Question

Which of the following is most likely to shift the demand curve for electricity to the left?

	a.	consumers becoming more energy conscious.
	b.	an increase in income.
	c.	a decrease in the price of electricity.
	d.	an increase in the price of natural gas, a substitute source of energy.

Sugar and honey are viewed as substitutes for each other in many cooking applications. If the price of sugar rises, we would expect the:

	a.	demand for honey to increase.
	b.	demand for honey to decrease.
	c.	quantity demanded of honey to decrease.
	d.	price of honey to decrease.

The long-run equilibrium condition for perfect competition is:

	a.	P = AVC = MR = MC.
	b.	P = ATC = MR = MC.
	c.	Q = AVC = MR = MC.
	d.	Q = ATC = MR = MC.

Exhibit 4-11 Data on supply and demand Bushels demanded per month Price per bushel Bushels supplied per month 45 $5 77 50   4 73 56   3 68 61   2 61 67   1 57

In Exhibit 4-11, the equilibrium price per bushel of wheat is: a. $1. b. $2. c. $3. d. $4.

Answer 1

1.

a.consumers becoming more energy conscious.

Explanation :

When demand decreases, demand shift to the left. So when people becomes more conscious about electricity, they use less energy thus demand curve will shift to the left. When people income increases, demand curve shifts to the right. When there is increase in price, quantity demanded reduced. When price of natural gas increases, as it is substitute demand for electricity increases.

2.

a.demand for honey to increase

Explanation : when two goods are substitute they are use in the place of each other. Thus when price of one good increases, quantity demanded for that good decreases and people will use another good so demand for another good increases. Here when price of sugar increases, thus quantity demanded for sugar will decrease and demand for honey increase.

3.

b.P = ATC = MR = MC

Explanation :

In long run, perfectly competitive firm earns zero economic profit. Thus price =ATC. And firms maximise its profit where MR equals MC. And thus. Price =ATC =MC =MR.

4.

b.$2.

Explanation : equilibrium quantity is where demand and supply are equal. So here at price 2 demand and supply for bushel of wheat equals.