HW #3 Econ 201
Fall 2015
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) If the Apple iPhone and the Samsung Galaxy are considered substitutes, then, other things equal, an increase in the price of the iPhone will1) _______
A) increase the demand for the Galaxy.
B) decrease the demand for the iPhone.
C) increase the quantity demanded for the Galaxy.
D) increase the quantity demanded for the iPhone.
2) What is the difference between an “increase in demand” and an “increase in quantity demanded”?2) _______
A) There is no difference between the two terms; they both refer to a movement downward along a given demand curve.
B) An “increase in demand” is represented by a rightward shift of the demand curve while an “increase in quantity demanded” is represented by a movement along a given demand curve.
C) There is no difference between the two terms; they both refer to a shift of the demand curve.
D) An “increase in demand” is represented by a movement along a given demand curve, while an “increase in quantity demanded” is represented by a rightward shift of the demand curve.
3) If, in response to an increase in the price of chocolate the quantity of chocolate demanded decreases, economists would describe this as3) _______
A) a change in consumer income.
B) a decrease in consumers’ taste for chocolate.
C) a decrease in quantity demanded.
D) a decrease in demand.
4) A change in all of the following variables will change the market demand for a product except4) _______
A) population and demographics.B) tastes.
C) income.D) the price of the product.
5) The income effect of a price change refers to the impact of a change in
A) the quantity demanded when income changes.
B) demand when income changes.
C) income on the price of a good.
D) the price of a good on a consumer’s purchasing power.
6) A movement along the demand curve for toothpaste would be caused by
A) a change in population.B) a change in the price of toothpaste.
C) a change in the price of toothbrushes. D) a change in consumer income.
7) If the price of grapefruit rises, the substitution effect due to the price change will cause
A) a decrease in the quantity demanded of grapefruit.
B) a decrease in the demand for grapefruit.
C) a decrease in the quantity supplied of grapefruit.
D) a decrease in the demand for oranges, a substitute for grapefruit.
8) The ________ effect refers to the change in quantity demanded for a good that results from the effect of a change in the good’s price on consumer’s purchasing power.
A) populationB) substitutionC) ceteris paribusD) income
9) The Internet has created a new category in the book selling market, namely, the “barely used” book. How does the availability of barely used books affect the market for new books?
A) The demand curve for new books shifts to the right.
B) The supply curve for new books shifts to the left.
C) The supply curve for new books shifts to the right.
D) The demand curve for new books shifts to the left.
10) Tomas increased his consumption of potato chips when the price of pistachios increased. For Tomas, potato chips and pistachios are
A) substitutes in consumption.B) both luxury goods.
C) complements in consumption.D) both inferior goods.
11) If the price of automobiles was to increase, then
A) the demand for gasoline would increase.
B) the quantity demanded of gasoline would decrease.
C) the demand for gasoline would decrease.
D) the supply of gasoline would increase.
12) Studies have shown links between calcium consumption and a reduction in osteoporosis. How does this affect the market for calcium?
A) The calcium demand curve shifts to the left because this new information will increase the price of calcium.
B) The calcium demand curve shifts to the right because of a change in tastes in favor of calcium.
C) The calcium supply curve shifts to the left because this new information will increase the price of calcium.
D) The calcium supply curve shifts to the right because of a change in tastes in favor of calcium.
13) How does the increasing use of MP3 players affect the market for compact discs?
A) The supply curve for compact discs shifts to the right.
B) The supply curve for compact discs shifts to the left.
C) The demand curve for compact discs shifts to the right.
D) The demand curve for compact discs shifts to the left.
14) If tablet computers are considered substitutes for e-readers, the decline in the price of tablet computers would, all else equal
A) decrease the quantity demanded for e-readers.
B) increase the demand for e-readers.
C) increase the quantity demanded for e-readers.
D) decrease the demand for e-readers.
15) Which of the following has occurred as the baby-boom generation ages?
A) The demand for soft drinks has increased in the U.S. market.
B) The demand for soft drinks has decreased in the U.S. market.
C) The global demand for soft drinks has remained relatively low.
D) The global demand for soft drinks has decreased.
16) What is the difference between an “increase in supply” and an “increase in quantity supplied”?
A) An “increase in supply” means the supply curve has shifted to the right while an “increase in quantity supplied” means at any given price supply has increased.
B) There is no difference between the two terms; they both refer to a movement along a given supply curve.
C) An “increase in supply” means the supply curve has shifted to the right while an “increase in quantity supplied” refers to a movement along a given supply curve in response to an increase in price.
D) There is no difference between the two terms; they both refer to a shift of the supply curve.
17) Which of the following would cause a decrease in the supply of milk?
A) a decrease in the price of milk
B) an increase in the price of cookies (assuming that milk and cookies are complements)
C) an increase the price of a product that producers sell instead of milk
D) an increase in the number of firms that produce milk
18) Danielle Ocean pays for monthly pool maintenance for her home swimming pool. Last week the owner of the pool service informed Danielle that he will have to raise his monthly service fee because of increases in the price of pool chemicals. How is the market for pool maintenance services affected by this?
A) There is a decrease in the demand for pool maintenance services.
B) There is an increase in the supply of pool maintenance services.
C) There is a decrease in the supply of pool maintenance services.
D) There is a decrease in the quantity of pool maintenance services supplied.
19) The popularity of digital cameras has enticed large discount stores like Wal-Mart and Costco to offer digital photo printing services. How does this affect the digital photo printing market?
