Figure 44 15 100 200 300 400 500 0 700 800 1 Refer to the Fi

Figure 4-4 15 100 200 300 400 500 ?0 700 800 1. Refer to the Figure 4-4. If the price is $25, what would the quantity demanded be? a. 400 b. 500 c, 600 d. 800 Which of the following will definitely cause equilibrium quantity to fall? a. demand increases and supply decreases b. demand and supply both decrease c. demand decreases and supply increases d. demand and supply both increase 2. Suppose that the incomes of buyers in a particular market for a normal good increase and there is also an ncrease in input prices. What would we expect to occur in this market? a. The equilibrium price would increase, but the impact on the amount sold in the markct 3. would be ambiguous. The equilibrium price would decrcase, but the impact on the amount sold in the market would be ambiguous Equilibrium quantity would increase, but the impact on equilibrium price would be am biguous. Equilibrium quantity would decrease, but the impact on equilibrium price would be am biguous. b. c. d. 4. What would happen to the equilibrium price and quantity of pcanut butter if the price of peanuts went up. the price of jelly (a complementary good) increased, fewer firms decided to produce peanut butter, and healt officials announced that eating peanut butter was good for you? a. b. price will rise and the effect on quantity is ambiguous c. quantity will fall and the effect on price is ambiguous d. effect on both price and quantity is ambiguous e will fall and the effoct on quantity is ambiguous 5. What are the signals that guide the allocation of resources in a market cconomy? a laws b. buyers and sellers e. property rights pri?es 6. What is market demand? a. b. c. d. It is a vertical summation of individual demand curves It is a horizontal summation of individual demand curves. It is not responsive to change in tastes and preferences It is determined solely by the number of buyers and sellers in the market. 7. Given a fixed demand curve, which of the following is affected when the price changes? a. income b. tastes c. expectations d. quantity demanded 8. Suppose that scientists find evidence that proves chocolate pudding lowers cholesterol. What would we expect to see? a. no change in the demand for chocolate pudding b. a decrease in the demand for chocolate pudding c- an increase in the demand for chocolate pudding d. a decrease in the supply of chocolate pudding Suppose that Carolyn receives a pay increase. What would we expect? a. b. e. d. 9. Carolyn\'s demand for normal goods to remain unchanged Carolyn\'s demand for inferior goods to decrease Carolyn\'s demand for luxury goods to decrease. Carolyn\'s demand for normal goods to decrease.

Solution

Q1. Answer is b. 500. Q2. Answer is a. Demand decreases and supply decreases. Q3. Answer is a. Equilibrum price would increase; but the impact on amount sold in the market would be ambigous. Q4. Answer is d. effect on both prices and quantity is ambigous. Q5. Answer is d. prices. Q6. Answer is b. It is a Hhorizontal summation of individual demand curve. Q7. Answer is d. Quantity demanded Q8. Answer is c. an increase in demand for chocolate pudding. Q9. Answer is b. Carolyn demand for inferior goods to decrease.