Question

19. Suppose that a more efficient way to produce a good is discovered, thus lowering production costs for the good. This will cause a. no change in the supply curve, only a change in price b. a decrease in supply (a leftward shift of the supply curve) c. a movement up the supply curve d. a movement down the supply curve. e. an increase in supply (a rightward shift of the supply curve) If the quantity demanded changes substantially with a small price change, then 20. demand is said to be a. elastic b. unelastic c. inelastic d. unit elastic e. zero elastic. A point outside the production possibility curve represents: a combination of goods that can be produced with a change in resource allocation b. a combination of goods that society does not want. c. a combination of goods that represents an inefficient allocation of resources d. a combination of goods that is unattainable with a given level of resources e. all of the above are correct 21 a. 22 If the cross-price elasticity of demand is +0.25. These goods are? a. substitute goods. b. complementary goods. c. normal goods d. inferior goods e. perfectly inelastic 23. Suppose demand can be represented by the equation Qa 1000 9.5P and supply by the equation Qs500 +0.50P. The equilibrium price and quantity will therefore be: P $525 and Q= $50 units b. P $50 and Q 525 units. c. P $9.50 and Q 1000 units d. P $0.50 and Q 500 units e. P $166.67 and Q 416.67 units a. Version A

Answer 1

19) when production cost is lowered, the supply increases which decreases the price and increases the quantity

option(E)

20) elastic

option(A)

21) a combination which is unobtainable with the given resources

option(D)

22) Cross elasticity is positive so the goods are substitutes

option(A)

23) 1000-9.5p = 500+0.5p

1000-500 = 0.5p+9.5p

500 = 10p

p = 500/10 = 50

q = 1000-9.5*50 = 525

option(B)