Question

1) Which of the following statements is true?

• A. A change in the market price can only shift the demand curve.
• B. A decrease in supply causes equilibrium price to rise; the increase in price then results in a decrease in demand.
• C. If both demand and supply increase there must be an increase in equilibrium price; equilibrium quantity may either increase or decrease.
• D. If demand decreases and supply increases one cannot determine if equilibrium price will increase or decrease without knowing which change is greater.
• E. An increase in demand causes a change in equilibrium price; the change in price does not cause a further change in demand or supply.

2)

Two researchers estimated how the price elasticity of demand for coal in China has changed from 1998 to 2012. Without reading their peer-reviewed paper, can you predict their findings?

• A. Yes, price elasticity of demand became more elastic over time.
• B. Yes, price elasticity of demand became less elastic over time.
• C. Yes, price elasticity of demand became less elastic as coal has more substitutes.
• D. No, without knowing the initial elasticity classification we are unable to determine how elasticity changed.

3) Since November 2016, Arabica coffee bean prices have continually fallen. Brazil is the world's leading producer of Arabica beans. What would happen in the labor market for Brazilian coffee bean farmers.

• A. Labor demand shifts rightward due to increased human capital resulting in a higher marginal revenue product (MRP). Equilibrium wage and equilibrium quantity of labor both increase.
• B. Labor supply shifts rightward due to increased population. Equilibrium wage decreases and equilibrium quantity of labor increases.
• C. Labor demand shifts leftward due to decreased inputs resulting in a lower marginal revenue product (MRP). Equilibrium wage and equilibrium quantity of labor both decrease.
• D. Labor supply shifts leftward due to a change in demographics. Equilibrium wage increases and equilibrium quantity of labor decreases.
• E. Labor demand shifts leftward due to decreased prices resulting in a lower marginal revenue product (MRP). Equilibrium wage and equilibrium quantity of labor both decrease.

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Use for 4-5

	Chinese Yen to (one) USD	USD to (one) Chinese Yen
FEb 2018	6.3183	.1583
Nov 2018	6.9367	.1442

4) (TABLE)

According to the table above, from February 2018 to November 2018 the U.S. dollar has ________ in value compared to the Chinese yuan and the Chinese yuan has ________ compared with the U.S. dollar which is ________ with the United States increasing tariffs on imports from China.

• A. appreciated; depreciated; consistent
• B. appreciated; depreciated; inconsistent
• C. depreciated; appreciated; consistent
• D. depreciated; appreciated; inconsistent
• E. appreciated; appreciated; consistent

5) (TABLE)

Ceteris paribus, IF the U.S. dollar appreciates relative to the Chinese yuan, then tourists from China are ________ likely to visit the U.S., Chinese exports will ________, Chinese imports will ________, and Chinese net exports will ________.

• A. less; increase; decrease; decrease
• B. less; decrease; increase; increase
• C. more; decrease; increase; increase
• D. less; increase; decrease; increase
• E. None of the above.

Answer 1

1) Which of the following statements is true?

C. If both demand and supply increase there must be an increase in equilibrium price; equilibrium quantity may either increase or decrease.

Explanation: Rise in demand puts upward pressure on price. Rise in supply puts downward pressure on price. Net effect is ambiguous.

2) Two researchers estimated how the price elasticity of demand for coal in China has changed from 1998 to 2012. Without reading their peer-reviewed paper, can you predict their findings?

A. Yes, price elasticity of demand became more elastic over time.
Explanation: demand is more elastic over a large period of time. Moreover, other substitutes for coal (as fuel) have been found.

3) Since November 2016, Arabica coffee bean prices have continually fallen. Brazil is the world's leading producer of Arabica beans. What would happen in the labor market for Brazilian coffee bean farmers.
E. Labor demand shifts leftward due to decreased prices resulting in a lower marginal revenue product (MRP). Equilibrium wage and equilibrium quantity of labor both decrease.

Explanation: Labor demand is derived demand. hence fall in demand for final product would reduce demand for the farmers.

5) (TABLE)

Ceteris paribus, IF the U.S. dollar appreciates relative to the Chinese yuan, then tourists from China are ________ likely to visit the U.S., Chinese exports will ________, Chinese imports will ________, and Chinese net exports will ________.
D. less; increase; decrease; increase

Explanation: Since US would be more expensive, less tourists would visit. US would find it cheaper to import from China so Chinese exports will increase. Since US exports are more expensive, Chinese imports will decrease. As a result, Chine net exports will increase.