1. A moreefficient means of processing tree bark to produce an anticancerdrug is discovered. As a result, the supply curve for the drug will:
a. shiftto the right, increasing the price of the drug.
b. shiftto the left, increasing the price of the drug.
c. shiftto the right, decreasing the price of the drug.
d. shiftto the left, decreasing the price of the drug.
e. remain stationary, but movement along the supply curve willoccur.
2. Which of the following would most likely increase the price of chicken?
a. areduction in the price of grains used to produce chicken feed
b. areduction in the price of beef, a substitute for chicken
c.unusually hot weather that kills millions of chickens before theyare ready for market
d. a decrease in consumer income
3. In January, 2,500 quarts of ice cream are sold in Boston at $2 perquart. In February, 3,000 quarts are sold at $2.50 a quart. This change in the price and quantity sold of ice cream mayhave been caused by:
a. areduction in wages in the Boston area.
b. theintroduction of labor-saving, automated ice cream packingmachinery.
c. therelease of a medical study showing that ice cream consumptionimproves mental health.
d. the decision by Boston ice cream sellers to eliminatediscount coupons.
4. Theprice elasticity of demand measures the:
a.responsiveness of quantity demanded to a change in income.
b.responsiveness of quantity demanded to a change in price.
c.responsiveness of price to a change in quantity demanded.
d.responsiveness of quantity demanded to a change in quantitysupplied.
e. responsiveness of price to a change in income.
5. If thedemand curve for a particular brand of paper towels is perfectlyelastic, a reduction in supply will cause the equilibrium price to:
a. falland the equilibrium quantity to fall.
b. falland the equilibrium quantity to stay the same.
c. staythe same and the equilibrium quantity to rise.
d. staythe same and the equilibrium quantity to fall.
e. rise and the equilibrium quantity to stay the same.
6. Good Ahas an income elasticity equal to 0.4 and a cross price elasticitywith respect to Good B of 1.2. Then:
a. Good Ais an inferior good and Goods A and B are substitutes.
b. Good Ais an inferior good and Goods A and B are complements.
c. Good Ais a normal good and Goods A and B are substitutes.
d. Good Ais a normal good and Goods A and B are complements.
e. none of the above are correct.
7. Whichof the following best explains the source of consumer surplus forGood A?
a. Manyconsumers pay prices that are greater than the equilibrium price ofGood A.
b. Manyconsumers would be willing to pay more than the market price forsome units of Good A.
c. Manyconsumers think the market price of Good A is greater than itscost.
d. Many consumers of Good A place a value on it that is less thanthe market price.