Question

Suppose the equilibrium price is $50 and the equilibrium quantity is 750 units. An increase in demand would cause a surplus at the price of $50 and the quantity would fall below 750 units as the price moved to the new equilibrium.

Select one:

True

False

Question text

A weak demand increase together with a stronger supply increase would necessarily result in a higher quantity and a lower price.

Select one:

True

False

Holding the nonprice determinants of supply constant, a change in price would change the quantity supplied; however, supply would not change and the supply curve would not shift.

Select one:

True

False

Suppose that the incomes of buyers increase in a particular market for an inferior good. In addition, there is an advance in production technology. As a result, equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous in this market.

Select one:

True

False

A reduction in the price of an input that reduces the costs of production of a good will cause the supply curve for that good to shift to the right.

Select one:

True

False

Answer 1

False. When the demand increases then a deficit would occur. Also the new equilibrium quantity would be greater than 750 now

True. The supply curve shifts rightward to a larger extent as compared to the upward movement of the demand curve. Hence there will be an increase in the quantity and a decrease in the price

True. The suppliers would be willing to increase the supply. However price change does not shift the supply curve.

False. Since the income of the buyers has increased in the inferior goods market therefore its demand will decrease. Thus shifting the demand curve to the left. At the same time the technological improvement will shift the supply curve to the right. Thus the equilibrium price will decrease. However the impact on equilibrium quantity will be ambiguous

True. The supply curve will shift to the right as the producers will be willing to accept a lower price for their product. This is similar to the technological improvement case