Question 1: The annual Supply and demand for the Paper Firm is given by:
QS = 100P - 5000
and
QD = 0.5 I + 0.2 A - 100P + 5000
where Q is the quantity per year, P is price, I is income per household, and A is advertising expenditure.
a. If A = $10,000 and I = $25,000, what is the demand curve?
b. Plot the demand curve found in part a with the supply curve, then use the graph to find the equilibrium price and quantity.
c. If consumer incomes increase to $30,000, what will be the new equilibrium price and the new equilibrium quantity?
Question 2. What will be the effect on the demand curve, and what will happen to market equilibrium price and quantity in the short run if, Consumers expect that the price of the good will be higher in the future.
- Demand increases ; equilibrium price and quantity increase.
- Demand increases; equilibrium price decreases and quantity increases.
- Demand decreases; equilibrium price and quantity fall.
- Demand increases; equilibrium price and quantity remain unchanged.
- This is a movement along the demand curve, and the quantity demanded will decrease
Question 3. From 2001 to 2004, the real price of eggs decreased and the total annual consumption of eggs decreased. Which of the following would cause an unambiguous decrease in the real price of eggs and an unambiguous decrease in the quantity of eggs consumed?
- A shift to the right in the supply curve for eggs and a shift to the right in the demand curve for eggs.
- A shift to the left in the supply curve for eggs and a shift to the right in the demand curve for eggs.
- A shift to the left in the supply curve for eggs and a shift to the left in the demand curve for eggs.
- None of the above.
Question 4. Industry supply and demand are given by: QD = 1000 - 2P and QS = 3P. At a price of $100, will there be a shortage or a surplus, and how large will it be?
- There will be a surplus of 100
- There will be a shortage of 300
- There will be a shortage of 500
- There will be a surplus of 800
- There will be a surplus of 600
- None of the above
Question 5. Holding all else equal, if supply increases, the:
- equilibrium price will decrease while the quantity produced and sold could increase, decrease or remain constant.
- quantity produced and sold will increase while the equilibrium price could increase, decrease, or remain constant.
- equilibrium price will increase while the quantity produced and sold could increase, decrease or remain constant.
- none of these.
Question 6: From 2000 to 2010, the real price of a college education increased, and total enrollment increased. Which of the following could have caused this increase in price and enrollment?
- A shift to the right in the supply curve for college education and a shift to the left in the demand curve for college education.
- A shift to the left in the supply curve for college education and a shift to the right in the demand curve for college education.
- A shift to the left in the supply curve for college education and a shift to the left in the demand curve for college education.
- None of the above.
Question 7: What will be the effect on the demand curve, and what will happen to market equilibrium price and quantity in the short run if the price of the product rises?
- This is a movement along the demand curve, and the quantity demanded will decrease.
- Demand decreases; equilibrium price and quantity increase.
- Demand decreases; equilibrium price and quantity fall.
- Demand increases; equilibrium price falls and quantity increases.
- Demand decreases; equilibrium price falls and quantity increases.
Question 8: What will be the effect on the demand curve, and what will happen to market equilibrium price and quantity in the short run if, a medical report is published showing that this product is hazardous to your health?
- Demand decreases; equilibrium price and quantity fall.
- Demand increases; equilibrium price and quantity increase.
- Demand decreases; equilibrium price and quantity remains the same.
- Demand increases; equilibrium price falls and quantity increases.
- This is a movement along the demand curve, and the quantity demanded will decrease.
Question 9: What will be the effect on the demand curve, and what will happen to market equilibrium price and quantity in the short run if, the price of a substitute good rises.
- This is a movement along the demand curve, and the quantity demanded will remain the same
- Demand increases; equilibrium price and quantity increase.
- Demand decreases; equilibrium price and quantity fall.
- Demand decreases; equilibrium price remains the same and quantity increases.
- Demand remains constant; equilibrium price and quantity fall.
- This is a movement along the demand curve, and the quantity demanded will decrease.
Question 10: PetroChemical engineers can vary the mix of gasoline versus diesel fuel derived from a barrel of oil. If the price of diesel fuel increases relative to the price of gasoline:
- supply of gasoline will shift to the right.
- supply of gasoline will shift to the left.
- supply of both diesel fuel and gasoline will shift, but in opposite directions.
- supply of diesel fuel will shift to the right.
- None of these
Question 11: What will be the effect on the supply curve, and what will happen to market equilibrium price and quantity in the short run, if: the price of the product falls?
- Supply decreases; equilibrium price rises and quantity falls.
- Supply increases; equilibrium price falls and quantity rises.
- This is a movement along the supply curve, and the quantity supplied will decrease.
- Supply remains the same; equilibrium price falls and quantity rises.
Question 12: What will be the effect on the demand curve, and what will happen to market equilibrium price and quantity in the short run if, Consumer incomes fall, and the good is inferior.
- Demand decreases; equilibrium price and quantity remain the same.
- Demand increases; equilibrium price decreases and quantity increases.
- Demand decreases; equilibrium price and quantity fall.
- Demand increases; equilibrium price and quantity increase.
- This is a movement along the demand curve, and the quantity demanded will decrease.
Question 13: What will be the effect on the supply curve, and what will happen to market equilibrium price and quantity in the short run, if: there is an improvement in technology.
- Supply decreases; equilibrium price rises and quantity falls.
- Supply increases; equilibrium price falls and quantity rises.
- This is a movement along the supply curve, and the quantity supplied will decrease.
- Supply remains the same; equilibrium price rises and quantity rises.
Question 14: What will be the effect on the supply curve, and what will happen to market equilibrium price and quantity in the short run, if: Wages of workers in this industry fall?
- Supply decreases; equilibrium price rises and quantity falls.
- Supply increases; equilibrium price falls and quantity rises.
- This is a movement along the supply curve, and the quantity supplied will decrease.
- Supply remains the same; equilibrium price falls and quantity rises.
Question 15: What will be the effect on the demand curve, and what will happen to market equilibrium price and quantity in the short run if, Consumer incomes fall, and the good is normal.
- Demand increases ; equilibrium price falls and quantity increases.
- Demand increases; equilibrium price and quantity increase.
- Demand decreases; equilibrium price and quantity fall.
- Demand increases; equilibrium price and quantity increase.
- This is a movement along the demand curve, and the quantity demanded will decrease.
Question 16: Industry supply and demand are given by: QD = 1000 - 2P and QS = 3P. At a price of $300, will there be a shortage or a surplus, and how large will it be?
- There will be a surplus of 100
- There will be a shortage of 300
- There will be a shortage of 500
- There will be a surplus of 800
- None of the above