A) The supply curve for digital photo printing services shifts to the left.
B) The supply curve for digital photo printing services shifts to the right.
C) The demand curve for digital photo printing services shifts to the right.
D) The demand curve for digital photo printing services shifts to the left.
20) Ranchers can raise either cattle or sheep on their land. Which of the following would cause the supply of sheep to increase?
A) a decrease in the price of cattleB) an increase in the price of sheep feed
C) an increase in the price of sheepD) an increase in the demand for cattle
21) Vineyards can grow either red wine grapes or white wine grapes on their land. Which of the following would cause the supply of red wine grapes to decrease?
A) an increase in the price of white wine grapes
B) an increase in the demand for red wine grapes
C) a decrease in the price of white wine grapes
D) an increase in the price of red wine
22) In February, market analysts predict that the price of titanium will rise in March. What happens in the titanium market in February, holding everything else constant?
A) The demand curve shifts to the left.
B) The supply curve shifts to the left.
C) The supply curve shifts to the right.
D) The quantity demanded and the quantity supplied of titanium increase.
23) In 2004, hurricanes damaged a large portion of Florida’s orange crop. As a result of this, many orange growers were not able to supply fruit to the market. At the pre-hurricane equilibrium price (i.e., at the initial equilibrium price), we would expect to see
A) the quantity demanded equal to the quantity supplied.
B) an increase in the demand for oranges.
C) a shortage of oranges.
D) a surplus of oranges.
Figure 3–4
24) Refer to Figure 3–4. If the price is $10,
A) there would be a surplus of 600 units.B) there would be a shortage of 200 units.
C) there would be a surplus of 200 units.D) there would be a shortage of 600 units.
25) Refer to Figure 3–4. At a price of $10, how many units will be sold?
A) 200B) 400C) 600D) 800
26) Refer to Figure 3–4. If the current market price is $10, the market will achieve equilibrium by
A) a price increase, increasing the quantity supplied and decreasing the quantity demanded.
B) a price increase, increasing the supply and decreasing the demand.
C) a price decrease, decreasing the supply and increasing the demand.
D) a price decrease, decreasing the quantity supplied and increasing the quantity demanded.
27) Assume there is a shortage in the market for digital music players. Which of the following statements correctly describes this situation?
A) The demand for digital music players is greater than the supply of digital music players.
B) the shortage will cause an increase in the equilibrium price of digital music players.
C) Some consumers will be unable to obtain digital music players at the market price and will have an incentive to offer to buy the product at a higher price.
D) The price of digital music players will rise in response to the shortage; as the price rises the quantity demanded will increase and the quantity supplied will decrease.
28) Auctions in recent years have resulted in higher prices paid for letters written by John Wilkes Booth than those written by Abraham Lincoln. Which of the following events would cause the price differences in these letters to get smaller?
A) The demand for Lincoln letters increases and the supply of Booth letters increases.
B) The demand for Lincoln letters decreases and the demand for Booth letters increases.
C) The supply of Lincoln letters increases.
D) The demand for Booth letters decreases.
29) Let D= demand, S = supply, P = equilibrium price, Q= equilibrium quantity. What happens in the market for walnuts if the Centers for Disease Control and Prevention announces that consuming a half cup of walnuts each week helps to lower bad levels of cholesterol?
A) D no change, S increases, P decreases, Q decreases
B) D increases, S no change, P and Q increase
C) D and S increase, P and Q decrease
D) S increases, D no change, P decreases, Q increases
30) In 2004, hurricanes destroyed a large portion of Florida’s orange and grapefruit crops. In the market for citrus fruit
A) the supply curve shifted to the right resulting in an increase in the equilibrium price.
B) the demand curve shifted to the right resulting in an increase in the equilibrium price.
C) the supply curve shifted to the left resulting in an increase in the equilibrium price.
D) the demand curve shifted to the left resulting in a decrease in the equilibrium price.
31) Which of the following would cause both the equilibrium price and equilibrium quantity of cotton (assume that cotton is a normal good) to increase?
A) a drought that sharply reduces cotton output
B) unusually good weather that results in a bumper crop of cotton
C) a decrease in consumer income
D) an increase in consumer income
32) In recent years the cost of producing organic produce in the U.S. has decreased largely due technological advancement. At the same time, more and more Americans prefer organic produce over conventional produce. Which of the following best explains the effect of these events in the organic produce market?
A) Both the supply and demand curves have shifted to the right. As a result, there has been an increase in both the equilibrium price and the equilibrium quantity.
B) The supply curve has shifted to the left and the demand curve has shifted to the right. As a result, there has been an increase in the equilibrium price and an uncertain effect on the equilibrium quantity.
C) The supply curve has shifted to the left and the demand curve has shifted to the right. As a result there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price.
D) Both the supply and demand curves have shifted to the right. As a result, there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price.
33) An increase in the demand for lobster due to changes in consumer tastes, accompanied by a decrease in the supply of lobster as a result bad weather reducing the number of fishermen trapping lobster, will result in
A) an increase in the equilibrium price of lobster and no change in the equilibrium quantity.
B) a decrease in the equilibrium quantity of lobster and no change in the equilibrium price.
C) a decrease in the equilibrium quantity of lobster; the equilibrium price may increase or decrease.
D) an increase in the equilibrium price of lobster; the equilibrium quantity may increase or decrease.
