Chapter 3 – Practice Quiz Answers At a price of $15, Marta buys 3 CD’s per month. When the price increases to $20, Marta buys 2 CD’s per month. Luz says that Marta’s demand for CD’s has decreased. Is Luz correct? No, Luz is incorrect. Marta’s quantity demanded has decreased, but her demand has stayed the same. An advance in technology causes a rightward shift in the supply curve. Suppose the government decides that every family should own its own home. To bring this about, the government decides to subsidize the home-construction industry by giving the homeconstruction companies $10,000 for every house that they build. As a result of this, the supply curve of new houses would shift rightward, since builders would be willing to produce and sell more houses at each given price. If demand rises by a lesser amount than supply falls, then equilibrium price falls and equilibrium quantity rises. A rightward shift in the demand curve for tennis balls could be caused by a fall in the price of tennis rackets. Refer question: Q1 doctors are employed at F1 fee. In the market for good X there are three buyers, Adam, Bill, and Carolyn. Adam buys 3 units of good X at $4, Bill buys 7 units of good X at $4, and Carolyn buys 8 units of good X at $5. A point on the market demand curve consists of the following price-quantity combination: none of the above If the price of good X is $100 and the price of good Y is $20, it follows that the relative price of one unit of good Y is 0.20 unit of X. There are two goods in the economy, apples and bread. The relative price of apples has increased. This could be due to a and b. (increase in absolute price of apples, decrease in absolute price of bread. If the absolute price of a computer is $2,000 and the relative price of a dining room table is 4 computers, it follows that the absolute price of a dining room table is $8,000 (simple math) If the government increased licensing requirements for beauty salons, the supply curve for salon services would shift to the left. True. Economists use the terms neutral good and normal good interchangeably. False An increase in demand means the same thing as an increase in quantity demanded. False. In moving along a demand curve, everything is held constant except the prices of related goods. False. A demand curve is the graphical representation of the law of demand. True. A shortage in bread market can cause the price of bread to rise. True Another term for excess supply is shortage. False. The sum of consumers ‘surplus and producers’ surplus is maximized at equilibrium. True. If hot dogs are inferior good, a decrease in income will cause the equilibrium price of hot dogs to rise. True. Scarcity and shortage are synonyms. False.