Question

1. Which of the following will shift the demand curve for a good?

A change in the cost of materials used to make the good

None of these answers

A change in the price of the good

A change in per unit taxes on sellers

A change in the technology used in producing the good

2) Suppose consumer incomes decrease. In the market for a normal good, at the original equilibrium price this would create:

Excess supply

An increase in production

A decrease in production

Excess demand

3. Suppose a market is characterized by consumers waiting in long lines and persistent shortages of the good. This is most likely the result of which government action?

A decrease in taxes on the good

The setting of a price floor

An increase in taxes on the good

The setting of a price ceiling

4)Wood is an important material in the production of housing. What would happen to the equilibrium price and quantity of houses if wood prices drastically increased?

Group of answer choices

Prices will increase, Quantity will increase

Prices will increase, Quantity will decrease

Prices will decrease, Quantity will increase

Prices will decrease, Quantity will decrease

5)Suppose the equilibrium price in a market is $5.00 per unit. Which of the following would be an example of a non-binding price ceiling?

Group of answer choices

A law preventing sellers from charging less than $4.00

A law preventing sellers from charging more than $4.00

A law preventing sellers from charging less than $6.00

A law preventing sellers from charging more than $6.00

6)Suppose a binding price floor is placed on the sale of DVDs. Which of the following would you expect to see in the market for DVDs?

Group of answer choices

Consumers will wait in long lines in order to purchase the DVDs

The quality of the DVD and service provided by sellers may increase

Some consumers will buy the good at the legal price and then resell the DVD in the black market.

Consumers will bribe store owners for the right to buy DVDs.

7)Tim, Cindy, Fred, and Joe are shopping at Walmart for sweatpants. The most each is willing to pay is $10, $13, $7, and $22. If the actual price of sweatpants is $12, how much consumer surplus is created?

Group of answer choices

$17

$7

$11

$35

8)Suppose the government increases taxes on sales of milk. This will lead to

Group of answer choices

A decrease in demand

An increase in demand

A decrease in quantity demanded

An increase in supply

9) Suppose a market has the following points on its demand curve:

Price      70           65           60           55           50           45           40

QandD 0               10           20           30           40           50           60

     

Assuming the price is $50, how much consumer surplus exists in this market?

Group of answer choices

1000

400

50

500

Answer 1

Ans 1. Option b

Change in technology, change in cost of inputs and change in tax on seller leads to change in supply of the good.

Change in price of fhe good leads to movement along the demand curve and not shifting in demand curve.

Ans 2. Option  d

Increase in consumer income increases demand for the good at each price level which at a given supply of the good creates shortage of the good.

Ans 3. Option d

A price ceiling below the market clearing price leads to fall in quantity supplied but rise in quantity demanded of the good causing shortage of the good in the market giving rise to lines and long waiting periods.

Ans. Option b

Increase in price of wood increases the cost of production of houses leading to decrease in their supply which at given demand for houses creates a shortage in the market leading to increase in price which pushes some buyers out of the market decreasing the equilibrium quantity.

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