Homework 2 (Test 1)

How will an increase in the birth rate affect the equilibrium price of land?

An increase in the birth rate will lead to a rise in the population of potential buyers of land. This leads to a rightward shift of the demand curve for land, increasing the equilibrium price of land.

State whether these pairs of products are complements or substitutes: a. Tennis courts and handball courts b. Squash racquets and squash courts c. Coffee and cream d. Butter and margarine e. Bathing suits and towels

a. Substitutes b. Complements c. Complements d. Substitutes e. Complements

When a free market is not in equilibrium: a. the economic motives of sellers and buyers will move the market to its equilibrium. b. a change in either supply or demand is required to reestablish equilibrium. c. there is neither excess supply nor excess demand. d. government intervention is required to achieve equilibrium.

a. the economic motives of sellers and buyers will move the market to its equilibrium.

If a country's economic decisions are made by an individual or small numbers of individuals, then it has a: a. open economy. b. centralized economy. c. capitalist economy. d. free-market economy.

b. centralized economy.

An increase in the price of a good will a. increase demand (i.e. shift it right). b. decrease quantity demanded. c. increase quantity demanded. d. decrease demand (i.e. shift it left).

b. decrease quantity demanded.

Which of the following phrases best captures the notion of efficiency? a. absolute fairness. b. minimum waste. c. equitable outcome. d. equal distribution.

b. minimum waste.

Positive statements are a. claims about how the world should be. b. made by economists speaking as policy advisers. c. claims about how the world is. d. prescriptive.

c. claims about how the world is.

The supply curve illustrates that firms: a. increase the supply of a good when its price rises. b. decrease the quantity supplied of a good when its price rises. c. increase the quantity supplied of a good when its price rises. d. decrease the supply of a good when its price rises.

c. increase the quantity supplied of a good when its price rises.

If a good is normal, then an increase in income will result in a(n) a. movement down and to the right along the demand curve for the good. b. movement up and to the left along the demand curve for the good. c. decrease in or leftward shift of the demand for the good. d. increase in or rightward shift of the demand of the good.

d. increase in or rightward shift of the demand of the good.

When a market is in equilibrium a. there is either excess demand or excess supply. b. both excess demand and excess supply are positive. c. both excess demand and excess supply are positive and equal to each other. d. there is neither excess demand nor excess supply.

d. there is neither excess demand nor excess supply.