homework 2

Which of the following events would cause both the equilibrium price and equilibrium quantity of number two grade potatoes to increase if number two grade potatoes are an inferior good? a. A decrease in consumer income b. Greater government restrictions on agricultural chemicals c. Fewer government restrictions on agricultural chemicals d. An increase in consumer income

a. A decrease in consumer income

Which of the following events would unambiguously cause a decrease in the equilibrium price of cotton shirts? a. A decrease in the price of wool shirts and a decrease in the price of raw cotton b. An increase in the price of wool shirts and a decrease in the price of raw cotton c. A decrease in the price of wool shirts and an increase in the price of raw cotton d. An increase in the price of wool shirts and an increase in the price of raw cotton

a. A decrease in the price of wool shirts and a decrease in the price of raw cotton

Suppose scientists provide evidence that people who drink energy drinks are more likely to have a heart attack than people who do not drink energy drinks. We would expect to see a. a decrease in the demand for energy drinks. b. a decrease in the supply of energy drinks. c. an increase in the demand for energy drinks. d. no change in the demand for energy drinks.

a. a decrease in the demand for energy drinks.

Refer to Figure 4-6. The shift from S to S' is called a. an increase in supply. b. an increase in quantity supplied. c. a decrease in quantity supplied. d. a decrease in supply.

a. an increase in supply.

The price elasticity of demand measures a. buyers' responsiveness to a change in the price of a good. b. the extent to which demand increases as additional buyers enter the market. c. the movement along a supply curve when there is a change in demand. d. how much more of a good consumers will demand when incomes rise.

a. buyers' responsiveness to a change in the price of a good.

refer to figure 4-10. which of the following movements would illustrate the effect in the market for chocolate chip cookies of an improved high-speed mixer that allows bakers to produce cookies in less time? a. Point A to Point B b. Point C to Point D c. Point A to Point D d. Point C to Point B

a. point A to point B

Suppose roses are currently selling for $40 per dozen, but the equilibrium price of roses is $30 per dozen. We would expect a a. surplus to exist and the market price of roses to decrease. b. surplus to exist and the market price of roses to increase. c. shortage to exist and the market price of roses to increase. d. shortage to exist and the market price of roses to decrease.

a. surplus to exist and the market price of roses to decrease.

Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and, as a result, the quantity of bags demanded increases from 600 to 800. Using the midpoint method, the price elasticity of demand for frozen chicken nuggets in the given price range is a. 2.89. b. 2.33. c. 0.43. d. 0.35.

b. 2.33.

Suppose the United States had a short-term shortage of farmers. Which market mechanisms would adjust to remove the shortage? a. The government would subsidize the production of food. b. The prices of food and the wages of farmers would adjust. c. The government would provide tax incentives to encourage people to become farmers. d. There are no market mechanisms to remove the shortage.

b. The prices of food and the wages of farmers would adjust.

When the quantity demanded has increased at every price, it might be because a. the number of buyers in the market has decreased. b. the price of a complementary good has decreased. c. the costs incurred by sellers producing the good have decreased. d. income has increased, and the good is an inferior good.

b. the price of a complementary good has decreased.

If a 15% increase in price for a good results in a 20 percent decrease in quantity demanded, the price elasticity of demand is a. 1.60. b. 0.75. c. 1.33. d. 1.25.

c. 1.33.

Suppose that demand for a good increases and, at the same time, supply of the good decreases. What would happen in the market for the good? a. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous. b. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous. c. Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous. d. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous.

c. Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.

Beef is a normal good. You observe that both the equilibrium price and quantity of beef have fallen over time. Which of the following explanations would be most consistent with this observation? a. Consumers have experienced an increase in income, and beef-production technology has improved. b. The price of chicken has risen, and the price of steak sauce has fallen. c. New medical evidence has been released that indicates a negative correlation between a person's beef consumption and life expectancy. d. The demand curve for beef must be positively sloped.

c. New medical evidence has been released that indicates a negative correlation between a person's beef consumption and life expectancy.

Refer to Figure 4-10. Which of the following movements would illustrate the effect in the market for bullet-proof vests of an increase in the price of Kevlar, the material used to make the vests? a. Point A to Point D b. Point A to Point B c. Point C to Point D d. Point C to Point B

c. Point C to Point D

What will happen to the equilibrium price and quantity of new cars if the price of gasoline rises, the price of steel rises, public transportation becomes cheaper and more comfortable, and auto-workers negotiate higher wages? a. Price will rise, and the effect on quantity is ambiguous. b. Price will fall, and the effect on quantity is ambiguous. c. Quantity will fall, and the effect on price is ambiguous. d. Quantity will rise, and the effect on price is ambiguous.

c. Quantity will fall, and the effect on price is ambiguous.

Refer to Figure 4-7. At what price would there be an excess supply of 200 units of the good? a. $20 b. $35 c. $15 d. $30

d. $30

If the price elasticity of demand for a good is 2.0, then a 10 percent increase in price results in a a. 40 percent decrease in the quantity demanded. b. 0.2 percent decrease in the quantity demanded. c. 5 percent decrease in the quantity demanded. d. 20 percent decrease in the quantity demanded.

d. 20 percent decrease in the quantity demanded.

equilibrium price must decrease when demand a. increases and supply does not change, when demand does not change and supply decreases, and when demand decreases and supply increases simultaneously. b. decreases and supply does not change, when demand does not change and supply increases, and when demand increases and supply decreases simultaneously. c. increases and supply does not change, when demand does not change and supply decreases, and when demand increases and supply decreases simultaneously. d. decreases and supply does not change, when demand does not change and supply increases, and when demand decreases and supply increases simultaneously.

d. decreases and supply does not change, when demand does not change and supply increases, and when demand decreases and supply increases simultaneously.

Suppose an increase in the price of rubber coincides with an advance in the technology of tire production. As a result of these two events, the demand for tires a. is unaffected, and the supply of tires decreases. b. is unaffected, and the supply of tires increases. c. decreases, and the supply of tires increases. d. is unaffected, and the supply of tires could increase, decrease, or stay the same.

d. is unaffected, and the supply of tires could increase, decrease, or stay the same.

Refer to Figure 4-7. At a price of $35, there would be a a. surplus of 200 units. b. surplus of 600 units. c. shortage of 400 units. d. surplus of 400 units.

d. surplus of 400 units