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Exhibit 4-2 Exhibit 4-2 -Refer to the exhibit.Which of the following would be caused by a decrease in the price of baby formula?   A)  a movement from a to b on demand curve D₁  B)  a demand shift from D₁ to D₂  C)  a movement from c to d on demand curve D₂  D)  a demand shift from D₂ to D₁ -Refer to the exhibit.Which of the following would be caused by a decrease in the price of baby formula?  


A)  a movement from a to b on demand curve D₁ 
B)  a demand shift from D₁ to D₂ 
C)  a movement from c to d on demand curve D₂ 
D)  a demand shift from D₂ to D₁

E) A) and B)
F) A) and C)

Correct Answer

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As the baby boom ended, fewer families had young children.As a consequence, what was the outcome for preschool services?  


A)  The demand curve for preschool services shifted outward. 
B)  The demand curve for preschool services shifted inward. 
C)  The supply curve for preschool services shifted outward. 
D)  The supply curve for preschool services shifted inward.

E) A) and D)
F) A) and C)

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Suppose supply decreases along a given demand curve.What would be expected to happen to equilibrium price and quantity?  


A)  An excess quantity demanded will be created, increasing the equilibrium price and causing equilibrium quantity to fall. 
B)  An excess quantity supplied will be created, lowering the equilibrium price and causing equilibrium quantity to rise. 
C)  An excess quantity demanded will be created, raising the equilibrium price and quantity. 
D)  An excess quantity supplied will be created, lowering the equilibrium price and quantity.

E) A) and B)
F) B) and C)

Correct Answer

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Which pair is comprised of unrelated goods?  


A)  hot dogs and mustard 
B)  Coke and Pepsi 
C)  jewellery and bus tickets 
D)  fish and chips

E) C) and D)
F) None of the above

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Velcro has become more and more popular for a variety of uses, including as fasteners for shoes.What should happen to the equilibrium price and quantity for shoelaces as a result?  


A)  Both price and quantity should increase. 
B)  Both price and quantity should decrease. 
C)  Price should increase and quantity should decrease. 
D)  Price should decrease and quantity should increase.

E) B) and C)
F) A) and B)

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What occurs when quantity demanded of a good is less than the quantity supplied at the prevailing market price?  


A)  The price of the good tends to rise. 
B)  The price of the good tends to fall. 
C)  The demand curve shifts rightward until the surplus is eliminated. 
D)  The supply curve shifts leftward until the shortage is eliminated.

E) None of the above
F) A) and C)

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What do supply and demand curves have in common?  


A)  They have negative slopes. 
B)  They have positive slopes. 
C)  They relate quantities to prices. 
D)  They reflect the actions of producers.

E) None of the above
F) A) and B)

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Which of the following is most likely to be a normal good?  


A)  used furniture 
B)  macaroni-and-cheese dinners 
C)  tickets to major league baseball games 
D)  bus rides

E) A) and D)
F) None of the above

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Assume coffee is a substitute for tea.Suppose the tea harvest is bad this year.What will happen in the market for coffee?  


A)  Price will increase and quantity will decrease. 
B)  Price will increase and quantity will increase. 
C)  Price will decrease and quantity will increase. 
D)  Price will decrease and quantity will decrease.

E) A) and C)
F) C) and D)

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Suppose demand increases and supply increases, but supply increases more than demand.What will happen to equilibrium price and quantity?  


A)  Equilibrium price will increase, and equilibrium quantity will increase. 
B)  Equilibrium price will decrease, and equilibrium quantity will increase. 
C)  Equilibrium price will increase, and equilibrium quantity will decrease. 
D)  Equilibrium price will decrease, and equilibrium quantity will decrease.

E) B) and C)
F) A) and D)

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Exhibit 4-1 Exhibit 4-1 -Refer to Exhibit 4-1.The exhibit shows a demand curve for dog ownership.Suppose the local government passes an anti-dog-litter law that raises the personal cost of owning a dog from C to C'.What will happen to the quantity of dogs demanded?   A)  It will drop to zero.  B)  It will stay the same.  C)  It will decrease.  D)  It will increase. -Refer to Exhibit 4-1.The exhibit shows a demand curve for dog ownership.Suppose the local government passes an anti-dog-litter law that raises the personal cost of owning a dog from C to C'.What will happen to the quantity of dogs demanded?  


