Question 1

In 2007 the price of oil increased, which in turn caused the price of natural gas to rise. This can best be explained by saying that oil and natural gas are:&#10;A) complementary goods and the higher price for oil increased the demand for natural gas.&#10;B) substitute goods and the higher price for oil increased the demand for natural gas.&#10;C) complementary goods and the higher price for oil decreased the supply of natural gas.&#10;D) substitute goods and the higher price for oil decreased the supply of natural gas.

Accepted Answer

Oil and natural gas are substitute goods, so when the price of oil increased, consumers turned to natural gas as an alternative, increasing its demand and price.

Question 2

Refer to the above diagram, which shows three demand curves for coffee. Which would cause the change in the quantity of coffee demanded illustrated by the shift from point a to point b?&#10;A) A decrease in the price of coffee&#10;B) An increase in consumer incomes&#10;C) A decrease in the price of sugar&#10;D) An increase in the price of tea

Accepted Answer

A decrease in the price of coffee&#10;

Question 3

Refer to the above diagram for good X. A shift from D₂ to D₁ would best be explained by: A) an increase in the price of good X. B) a decrease in the price of good X. C) an increase in the price of a complementary good Y. D) an increase in the price of a substitute good Z.

Accepted Answer

an increase in the price of a complementary good Y.&#10;

Question 4

Refer to the above diagram for good R. A shift in the supply curve from S₂ to S₁ would best be explained by: A) government imposing a tax on good R. B) a decrease in the price of resources used to produce good R. C) an increase in the price of good R. D) an improvement in the technology used to produce good R.

Accepted Answer

The answer of   Refer to the above diagram...

Question 5

Assume a drought in the Great Plains reduces the supply of wheat. Since wheat is a basic ingredient in the production of bread and potatoes are a consumer substitute for bread, we would expect the price of wheat to:

A) rise, the supply of bread to increase, and the demand for potatoes to increase.
B) rise, the supply of bread to decrease, and the demand for potatoes to increase.
C) rise, the supply of bread to decrease, and the demand for potatoes to decrease.
D) fall, the supply of bread to increase, and the demand for potatoes to increase.

Accepted Answer

A drought reduces wheat supply, increasing its price. This leads to a decrease in bread supply, raising bread prices and increasing demand for substitute goods like potatoes.

Question 6

Refer to the above data. Equilibrium price is:&#10;A) $4.&#10;B) $3.&#10;C) $2.&#10;D) $1.

Accepted Answer

The answer of   Refer to the above data....

Question 7

&#10;&#10;- Refer to the above diagram. The equilibrium price and quantity in this market will be:&#10;A) $1.00 and 200.&#10;B) $1.60 and 130.&#10;C) $.50 and 130.&#10;D) $1.60 and 290.

Accepted Answer

The equilibrium price and quantity are found at the intersection of the supply and demand curves. In this case, the equilibrium price is $1.00 and the equilibrium quantity is 200.

Question 8

&#10;&#10;-Refer to the above diagram. A surplus of 160 units would be encountered if price was:&#10;A) $1.10, that is, $1.60 minus $.50.&#10;B) $1.60.&#10;C) $1.00.&#10;D) $.50.

Accepted Answer

A surplus occurs when the quantity supplied exceeds the quantity demanded at a given price. At $1.60, the quantity supplied is likely higher than the quantity demanded, resulting in a surplus of 160 units.

Question 9

&#10;&#10;- Refer to the above diagram. A shortage of 160 units would be encountered if price was:&#10;A) $1.10, that is, $1.60 minus $.50.&#10;B) $1.60.&#10;C) $1.00.&#10;D) $.50.

Accepted Answer

A shortage occurs when the quantity demanded exceeds the quantity supplied. At a lower price like $0.50, the quantity demanded is likely higher than the quantity supplied, leading to a shortage.

Question 10

Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. Given D₀, if the supply curve moved from S₀ to S₁, then: A) supply has increased and equilibrium quantity has decreased. B) supply has decreased and equilibrium quantity has decreased. C) there has been an increase in the quantity supplied. D) supply has increased and price has risen to 0G.

Accepted Answer

The answer of   Refer to the above diagram,...

Question 11

- Refer to the above diagram, in which S₁ and D₁ represent the original supply and demand curves and S₂ and D₂ the new curves. In this market the indicated shift in demand may have been caused by:

A) a decline in the number of buyers in the market.
B) a decline in the price of a substitute good.
C) an increase in incomes if the product is a normal good.
D) an increase in incomes if the product is an inferior good.

Accepted Answer

The answer of  &#10;&#10;- Refer to the above diagram,...

Question 12

- Refer to the above diagram, in which S₁ and D₁ represent the original supply and demand curves and S₂ and D₂ the new curves. In this market the indicated shift in demand may have been caused by:

A) a decline in the number of buyers in the market.
B) a decline in the price of a substitute good.
C) an increase in incomes if the product is a normal good.
D) an increase in incomes if the product is an inferior good.

Accepted Answer

The answer of  &#10;&#10;- Refer to the above diagram,...

Question 13

-Refer to the above diagram, in which S₁ and D₁ represent the original supply and demand curves and S₂ and D₂ the new curves. In this market the indicated shift in supply may have been caused by:

A) an increase in the wages paid to workers producing this good.
B) the development of more efficient machinery for producing this good.
C) this product becoming less fashionable.
D) an increase in consumer incomes.

Accepted Answer

The answer of    &#10;&#10;-Refer to the above...

Question 14

- Refer to the above diagram, in which S₁ and D₁ represent the original supply and demand curves and S₂ and D₂ the new curves. In this market the indicated shift in demand may have been caused by:

A) a decline in the number of buyers in the market.
B) a decline in the price of a substitute good.
C) an increase in incomes if the product is a normal good.
D) an increase in incomes if the product is an inferior good.

Accepted Answer

The answer of  &#10;&#10;-  Refer to the above...

Question 15

In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X; (2) the equilibrium price (P) of X; and (3) the equilibrium quantity (Q) of X.

-
The price of complementary consumer good Y rises. At the same time, government creates subsidies for firms producing X. When both of these occur, what outcome will occur with greatest certainty?

A) decrease D, increase S, decrease P, and increase Q.
B) decrease D, increase S, decrease P, and effect on Q uncertain.
C) decrease D, increase S, decrease P, and decrease Q.
D) decrease D, decrease S, decrease Q, and effect on P uncertain.

Accepted Answer