Question

Question 1. All of the following factors will affect the supply of shoes except one. Which will not affect the supply of shoes? Select one:

a. Higher prices for leather.

b. An increase in consumer income

c. Higher wages for shoe factory workers.

d. A technological improvement that reduces waste of leather and other raw materials in shoe production.

Question 2. An equilibrium price does all but which of the following?

Select one:

a. Equates quantity supplied with quantity demanded.

b. Make the supply curve and the demand curve equal.

c. Eliminates excess supply.

d. Eliminates excess supply

Question 3.

For a given decrease in price, the greater the elasticity of demand, what is resulting quantity demanded?

Select one:

a. increase in demand.

b. increase in quantity demanded.

c. decrease in quantity demanded.

d. decrease in demand.

Question 4.

If a farmer were choosing between growing wheat on his own land and growing soybeans on his own land, what is the impact of increase in price of soybeans supply?

Select one:

a. an increase in the price of soybeans would increase his supply of soybeans.

b. an increase in the price of soybeans would decrease his supply of wheat.

c. an increase in the price of soybeans would not change his supply of either wheat or soybeans.

d. an increase in the price of soybeans would increase his supply of wheat.

e. an increase in the price of soybeans would decrease his supply of soybeans.

Question 5.

If many cooks consider butter and margarine to be substitutes, and the price of butter rises, then in the market for margarine, what is impact of followings on equilibrium price and quantity?

Select one:

a. both the equilibrium price and equilibrium quantity will fall.

b. the equilibrium price will rise, while the change to equilibrium quantity is indeterminate.

c. the equilibrium price will rise, and the equilibrium quantity will fall.

d. both the equilibrium price and equilibrium quantity will rise.

e. the equilibrium price will fall, and the equilibrium quantity will rise.

.

Answer 1

1. The correct answer is 'Option B'.

An increase in consumer income will affect the demand of the shoes and has no role to play with the supply of shoes. So, the correct answer is 'Option B'.

2. The correct answer is 'Option B'.

An equilibrium price can be calculated from the intersection of the demand curve and the supply curve. It occurs at a point where the quantity demanded is equal to the quantity supplied which eliminates the excess demand and excess supply. So, it does not make the demand curve and supply curve equal and only make them intersect each other.

3. The correct answer is 'Option B'.

Elasticity of demand shows the percentage change in quantity demanded due to a percentage change in price. The more the elasticity of demand the greater the responsiveness to a change in price. So, a fall in price will lead to an increase in quantity demanded.

4. The correct answer is 'Option A'.

If there is an increase in the price of soyabeans then the farmer would be willing to produce more soyabean in order to maximize the profits. So, there will be an increase in the supply of soyabeans.

5. The correct answer is 'Option D'.

If butter and margarine are substitutes of each other then a rise in price of butter will increase the quantity demanded of margarine because people will go for cheaper goods and prefer margarine over butter because both are substitutes of each other. So, this will shift the demand curve of margarine to the right which will cause an increase in equilibrium price as well as equilibrium quantity.