If a consumer’s income doubles and she now purchases more of good X, we can infer that good …

1. If a consumer’s income doubles and she now purchases more of
good X, we can infer that good X is a(n) _______________ good.

NormalInferiorNeither
normal nor inferiorGiffen

2.All of the following can lead to an increase in the demand for ice cream,
a normal good, EXCEPT:

An
increase in incomeA
decrease in incomeAn
increase in the price of popsiclesA new
scientific study that finds eating ice cream does not cause weight gain

3.A decrease in supply will lead to:

An
increase in priceA
increase in quantityAn
increase in demandAn
increase in sales

4.Generally, with all else held constant, when the price of a good
increases, consumers purchase:

More of
the goodLess of the
goodThe same
amount of the goodNone of
the good

5.An increase in demand will lead to:

An
increase in supplyA fall in
quantityAn
increase in priceA
decrease in producer surplus

6.Which of the following events would lead to an increase in demand for air
travel?

An
increase in the number of people who are afraid to flyA fall in
the price of oilAn
increase in the price of ground transportationA
decrease in income levels

7.Which of the following will cause a rightward shift of the market supply
curve?

An
increase in the product priceA
decrease in input costsChange in
consumers’ tastesAn
increase in income

8.Substitutes are goods that people buy

More of
when their incomes increaseLess of
when their incomes increaseInstead
of another product whose price has increasedTo use
with another product

9.Which of the following is consistent with the law of supply?

As the
price of calculators rises, the supply of calculators increases, ceteris paribus.As the
price of calculators falls, the supply of calculators increases, ceteris paribus.As the
price of calculators rises, the quantity supplied of calculators increases, ceteris paribus.As the
price of calculators rises, the quantity supplied of calculators decreases, ceteris paribus.

10.The quantity demanded of Pepsi has decreased. The best explanation
for this is that

The price
of Coca-Cola has increased.Pepsi’s
advertising is not as effective as in the pastThe price
of Pepsi increasedPepsi
consumers had an increase in income

11.Assume your demand for gingerale remains constant, but the price of
gingerale increases. Your consumer surplus

DecreasesIncreasesRemains
constantMay
increase or decrease depending on the amount of the price decrease

12.Assume hamburgers and french fries are complements. A decrease in
the price of french fries will cause

An
increase in quantity demanded for hamburgersA
decrease in quantity supplied of hamburgersA
decrease in the supply of hamburgersAn
increase in the demand for hamburgers

13. Suppose you are
given the following equations for demand and supply of copper in the US.
Demand: Qd = 500 – 3P
Supply: Qs = 2P
where P = price, Qd = quantity demanded
and Qs = quantity supplied.
Find the no trade equilibrium.

14. Suppose the world
price is set at $80 and we have free trade. Using the equations in
question 13 (also reproduced below), find what the domestic producers would
produce at this price and what the domestic consumers would consume.
Would the US export of import copper as a result? How much?
Qd = 500 – 3P
Qs = 2P

15.On the basis of what you have found in questions 13 and 14, do you think
there would be gains from trade? Will the consumer surplus increase or decrease
as a result of trade? Will producer surplus increase or decrease? What about
the sum of CS and PS? (Hint: draw a graph for yourself, as in the practice
questions for quiz 1. You DO NOT need to reproduce the graph here).

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