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Homework answers / question archive / University of Waterloo MICROECONO AFM101 Chapter 3A 1)A decrease in the demand for sports cars together with an increase in the supply of sports cars brings a of sports cars at the original price and a in their price
University of Waterloo
MICROECONO AFM101
Chapter 3A
1)A decrease in the demand for sports cars together with an increase in the supply of sports cars brings a of sports cars at the original price and a in their price.
A. Surplus; rise
B. Surplus; fall
C. Shortage; fall
D. shortage; rise
2) The figure shows the demand curve for amusement park tickets. Complete the following sentences.
If the price of an amusement park ticket rises from $40 to $60, while all other influences on buying plans are unchanged, the quantity of amusement park tickets demanded .
A. decreases
B. increases
C. does not change
3) If, as the price of a taxi ride decreases, the quantity of bus rides that people buy decreases, then taxi rides and bus rides are .
A. complements
B. inferior goods
C. substitutes
D. normal goods
4) The figure shows the supply curve of printers.
If the price of a printer falls from $40 to $20, while all other influences on selling plans are unchanged, the quantity of printers supplied .
E. decreases from 12 million to 6 million
F. increases from 6 million to 12 million
G. decreases by an unknown amount
H. increases by an unknown amount
5) A decrease in the supply of sports cars brings a of sports cars at the original price and a
in their price.
A. surplus; fall
B. shortage; fall
C. surplus; rise
D. shortage; rise
6) Draw a demand curve for football tickets labelled D1 and a supply curve of football tickets labelled
S. Use and prices and quantities you wish but make your demand and supply curves obey the laws of demand and supply. Draw a point to indicate the equilibrium price and equilibrium quantity.
The equilibrium quantity .
A. is the quantity supplied at the equilibrium price, but not necessarily the quantity demanded.
B. Is the quantity demanded at the equilibrium price, but not necessarily the quantity sold
C. Is any quantity at which the quantity supplied is greateer than or equal to the quantity demanded
D. And equilibrium price are determined at the intersection of the supply curve and the demand curve.
4) Complete the following sentences.
Bottled water and health club memberships are .
A. substitutes
B. complements in production
C. complements
D. substitutes in production
French fries and baked potatoes are .
A. substitutes but not substitutes in production
B. complements but not complements in production
C. substitutes or substitutes in production
D. complements or complements in production
5) If as the price of a sports car increases, the quantity of sedans that firms plan to sell decreases, then sport cars and sedans are .
A. complements in production
B. inferior goods
C. substitutes in production
D. normal goods
6) The figure shows the demand curve for tacos. Suppose that the price of a taco falls but all other influences on buyers' plans remain the same.
Show the effect in the graph. Draw either an arrow on the demand curve showing the direction of change or a new demand curve.
If the price of a taco falls, a the demand curve occurs. If any factor that influences buying plans other than the price changes, then a the demand curve occurs.
A. movement downdown along; shift of
B. movement up along; shift of
C. rightward shift of; movement downdown along
D. leftward shift of; movement up along
7) American to cut flights, charge for luggage
American Airlines announced yesterday that it will begin charging passengers $15 for their first piece of checked luggage, in addition to raising other fees and cutting domestic flights as it grapples
with record-high fuel prices.
Source: Boston Herald,May 22, 2008 What is the influence on the supply of American Airlines flights?
The news clip illustrates a change in the supply of flights when it reports that American Airlines is .
A. cutting the number of flights with no mention of a change in the airfare
B. charging $15 to check a bag so that it can cut the number of flights
C. charging $15 for a checked bag, which will cut the number of air travelers
D. paying more for fuel and charging people to check a bag
8) Complete the following. In the market for chocolate bars, the supply of chocolate bars will decrease if .
A. the number of chocolate manufacturers decreases
B. the price of cocoa decreases
C. price of a chocolate bar decreases
D. the future expected price of a chocolate bar decreases
9) Oil Price Soars to $135
The price of oil hit a record high above $135 a barrel in May 2008long dash—more
than twice what it cost the year before. OPEC has so far blamed price rises on speculators and says there is no shortage of oil.
BBC News
Complete the following sentences.
The price of oil rises if the demand for oil and the supply of oil .
A. decreases; decreases
B. decreases; increases
C. increases; increases
D. increases; decreases
A shortage in the market for oil implies that .
