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Exam 3: Supply and Demand

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Question 131

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Good X and good Y are related goods. Holding everything else constant, if the price of X decreases and the demand for Y increases, X and Y are probably:

A) complements.
B) substitutes.
C) inferior.
D) normal.

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Question 132

Multiple Choice

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Use the following to answer questions: Figure: Demand and Supply of Gasoline -(Figure: Demand and Supply of Gasoline) Look at the figure Demand and Supply of Gasoline. A factor that may have changed supply from S₁ to S₂ is:

A) better technology in the production of gasoline.
B) increased demand.
C) lower labor productivity in gasoline production.
D) increased prices of substitutes in production for gasoline.

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Question 133

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How would each of the following events affect the demand for new textbooks? I. The price of a used textbook rises. II. The price of college tuition rises. III. More high school graduates decide to attend college.

Which of the following would result in a movement along the demand curve?

The cost of sensors used in making digital cameras falls, while a successful ad campaign makes digital cameras more fashionable. As a result, the equilibrium price of digital cameras _____ and the equilibrium quantity _____.

Assume that corn is an input in the production of beef but not in the production of pork. Further, beef and pork are substitutes in consumption. A decrease in the price of corn will _____ the supply of beef and _____ the demand for pork.

If the input costs associated with supplying gasoline increases in Wisconsin, the supply of gasoline in Wisconsin will decrease.

If goods A and B are substitutes, a decrease in the price of good B will:

In August 2005, Hurricane Katrina damaged or destroyed oil platforms in the Gulf of Mexico, refineries along the Gulf coast, and the pipeline infrastructure that transports oil and gas to customers across the eastern United States. The winter of 2006 was unusually cold in many parts of the country. How did these events affect the market for natural gas?

An increase in income will always shift the demand curve to the right.

Customers used to pay inside before pumping gas. When gas stations introduced paying at the pump, thus decreasing production costs, there was a shift to the _____ in the _____ curve and _____ pressure on gas prices _____.

Use the following to answer questions: Figure: Shifts in Demand and Supply II -(Figure: Shifts in Demand and Supply II) Look at the figure Shifts in Demand and Supply II. The graph shows how supply and demand might shift in response to specific events. Suppose a drought destroys one-third of the nation's peanut crop. Which panel BEST describes how this will affect the market for peanuts?

An ambiguous change in price and a decrease in quantity are most likely caused by:

Holding all other things constant, if ramen noodles are an inferior good to Vanessa, then as her income increases, her demand curve for ramen noodles:

Given a supply curve that is positively sloped and a demand curve for a normal good that is negatively sloped, an increase in income will most likely result in:

High-fructose corn syrup, which is derived from corn, is an important ingredient in the production of many soft drinks. If the price of corn increases, one would expect:

Use the following to answer questions: Figure: Shifts in Demand and Supply -(Figure: Shifts in Demand and Supply) Look at the figure Shifts in Demand and Supply. The graph shows how supply and demand might shift in response to specific events. Suppose a new machine allows restaurants and fast-food outlets to produce french fries at a lower cost. Which panel BEST describes how this will affect the market for french fries?

The market for lemonade is in equilibrium and the price of lemons rises. In the lemonade market _____ will _____, _____ the price and _____ the quantity.

Use the following to answer questions: Figure: The DVD Rental Market -(Figure: The DVD Rental Market) Look at the figure The DVD Rental Market. At a rental price of $6, there will be:

Use the following to answer questions: Figure: Shifts in Demand and Supply IV -(Figure: Shifts in Demand and Supply IV) Look at the figure Shifts in Demand and Supply IV. The figure shows how supply and demand might shift in response to specific events. Suppose the Surgeon General announces that eating chocolate prevents heart disease. Which panel BEST describes how this will affect the market for chocolate?