Homework 2

Refer to Figure 4-6. The shift from S' to S in the market for chocolate cake could be caused by a. a decrease in the number of commercial bakers. b. an improvement in oven technology. c. a decrease in the price of butter. d. a decrease in the price of chocolate cake.

a. a decrease in the number of commercial bakers.

Suppose that a decrease in the price of good X results in fewer units of good Y being demanded. This implies that X and Y are a. normal goods. b. substitute goods. c. complementary goods. d. inferior goods.

b. substitute goods.

Barb and Jim run a business that sets up and tests computers. Assume that Barb and Jim can switch between setting up and testing computers at a constant rate. The following table applies. Refer to Table 3-7. The number of minutes needed by Barb to test a computer is a. 36. b. 48. c. 60. d. 64.

c. 60.

Refer to Figure 4-1. It is apparent from the figure that the a. good is inferior. b. good is a normal good. c. demand for the good conforms to the law of demand. d. demand for the good decreases as income increases.

c. demand for the good conforms to the law of demand.

The market supply curve a. is found by vertically adding the individual supply curves. b. represents the sum of the prices that all the sellers are willing to accept for a given quantity of the good. c. represents the sum of the quantities supplied by all the sellers at each price of the good. d. slopes downward.

c. represents the sum of the quantities supplied by all the sellers at each price of the good.

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

c. surplus of 400 units.

Refer to Table 4-2. If these are the only four buyers in the market, then the market quantity demanded at a price of $1 is a. 7.75 units. b. 4 units. c. 14 units. d. 31 units.

d. 31 units.

If scientists discover that steamed milk, which is used to make lattés, prevents heart attacks, what would happen to the equilibrium price and quantity of lattés? a. The equilibrium price would decrease, and the equilibrium quantity would increase. b. Both the equilibrium price and quantity would decrease. c. The equilibrium price would increase, and the equilibrium quantity would decrease. d. Both the equilibrium price and quantity would increase.

d. Both the equilibrium price and quantity would increase.

The principle of comparative advantage does not provide answers to certain questions. One of those questions is a. Do specialization and trade benefit more than one party to a trade? b. Is it absolute advantage or comparative advantage that really matters? c. Is it possible for specialization and trade to increase total output of traded goods? d. How are the gains from trade shared among the parties to a trade?

d. How are the gains from trade shared among the parties to a trade?

A baker recently has come to expect higher prices for bread in the near future. We would expect a. the baker to supply more bread now than they were supplying previously. b. no change in the baker's current supply of bread; instead, future supply will be affected. c. the demand for bread to fall. d. the baker to supply less bread now than they were supplying previously.

d. the baker to supply less bread now than they were supplying previously.