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Week 2 Homework

Question 1

The price of cotton clothing falls. As a result,

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the demand for cotton clothing decreases.

both the demand for cotton clothing increases and the quantity demand of cotton clothing increases.

the quantity demanded of cotton clothing increases.

the quantity demanded of cotton clothing decreases.

the demand for cotton clothing increases.

Question 2

If a higher price for wheat decreases the quantity of corn being produced, which of the following describes what has occurred?

The quantity of wheat supplied increased and the supply of corn decreased.

The supply of wheat increased and the supply of corn decreased.

The quantity of wheat supplied increased and quantity of corn supplied decreased.

The supply of wheat decreased and the supply of corn decreased.

The supply of wheat increased and the quantity of corn supplied decreased

Question 3

If both producers and consumers believe that a product’s price will rise in the future, then at the present, demand ________ and supply ________.

increases; increases

increases; decreases

decreases; decreases

does not change; does not change

decreases; increases

Question 4

You are just about to finish college and are about to start a high paying job. Because of this new job, what is the most likely outcome in the market for cars?

Your demand for cars will decrease.

The market supply of cars will increase.

Your demand for cars will increase.

The demand and the supply for cars will decrease.

The market supply of cars will decrease.

Question 5

Many Americans are selling their used cars and buying new fuel-efficient hybrids. Other things remaining the same, in the market for used cars, ______ and in the market for hybrids ______.

demand? decreases, supply? increases, and the price? falls; supply increases and the price falls

demand decreases and the price? rises; supply increases and the price falls

supply increases and the price? falls; demand increases and the price rises

both demand and supply decrease and the price might? rise, fall, or not? change; demand increases and the price rises

Question 6

If the price of a one good increases and the quantity demanded of a different good decreases, then these two goods are

substitutes.

normal goods.

inelastic goods.

complements.

inferior goods.

Question 7

Which figure above shows the effect if research is published claiming that eating pizza is healthy?

Figure B

Both Figure A and Figure D

Figure C

Figure A

Figure D

Question 8

If consumers buy a large number of plug-in electric cars, the equilibrium price of electricity will ________ and the equilibrium quantity of electricity will ________.

rise; increase

fall; increase

not change; increase

rise; decrease

fall; decrease

Question 9

Which of the following describes the law of demand? When other things remain the same, as

the quantity demanded of bread increases, the price of bread falls.

more people decide to eat pizza, the demand for pizza increases.

your income increases, you’ll buy more hamburgers.

the price of peanut butter increases, the quantity demanded of jelly decreases.

the price of gas falls, the quantity demanded of gas increases.

Question 10

In a recession, consumers have less income to spend. As a result, if dining out is a normal good, then which of the following would happen to the demand curve for dining out?

The demand curve would shift rightward.

The demand curve would not shift but the price of dining out would fall.

The demand curve would shift leftward.

The demand curve would not shift but the price of dining out would rise.

The effect on the demand curve is unknown.

Question 11

Computer chips are a normal good. Suppose the economy slips into a recession so that income falls. As a result, the demand for computer chips ________ so that the price of a computer chip ________.

decreases; rises

decreases; does not change

increases; falls

decreases; falls

increases; rises

Question 12

If income increases and the demand for bus rides decreases,

consumers are behaving irrationally.

bus rides are an inferior good.

bus rides must be a complement good with some other good.

bus rides are a substitute good.

bus rides are a normal good.

Question 13

Which figure above shows the effect of a technological advance in the production of pizza?

Figure D

Both Figure A and Figure D

Figure B

Figure C

Figure A

Question 14

Suppose over the next several years the productivity of firms producing electric cars improves dramatically. The advance in productivity leads to

an increase in the supply of electric cars so that the supply curve shifts leftward.

a decrease in the supply of electric cars so that the supply curve shifts rightward.

an increase in the supply electric cars so that the supply curve shifts rightward.

no change in the supply of electric cars, only a change in the quantity supplied of electric cars.

a decrease in the supply of electric cars so that the supply curve shifts leftward.

Question 15

If good weather conditions result in a larger than normal crop of peaches, then the

equilibrium price of peaches falls, and the equilibrium quantity of peaches decreases.

equilibrium price of peaches falls, and the equilibrium quantity of peaches increases.

equilibrium price of peaches rises, and the equilibrium quantity of peaches increases.

demand curve for peaches shifts leftward.

increase in the supply of peaches induces a greater demand for peaches, so that the equilibrium price rises and the equilibrium quantity increases.

