ECO 203/204
HOMEWORK 3

1.      If the demand curve for wheat is negatively sloped, an increase in its supply will:

        a.      lower the equilibrium price
        b.      raise the equilibrium price
        c.      decrease the equilibrium quantity
        d.      stimulate technological change

2.      The market price of video recorders will rise if:

        a.      reading becomes more popular
        b.      supply increases
        c.      technology advances
        d.      imports are prohibited
        e.      consumers substitute towards cable TV

3.      When falling income causes the demand for a good to grow, it is an:

        a.      inferior good
        b.      expensive biological necessity
        c.      unnecessary luxury good
        d.      excessive complementary good
        e.      ideal substitute

4.      Increase in the sales of a good as a result of a price cut is an increase in:

        a.      demand
        b.      quantity demanded
        c.      supply
        d.      quantity supplied

5.      Shortages occur when the market price:

        a.      most greatly exceeds the average person's demand price
        b.      is above the typical seller's supply price
        c.      equals production costs plus the maximum possible profit
        d.      lies below the equilibrium price
        e.      is set by government to insure that supply exceeds demand

6.      The Yale Corporation was willing to sell 1800 vegetable mashers at $37 per unit, but is 
        now willing to sell 7400 units at a price of $30.  This is most compatible with Yale 
        experiencing a:

        a.      technological advance
        b.      labor strike that drove up wage costs
        c.      successful advertising campaign
        d.      bad rating from Consumer Reports
 
7.      Even if individual households' demand curves did not shift, the market demand for butter 
        would rise if there were an increase in:

        a.      the price of margarine
        b.      people's preferences for butter
        c.      population
        d.      household income

8.      Long term price ceilings are likely to cause:

        a.      shortages
        b.      queues
        c.      black markets and corruption
        d.      economic inefficiency
        e.      all of the above

9.      Reduced airline bookings following a series of commercial air disasters indicates:

        a.      a reduction in the quantity of airline travel demanded
        b.      a reduction in the demand for air travel
        c.      irrational behavior on the part of air travelers
        d.      a horizontal demand curve for air travel

10.     If the supply and demand for a product both increase, the:

        a.      price will rise
        b.      quantity will increase
        c.      price will remain stable
        d.      profits of competitors will increase
        e.      welfare of society rises

11.     Increased demand for beer would be most likely to follow a drop in the:

        a.      price of wine
        b.      price of ale
        c.      price of hard liquor
        d.      legal drinking age

12.     For normal goods and luxuries, decreases in income tend to cause:

        a.      market prices to rise
        b.      increases in quantities demanded
        c.      declines in demand
        d.      the demand curves to shift to the right