A)  It will drop to zero. 
B)  It will stay the same. 
C)  It will decrease. 
D)  It will increase.

E) All of the above
F) A) and D)

Correct Answer

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Saccharin and aspartame are both low-calorie substitutes for sugar.Suppose saccharin is found to cause cancer.What will likely occur?  


A)  The price of aspartame will increase. 
B)  The price of sugar will decrease. 
C)  The price of saccharin will increase. 
D)  The price of cakes will decrease.

E) B) and C)
F) A) and B)

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Suppose you drink more tea because the price of coffee has increased.Which of the following best explains your behaviour?  


A)  the supply effect 
B)  the complementary effect 
C)  the substitution effect 
D)  the income effect

E) A) and D)
F) All of the above

Correct Answer

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Suppose a surplus exists in the market for swimwear.What would an economist predict will happen?  


A)  that producers will increase the production of swimwear 
B)  that the supply of swimwear will increase 
C)  that the price of swimwear at retail outlets will begin to fall 
D)  that buyers will react to the surplus by increasing their demand for swimwear

E) B) and D)
F) A) and B)

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Suppose the government imposes a ceiling price on apartment rents.Which of the following is unlikely be observed?  


A)  an increase in the number of new apartment complexes being built 
B)  long waiting lists for apartment seekers 
C)  lower maintenance of existing apartments 
D)  conversion of some apartment complexes to condos

E) A) and C)
F) A) and D)

Correct Answer

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Exhibit 4-6  Price  Quantity  demanded  Quantity  supplied $1.00100101.2090301.4080501.5070701.606090\begin{array} { r c c } \hline \text { Price } & \begin{array} { c } \text { Quantity } \\\text { demanded }\end{array} & \begin{array} { c } \text { Quantity } \\\text { supplied }\end{array} \\\hline \$ 1.00 & 100 & 10 \\1.20 & 90 & 30 \\1.40 & 80 & 50 \\1.50 & 70 & 70 \\1.60 & 60 & 90 \\\hline\end{array} -Refer to the exhibit.Suppose the price of the good is $1.60.What would an economist expect to happen to the price?  


A)  expect it to decrease to $1.50 
B)  expect it to decrease to $1.40 
C)  expect it to decrease to $1.30 
D)  expect it to decrease to $1.20

E) None of the above
F) A) and B)

Correct Answer

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As the price of milk increases, producers are normally willing to provide greater quantities.What is this response known as?  


A)  the law of demand 
B)  the law of variable proportions 
C)  the law of profitability 
D)  the law of supply

E) C) and D)
F) A) and D)

Correct Answer

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Assume that black beans and rice are staples in the diet of one particular family.How would you know if these goods are substitutes?  


A)  If the price of black beans rises and the consumption of rice remains the same, they would be substitutes. 
B)  If the price of black beans rises and the consumption of rice increases, they would be substitutes. 
C)  If the price of black beans rises and the consumption of rice decreases, they would be substitutes. 
D)  If the price of black beans rises and the consumption of both goods remains the same, they would be substitutes.

E) All of the above
F) A) and D)

Correct Answer

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Which of the following could cause an increase in the demand for peanut butter?  


A)  a decrease in consumer income 
B)  a increase in the supply of peanut butter 
C)  a decrease in the price of bread 
D)  a drought in Georgia that destroys 30 percent of the peanut crop

E) B) and D)
F) C) and D)

Correct Answer

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Which of the following will cause a movement up along a market supply curve for corn?  


A)  a change in the price of corn 
B)  a change in the price of pesticides 
C)  a change in the number of producers 
D)  a change in a change in the number of hectares planted in corn

E) A) and C)
F) A) and B)

Correct Answer

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