# Practice Questions for Module 2

```All questions relate to Chapter 4 (For our purposes, there is no chapter 3).
Scenario A: The following table contains information on the demand curves for sugar for three separate
months.
Price
Quantity demanded
Quantity demanded
Quantity demanded
(pounds) in October
(pounds) in November
(pounds) in December
\$0.50
9,000
8,500
11,000
\$0.75
8,000
7,500
10,000
\$1.00
7,000
6,500
9,000
\$1.25
6,000
5,500
8,000
\$1.50
5,000
4,500
7,000
\$1.75
4,000
3,500
6,000
\$2.00
3,000
2,500
5,000
4.1 Scenario A: Plot the three demand curves on a single graph (with the price on the vertical axis).
4.2 Scenario A: Please choose the wording to make the following statement correct:
An increase in the price of sugar from \$1.50 to \$2.00 in the month of October would (increase; decrease) the
(demand; quantity demanded) by (2,000; 3,000) pounds.
4.3 Scenario A: Please choose the wording to make the following statement correct:
Between November and December the demand curve for sugar shifted (to the left; to the right). This
represents (a decrease; an increase) in the demand for sugar.
4.4 Scenario A: Please choose the wording to make the following statement correct:
A fall in the price of sugar from \$2.00 to \$1.25 in the month of December would (increase; decrease) the
(demand; quantity demanded) by (2,000; 3,000) pounds.
4.5 Spaghetti and tomato sauce are complements. When the price of tomato sauce increases, this leads to
A) an increase in demand for spaghetti.
B) a decrease in demand for spaghetti.
C) an increase in the supply of spaghetti.
D) a decrease in the supply of spaghetti.
4.6 An improvement in the technology used to produce a product will…
A) shift the demand curve to the left.
B) shift the demand curve to the right.
C) shift the supply curve to the left.
D) shift the supply curve to the right.
4.7 Consider a regular supply and demand diagram for laptops. If the price of microchips (which are needed in
the production of laptops) falls, then the new equilibrium will have
A) a lower price and a larger quantity.
B) a lower price and a smaller quantity.
C) a higher price and a larger quantity.
D) a higher price and a smaller quantity.
4.8 Which of the following events would NOT lead to a shift in the supply curve for oats?
A) A less wasteful way of harvesting is invented.
B) The price of farming machinery increases.
C) The number of oat farmers increases.
D) Average consumer income increases.
4.9 In the market for a normal good, a fall in average household income leads to a new equilibrium with
A) a lower price and a larger quantity.
B) a lower price and a smaller quantity.
C) a higher price and a larger quantity.
D) a higher price and a smaller quantity.
Scenario B: Consider the market for ball-point pens and the market for &quot;rollerball&quot; pens. Suppose that, due to
an increase in the cost of the metal used in &quot;rollerball&quot; pens, the price of &quot;rollerball&quot; pens increases. There are
no other changes.
4.10 In Scenario B, what is the relationship between &quot;rollerball&quot; pens and ball-point pens? They likely are…
A) Complementary goods
B) Substitute goods
C) Normal goods
D) Inferior goods
4.11 In Scenario B, what would happen to the demand curves of both products? The demand curve for ballpoint pens would ______________ ; the demand curve for &quot;rollerball&quot; pens would ______________.
A) shift to the right; not change
B) shift to the right; shift to the right
C) shift to the left; not change
D) shift to the left; shift to the right
4.12 In your life, what is likely to be an inferior good? Imagine this scenario: you graduate from Western, get a
well-paying full-time job, and suddenly have a lot more money than you did as a student. There are things you
will consume more, or more often; these are called “normal goods.” But there are also some things that you
would buy less often than now, or stop consuming them altogether.
4.13 During an unusually cool summer, the price of peaches rose substantially while the amount of peaches
sold fell. Was this a shift in demand, a shift in supply, or a shift in neither?
4.14 New technology lowering the costs of production will cause the equilibrium price to _____ and the
equilibrium quantity to ______.
A) Rise, rise.
B) Rise, fall.
C) Fall, fall.
D) fall, rise.
4.15 Let’s say that in the market for hand sanitizer, supply decreases while at the same time demand
increases. The equilibrium price in the market will…
A) increase
B) decrease
C) not change
D) could either increase or decrease
4.16 “The winds of the recent hurricanes in Florida are bringing significant financial gain to California orange
growers. Due to extensive damage to the Florida orange crop, many oranges were destroyed. The ones
remaining were just as good the previous oranges. California oranges are commanding their highest prices
ever.”
If Florida and California oranges are substitute goods, which of the following statements best explains the
economics of the quotation?
A) The demand for Florida oranges has been reduced, causing their prices to fall and therefore increasing the
demand for the substitute California oranges.
B) The supply of Florida oranges has decreased, causing the supply of California oranges to increase and their
price to rise.
C) The demand for Florida oranges has been reduced by the hurricanes, causing a greater demand for the
California oranges and an increase in their price.
D) The supply of Florida oranges has decreased, causing their price to increase and the demand for California
oranges to increase, too.
4.17 The market for (extra large) pizzas is described by the following equations
Demand: QD = 1800 – 20 P
Supply:
QS = 1200 +10 P, where P is the price of a pizza.
(a) Please find the equilibrium price in this market.
(b) Find the equilibrium quantity in this market.
```