanded e. Decrease in price, increase in quantity demanded

d. Decrease in price, decrease in quantity demanded

If tortilla chips are a normal good, what happens to equilibrium price and quantity when there is an increase in income? a. Equilibrium price decreases and equilibrium quantity decreases b. Equilibrium price decreases and equilibrium quantity increases c. Equilibrium price increases and equilibrium quantity decreases d. Equilibrium price increases and the equilibrium quantity stays the same. e. Equilibrium price increases and equilibrium quantity increases

e. Equilibrium price increases and equilibrium quantity increases

INSTRUCTIONS: Use the following model to answer questions 3 - 5. 1. Draw a Supply-Demand Model for the orange juice market in equilibrium. 2. Label equilibrium as point E1 with axis points p1 and q1. Assume that a tsunami hits Florida. In response, what would be the most likely result? a. Supply shifts to the right b. Both Demand and Supply shift to the right. c. Demand shifts to the left d. Demand shifts to the right e. Supply shifts to the left

e. Supply shifts to the left