A. more people are traveling
B. the market for oil needs government action
C. the price of oil is being prevented from influencing buying and selling plans
D. the market for oil is a competitive market
10) Oil soars to new record over $135
The price of oil hit a record high above $135 a barrel in May 2008long dash—more
than twice what it cost the year before. OPEC has so far blamed price rises on speculators and says there is no shortage of oil.
BBC News
Complete the following sentence.
If OPEC is correct, the price change could have occurred as a result of demand changing because
of in the expected price of oil and supply changing because of in the expected price of oil.
A. a decrease; a decrease
B. an increase; an increase
C. a decrease; an increase
D. an increase; a decrease
11) Taking a smartphone to the gym when you work out becomes less popular. What is the result of this event? As a result, .
A. the quantity of smartphones demanded decreases
B. the demand for smartphones decreases
C. the demand for smartphones increases
D. the quantity of smartphones demanded increases
12) Given the demand and supply curves in the graph, draw a point at the equilibrium price and equilibrium quantity. The equilibrium price is .
A. 2.5 million tabletstablets
B. $300.00 per tablet
C. unknown because we don't know the number of tablets actually sold
D. $300.00times×2.5 million tablets
13) Complete the following sentence. If, as Adrienne's income increases, herdemand for TVs increases, then for Adrienne, TVs are .
A. a normal good
B. a complement
C. a substitute
D. an inferior good
14) The graph shows the market for computers. Draw a point at the equilibrium price and equilibrium quantity of computers. Label it 1.
Draw a new demand curve that shows what happens in the market for computers if the price of a printer rises. Label it D1.
Draw a new supply curve that shows fewer firms in the computer market. Label it S1. Draw a point at the new equilibrium price and equilibrium quantity of computers. Label it 2.
15) The graph shows the market for tablets. Draw a horizontal line at a price at which there is a surplus of tablets. Label it Price. Draw an arrow that shows the amount of the surplus.
A surplus occurs at a given price when . The price to reach equilibrium.
A. supply is greater than demand; falls
B. demand is greater than supply; rises
C. the quantity demanded is greater than the quantity supplied; rises
D. the quantity supplied is greater than the quantity demanded; falls
16) Producers of smartphones expect the price of a factor of production used to produce a smartphone to rise and the number of firms producing and selling smartphones to decrease. You predict that the price of a smartphone will and the quantity of smartphones bought will .
A. same either rise, fall, or remain the same; increase B. rise; decrease
C. fall; increase, decrease or remain the same
D. either rise, fall, or remain the same decrease
17) The market for bananas is a competitive market .
A. only if the market where bananas are sold is a physical place
B. if many people buy bananas comma but only a few firms sell bananas
C. only if the market where bananas are sold consists of people spread around the world who never meet
D. if many people buy and many firms sell bananas, so no single buyer or seller can influence the price
18) Draw a supply curve for sweaters and label it.
Use any prices and quantities you wish but make your supply curve obey the law of supply. The law of supply states that other things remaining the same, the higher the price of a good, the ; and the lower the price of a good, the .
A. smaller is the supply; greater is the supply
B. smaller is the quantity supplied; greater is the quantity supplied
C. greater is the quantity supplied; smaller is the quantity supplied
D. greater is the supply; smaller is the supply
19) Draw a demand curve for lattes and label the curve.
Use any prices and quantities you wish, but make your demand curve obey the law of demand. The law of demand states that , the the price of a good, the smaller is the quantity demanded.
A. even when other factors change; higher
B. other things remaining the same; lower
C. other things remaining the same; higher
D. even when other factors change; lower
20) A decrease in the demand for T-shirts brings a of T-shirts at the original price and the market price will .
A. surplus; rise
B. surplus; fall
C. shortage; rise
D. shortage; fall
21) A relative price is .
A. what you get paid for babysitting your cousin
B. equal to a money price
C. the ratio of one money price to another
D. the price that you pay for two goods that you use simultaneously, like coffee and cream
Chapter 3 B
1) Eurostar boosted by Da Vinci Code
Eurostar, the train service linking London to Paris, said that its sales for the first-half of 2006 rose 6 percent, boosted by devotees of the blockbuster Da Vinci Code movie.
Source: CNN, July 26, 2006
Complete the following sentences.
Da Vinci Code fans helped to raise Eurostar's sales because they between London and Paris.