Question 16

People eat at restaurants less often when their incomes fall because of a recession. Eating at restaurants must be

a complement to other goods.

an inelastic good.

an inferior good.

a normal good.

a substitute for other goods.

Question 17

Which of the following increases the supply of a product?

some producers going bankrupt and leaving the industry

an increase in the expected future price of the product

a higher price for the product

lower prices for the resources used to produce the product

a decrease in productivity

Question 18

If a 30 percent price increase generates a 20 percent decrease in quantity demanded, then demand is

perfectly inelastic.

inelastic.

perfectly elastic.

unit elastic.

elastic.

Question 19

Suppose the San Francisco 49ers lower ticket prices by 15 percent and as a result the quantity of tickets demanded increases by 10 percent. This set of results shows that San Francisco 49ers tickets have

an elastic demand.

a unit elastic demand.

an inelastic supply.

an elastic supply.

an inelastic demand.

Question 20

In the above figure, the movement from point a to point b reflects

a decrease in the cost of the tomato sauce used to produce pizza.

a decrease in income if pizza is a normal good.

an increase in the number of producers of pizza.

an increase in the supply of pizza.

an increase in the price of pizza.

Question 21

If the automobile workers’ union successfully negotiates a wage increase for its members, how does the wage hike affect the supply of automobiles?

The quantity supplied decreases.

The supply and quantity supplied decreases.

The quantity supplied increases.

The supply decreases.

The supply increases.

Question 22

In the above figure, the shift in the demand curve from D to D1 can be the result of

a decrease in income if pizza is a normal good.

an increase in the price of a sub sandwich, a substitute for pizza.

an increase in the price of soda, a complement to pizza.

an increase in the price of pizza.

a change in quantity demanded.

Question 23

Patrick lives near two gas stations, Exxon and Shell. If Exxon decreases the price of gas, we predict that the quantity of gasoline demanded at Shell will

increase because Exxon and Shell gas are substitutes.

decrease because Exxon and Shell gas are substitutes.

not change Exxon and Shell are different brands of gasoline.

increase because Exxon and Shell gas are complements.

decrease because Exxon and Shell gas are complements.

Question 24

Pizza is a normal good. Which figure above shows the effect of a decrease in consumers’ incomes?

Figure D

Figure C

Both Figure B and Figure C

Figure A

Figure B

Question 25

Suppose improvements in technology cause the supply of natural gas to increase and at the same time the demand for natural gas increases. What are we sure of?

Equilibrium price decreases.

Both equilibrium price and quantity increase.

Equilibrium price increases.

You Answered

Equilibrium quantity decreases.

Correct Answer

Equilibrium quantity increases.

Question 26

Consider the market for smart phones. Which of the following shifts the demand curve rightward?

an increase in the price of smart phones

a decrease in the price of smart phones

a decrease in the number of smart phone buyers

an increase in the supply of smart phones

an increase in the price of land-line phone service, a substitute for smart phones

Question 27

The table above shows the situation in the gasoline market in Tulsa, Oklahoma. If the price of a gallon of gasoline is $2.20, then

There is neither a surplus nor a shortage, but the market is NOT in equilibrium.

the gasoline market in Tulsa is in equilibrium.

Without more information we cannot determine if there is a surplus, a shortage, or an equilibrium in the gasoline market in Tulsa.

there is a shortage of gasoline in Tulsa.

there is a surplus of gasoline in Tulsa.

Question 28

If a 10 percent price increase generates a 10 percent decrease in quantity demanded, then demand is

elastic.

perfectly elastic.

perfectly inelastic.

inelastic.

unit elastic.

Question 29

The law of supply reflects the fact that

suppliers have an incentive to use their resources in the way that brings the biggest return.

the demand curve is downward sloping.

higher prices are more attractive to consumers because they signal a higher quality product.

people buy more of a good when its price falls.

businesses can sell more goods at lower prices.

Question 30

In the above figure, an increase in cost of the cheese used to produce pizza

has no effect.

results in a movement from point a to point b.

shifts the supply curve from S to S2.

shifts the supply curve from S to S1.

results in a movement from point b to point a.

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