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Chapter 4

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Department
Economics
Course
ECN 104
Professor
Tsogbadral Galaabaatar
Semester
Winter

Description
Chapter 4 1. Workers at a bicycle assembly plant currently make minimum wage. If the provincial government increases the minimum wage by $1.00 an hour, what will likelyhappen? a. Demand for bicycle assembly workers will increase. b. Supply of bicycles will shift to the right. c. Supply of bicycles will shift to the left. d. The firm must increase output to maintain profit levels. 2. If suppliers expect the price of their product to fall in the future, what will they do? a. decrease supply now b. increase supply now c. increase supply in the future but not now d. nothing, since there is nothing they can do to affect the price in the future 3. Wheat is the main input in the production of flour. If the price of wheat decreases, all else equal, what would we expect? a. the supply of flour to be unaffected b. the supply of flour to decrease c. the supply of flour to increase d. the demand for flour to decrease Figure 4-1 4. Refer to Figure 4-1. What is the movement from S to S c1lled? a. a decrease in supply b. a decrease in quantity supplied c. an increase in supply d. an increase in quantity supplied 5. Refer to Figure 4-1. What could cause the movement from S to S ? 1 a. a decrease in the price of the good b. an improvement in technology c. an increase in income d. an increase in input prices 6. What is the price where quantity supplied equals quantity demanded? a. coordinating price b. monopoly price c. equilibrium price d. balancing point 7. What happens if there is a shortage of a good at the current price? a. Sellers are producing more than buyers wish to buy. b. The market must be in equilibrium. c. The price is below the equilibrium price. d. Quantity demanded equals quantity supplied. Figure 4-2 8. Refer to Figure 4-2. In this market, what would the equilibrium price and quantity be? a. $15 and 400 b. $20 and 600 c. $25 and 500 d. $25 and 800 9. Refer to Figure 4-2. If the price is $25, what would happen? a. There would be a surplus of 300 and the price would fall. b. There would be a surplus of 200 and the price would fall. c. There would be a shortage of 200 and the price would rise. d. There would be a shortage of 300 and the price would rise. 10. Suppose roses are currently selling for $40.00 per dozen. The equilibrium price of roses is $50.00 per dozen. What would we expect? a. a shortage to exist and the market price of roses to increase b. a shortage to exist and the market price of roses to decrease c. a surplus to exist and the market price of roses to increase d. a surplus to exist and the market price of roses to decrease Figure 4-3 11. Refer to Figure 4-3. Which of the four graphs represents the market for peanut butter after a major hurricane hits the peanut-growing area? a. graph A b. graph B c. graph C d. graph D 12. Refer to Figure 4-3. Which of the four graphs represents the market for pizza delivery in a university town in September? a. graph A b. graph B c. graph C d. graph D 13. 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 14. When evaluating differences or similarities between an increase in supply and an increase in quantity supplied, what do we know? a. The former is a shift of the curve and the latter is a movement along the curve. b. The former is a movement along the curve and the latter is a shift of the curve. c. Both are shifts of the supply curve. d. Both are movements along the curve. 15. Suppose that the number of buyers in a market increases and a technological advancement occurs. What would we expect to happen in the market? a. The equilibrium price would increase, but the impact on the amount sold in the market would be ambiguous. b. The equilibrium price would decrease, but the impact on the amount sold in the market would be ambiguous. c. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous. d. Both equilibrium price and equilibrium quantitywould increase. 16. Suppose that the incomes of buyers in a particular market for a normal good decrease and there is alsoa reduction 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 market would be ambiguous. b. The equilibrium price would decrease, but the impact on the amount sold in the market would be ambiguous. c. Both equilibrium price and equilibrium quantitywould increase. d. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous. 17. Suppose that demand decreases AND supply decreases.What would you expect to occur in the market for the good? a. Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous. b. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous. c. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous. d. Both equilibrium price and equilibrium quantitywould increase. 18. Which of the following would result in an increase in equilibrium price and an ambiguous change in equilibrium quantity? a. an increase in supply and demand b. an increase in supply and a decrease in demand c. a decrease in supply and an increase in demand d. a decrease in supply and demand 19. Which of the following would cause both the equilibrium price and equilibrium quantity of number two grade potatoes (an inferior good) to increase? a. an increase in consumer income b. a decrease in consumer income c. greater government restrictions on agricultural chemicals d. fewer government restrictions on agricultural chemicals 20. Beef is a normal good. You observe that both the equilibrium price and quantity of beef has fallen over time. Which of the following would be most consistent with this observation? a. Consumers have experienced an increase in income and beef-production technology has improved. b. The price of chicken has risen and the price of steak sauce has fallen. c. Consumer tastes have changed so as to prefer beef less than before. d. The demand curve for beef must be positively sloped. 21. What a
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