A. increased the supply of travel
B. increased the demand for travel
C. paid for Eurostar travel using foreign currency
D. prefer train travel over air travel
CNN commented on the "fierce competition from budget airlines." This competition decreases the Eurostar travel because Eurostar and budget airlines are .
A. supply of; substitutes in production
B. supply of; substitutes
C. demand for; substitutes in production
D. demand for; substitutes
Da Vinci Code fans in Paris increased the travel in Paris and increased the restaurant meals and hotel rooms.
A. demand for; demand for
B. demand for; supply of
C. supply of; supply of
D. supply of; demand for
2) If the price of a movie ticketmovie ticket is $10, 4 million movie ticketsmovie tickets a year are bought. Draw a point at this combination of price and quantity. If the price of a movie ticket falls to $2, 8 million movie tickets are bought.
Draw a point at this combination of price and quantity.
Draw a demand curve for movie tickets that is consistent with this information. Label the curve.
3) The graph shows the market for computers Draw a point at the market equilibrium. Label it 1.
Draw a demand curve that shows what happens if the price of a printerprinter
falls. Label the curve
D1.
Draw a supply curve that shows the effect of a technological advance that cuts the cost of producing computerscomputers.
Label it
S1.
Draw a point at the new market equilibrium. Label it 2.
If demand and supply change in the same direction, we the direction of change of the equilibrium quantity and we the direction of change of the equilibrium price.
A.
can predict; cannot predict This is the correct answer.
B.
cannot predict; cannot predict C.
can predict; can predict D.
cannot predict; can predict
4) Complete the following sentence. An increase in the demand for computers brings a
in the price of a computer and in the quantity of computers supplied.
A. fall; a decrease
B. rise; an increase
This is the correct answer.
C. rise; a decrease
D. fall; an increase
5) Complete the following sentence.A decrease in the price of fish fillets,
a complement in production of fish oil, will the equilibrium price of fish oil and the equilibrium quantity of fish oil.
A.decrease; increase B.decrease; decrease C. increase; decrease
This is the correct answer.
D.increase; increase
6) Complete the following sentences. Leather purses and leather shoes are . A.
substitutes in production This is the correct answer. B.
complements but not substitutes in production C.
substitutes D.
complements in production
SUVs and pickup trucks are . A.
complements or complements in production B.
complements but not complements in production C.
substitutes but not substitutes in production
D.
substitutes or substitutes in production
7) The graph shows the supply curve of sweaterssweaters.
Draw a new supply curve that shows what happens in the market for sweaters if the number of suppliers of sweaters decreases
but all other influences on selling plans remain the same. Label the curve.
Use any prices and quantities you wish, but make your supply curve obey the law of supply.
8) The table gives the demand and supply schedules for batteries.
Suppose that demand increases by 100 batteries a day and supply decreases by 50 batteries a day.
What is the new equilibrium price of a battery and what is the new equilibrium quantity of batteries? The new equilibrium price is
$ 4.00 per battery.
The new equilibrium quantity is batteries per day.
9) The graph illustrates the market for jackets.
Suppose the current price of a jacket is $40 and 4 million jackets a year are bought. What do you predict will happen to the price of a jacket?
A. The shortage of jackets forces the price up.
This is the correct answer.
B. The price will not change because neither a shortage nor a surplus occurs.
C. It is impossible to say what will happen to the price of a jacket.
D. The surplus of jackets forces the price downdown.
10) A laptop is a normal good.
If the population increases, you predict that the demand for laptops
..
A. will remain unchanged
B. will increase
This is the correct answer.
C. will decrease
D. might increase, decrease, or remain unchanged
11) The table gives the demand schedule and the supply schedule for smoothies. What is the equilibrium quantity of smoothies per day?
The equilibrium quantity of smoothies is 650 a day.
12) We observe a rise in the price of orange juice
and a decrease in the quantity of orange juice that producers sell. The most likely explanation is that .
A. juice firms should produce less orange juice
B. the law of demand applies to orange juice but the law of supply does not
C. the supply curve is downward sloping
D. the law of supply applies to orange juice, but some other influence on selling plans decreased
the supply of orange juice.
13) The money price of a can of shave gel is $2.75, and the relative price of a can of shave gel in terms of bananas is 5.00 kilograms of bananas
per can of shave ge.
