Question

QUESTION 5

You are an artist and create limited edition sculptures for sale at your website. Due to the limited number of pieces created, your supply curve is perfectly inelastic (vertical). What happens to the equilibrium price and quantity of sculptures sold if the demand curve for your art shifts to the right?

	A.	Price declines and quantity does not change
	B.	Price and quantity decline
	C.	Price and quantity increase
	D.	Price increases and quantity does not change

QUESTION 6

If the demand and supply curves both shift righward, what happens to the equilibrium quantity?

	A.	Does not change
	B.	Decreases
	C.	Increases

QUESTION 7

You operate a fast-food franchise in New York, and your parent company requires that you attend a quarterly sales meeting in Los Angeles. This is the only reason you have to fly for business reasons during the year. Is your demand for business air travel perfectly elastic or perfectly inelastic?

	A.	Perfectly elastic (horizontal)
	B.	Perfectly inelastic (vertical)

QUESTION 8

Suppose the supply curve for chicken sold at the grocery store shifts leftward due to a new illness that harms chickens. What is the expected impact on the equilibrium price of chicken?

	A.	Increase
	B.	Price does not change
	C.	Decrease

QUESTION 9

The price elasticity of demand for electricity used by residential homes is -0.4. Is the demand for electricity elastic or inelastic?

	A.	Inelastic
	B.	Elastic

Answer 1

5. D) Price increases and quantity does not change.

6. C) Increases

When the demand and supply curve both shifts to the right, the equilibrium quantity increases.

7. B) Perfectly inelastic

Since you do not have a choice and have to fly for business reasons to Los Angeles for the quarterly sales meeting.

8. A) Increases

9. A) Inelastic

Since the value is greater than -1.0, the elasticity for electricity is inelastic.