Homework #2

If two goods are complements: they are consumed independently. an increase in the price of one will increase the demand for the other. a decrease in the price of one will increase the demand for the other. they are necessarily inferior goods.

a decrease in the price of one will increase the demand for the other.

A shift to the right in the demand curve for product A can be most reasonably explained by saying that: consumer incomes have declined, and consumers now want to buy less of A at each possible price. the price of A has increased and, as a result, consumers want to purchase less of it. consumer preferences have changed in favor of A so that they now want to buy more at each possible price. the price of A has declined and, as a result, consumers want to purchase more of it.

consumer preferences have changed in favor of A so that they now want to buy more at each possible price.

Assume in a competitive market that price is initially above the equilibrium level. We can predict that price will: decrease, quantity demanded will decrease, and quantity supplied will increase. decrease and quantity demanded and quantity supplied will both decrease. decrease, quantity demanded will increase, and quantity supplied will decrease. increase, quantity demanded will decrease, and quantity supplied will increase.

decrease, quantity demanded will increase, and quantity supplied will decrease.

A market is in equilibrium: provided there is no surplus of the product. at all prices above that shown by the intersection of the supply and demand curves. if the amount producers want to sell is equal to the amount consumers want to buy. whenever the demand curve is downsloping and the supply curve is upsloping.

if the amount producers want to sell is equal to the amount consumers want to buy.

Assume in a competitive market that price is initially below the equilibrium level. We can predict that price will: decrease, quantity demanded will decrease, and quantity supplied will increase. decrease and quantity demanded and quantity supplied will both decrease. increase, quantity demanded will increase, and quantity supplied will decrease. increase, quantity demanded will decrease, and quantity supplied will increase.

increase, quantity demanded will decrease, and quantity supplied will increase

A decrease in the demand for recreational fishing boats might be caused by an increase in the: income of sports fishers. price of outboard motors. size and number of fish available. price of sailing boats.

price of outboard motors.

Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity? An increase in supply. An increase in demand. A decrease in supply. A decrease in demand.

producers will offer more of a product at high prices than at low prices.

If we say that a price is too high to clear the market, we mean that: quantity demanded exceeds quantity supplied. the equilibrium price is above the current price. quantity supplied exceeds quantity demanded. the price of the good is likely to rise.

quantity supplied exceeds quantity demanded.

Which of the following will cause the demand curve for product A to shift to the left? Population growth that causes an expansion in the number of persons consuming A. An increase in money income if A is a normal good. A decrease in the price of complementary product C. An increase in money income if A is an inferior good.

An increase in money income if A is an inferior good

move from point y to point x.

Refer to the diagram. A decrease in quantity demanded is depicted by a: move from point x to point y. shift from D1 to D2. shift from D2 to D1. move from point y to point x.

a surplus of 100 units.

Refer to the diagram. A price of $60 in this market will result in: equilibrium. a shortage of 50 units. a surplus of 50 units. a surplus of 100 units.

$0.50.

Refer to the diagram. A shortage of 160 units would be encountered if price was: $1.10, that is, $1.60 minus $.50. $1.60. $1.00. $0.50.

move from point y to point x.

Refer to the diagram. An increase in quantity supplied is depicted by a: move from point y to point x. shift from S1 to S2. shift from S2 to S1. move from point x to point y.

$1.00 and 200.

Refer to the diagram. The equilibrium price and quantity in this market will be: $1.00 and 200. $1.60 and 130. $0.50 and 130. $1.60 and 290.

Graph A

Refer to the four graphs above. Select the graph above that best shows the changes in demand and supply in the market specified in the following situation: In the market for corn, if gasoline producers use more ethanol from corn, and good weather during the growing season yields a bumper harvest. Graph A Graph B Graph C Graph D

A government tax per unit of output reduces supply. True False

T

C only

Which of the diagrams illustrates the effect of a governmental subsidy on the market for AIDS research? A only. B only. C only. D only.

In which of the following instances is the effect on equilibrium price dependent on the magnitude of the shifts in supply and demand? Demand rises and supply rises. Supply falls and demand remains constant. Demand rises and supply falls. Supply rises and demand falls.

Demand rises and supply rises.

Producing a good in the least costly way is known as allocative efficiency. True False

False

demand has increased and equilibrium price has decreased.

Refer to the diagram, in which S1 and D1 represent the original supply and demand curves and S2 and D2 the new curves. In this market: supply has decreased and equilibrium price has increased. demand has increased and equilibrium price has decreased. demand has decreased and equilibrium price has decreased. demand has increased and equilibrium price has increased.

0F and 0C, respectively.

Refer to the diagram, which shows demand and supply conditions in the competitive market for product X. If the initial demand and supply curves are D0 and S0, equilibrium price and quantity will be: 0F and 0C, respectively. 0G and 0B, respectively. 0F and 0A, respectively. 0E and 0B, respectively.

A demand curve: shows the relationship between price and quantity supplied. indicates the quantity demanded at each price in a series of prices. graphs as an upsloping line. shows the relationship between income and spending.

indicates the quantity demanded at each price in a series of prices.

If consumer incomes increase, the demand for product X: will necessarily remain unchanged. may shift either to the right or left. will necessarily shift to the right. will necessarily shift to the left.

may shift either to the right or left

By an "increase in demand," economists mean that: product price has fallen so consumers move down to a new point on the demand curve. the quantity demanded at each price in a set of prices is greater. the quantity demanded at each price in a set of prices is smaller. a leftward shift of the demand curve has occurred.

the quantity demanded at each price in a set of prices is greater.