What is the money price of a kilogram of bananas? The money price of a kilogram of bananas is .
A. the opportunity cost of a can of shave gel
B. $2.75
C the opportunity cost of a kilogram of bananas
D. $0.55
14) The table gives the demand schedule and the supply schedule for smoothies. What is the equilibrium price of a smoothie?
The equilibrium price is $ 5 a smoothie.
15) If the price of a calculator is $6,16 million calculators a year are supplied. Draw a point at this combination of price and quantity.
If the price of a calculator falls to $1, 4 million calculators are supplied. Draw a point at this combination of price and quantity.
Draw a supply curve for calculators that is consistent with this information. Label the curve. Along the supply curve, .
A. the quantity supplied increases as the price rises because the prices of
substitutes in production also rise
B. the quantity supplied increases as the price rises because the expected future price also rises
C. the quantity supplied increases as the price rises because technology advances
D. the price changes but all other influences on producers' planned sales remain the same
16) Choose the correct statements about competitive markets.
1. A competitive market is a market for services but not for goods.
2. A competitive market is a market for goods but not for services.
3. A competitive market has many sellers.
4. Competitive markets exist for goods, services, money, factors of production, and inputs.
A. Statements 3 and 4 are correct. This is the correct answer.
B. Statements 1 and 2 are correct.
C. Statements 1 and 4 are correct.
D. Statements 2 and 3 are correct.
17) Ramen noodles and rice are substitutes.
If the price of ramen noodles decreases, how does the demand for rice change? If the price of ramen noodles decreases, the demand for rice will .
A. not change, but there will be a movement along the demand curve for rice
B. increase or decrease, but the demand for ramen noodles will not change C. decrease, and the demand curve for rice will shift leftward This is the correct answer.
D.increase, and the demand curve for rice will shift rightward
18) The graph illustrates the market for tea. The initial equilibrium is at point After one or more changes, the new equilibrium moves to point
You predict that the market for tea was most likely influenced by .
A. a fall in the wage rate and many tea drinkers switch to coffee
B. a rise in household income and a rise in the wage rate paid to tea pickers C. a rise in household income and a rise in the number of plantations This is the correct answer.
E. a fall in the number of tea drinkers and a rise in the number of plantations
19) The figure shows the supply curve of sundaes.
Draw an arrow to show what happens to firms' plans if the price of a sundae rises but all other influences on selling plans remain the same.If the price of sundae rises, a the supply curve occurs.
If any factor that influences selling plans other than the price changes, then a the supply curve
occurs.
A. movement up along; shift of This is the correct answer.
B. leftward shift of; movement up along
C. rightward shift of; movement downdown along
D. movement downdown along; shift of
20) Complete the following sentence.
If the price of a smartphone falls, with all other influences on buying plans remaining the same, in the market for smartphones .
A. the demand for smartphones increases
B. the demand for smartphones decreases
C. the quantity of smartphones demanded increases This is the correct answer.
D. the quantity of smartphones demanded decreases
21) Luxury car makers announce a rise in next year's price of a luxury car announce a rise in next year's price of a luxury car
and an increase in the ease in which credit can be obtained.
What do you predict will happen to the demand for luxury cars today? You predict that the demand for luxury cars today .
A. will decrease
B. will increase
This is the correct answer.
C. will not change
D. might increase comma decrease comma or remain the same
22) Complete the following sentences. Diet coke and regular coke are . A.
substitutes for consumers and substitutes in production for producers This is the correct answer.
B.
substitutes for consumers but not substitutes in production for producers C.
complements for producers but not complements in production for producers D.
complements for consumers and complements in production for producers
Low-fat milk and cream are .
A.
complements in production for a dairy and substititues for consumers This is the correct answer.
B.
complements for consumers but not complements for a dairy farmer C.
substitutes for consumers and substitutes for a dairy farmer D.
substitutes in production for a dairy and complements for consumers
23) Paula graduates from college and her income increases by $40,000 a year. Nothing else changes. Paula decreases the quantity of donuts and pretzels that she buys and increases the quantity of coffee that she buys.
For Paula,
.
A.
donuts and pretzels are normal goodsdonuts and pretzels are normal goods
B.
coffee is a normal goodcoffee is a normal good This is the correct answer.
C.
coffee and pretzels are normal goodscoffee and pretzels are normal goods D.
donuts and coffee have become substitutes
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