Question

1. If pizza and burritos are substitutes in consumption and independent in production and if the price of pizza decreases, then, ceteris paribus, in the burrito market the

demand for burritos will increase and both the equilibrium price of burritos, P_burritos*, and the equilibrium quantity of burrito, Q_burritos*, will increase.

quantity demanded of burritos will decrease and both P_burritos* and Q_burritos* will decrease.

supply of burritos will decrease, P_burritos* will increase, and Q_burritos* will decrease.

demand for burritos will decrease, P_burritos* will decrease, and Q_burritos*, will decrease.

supply of burritos will increase, P_burritos* will decrease, and Q_burritos* will increase.

demand for burritos will increase, P_burritos* will increase, and Q_burritos* will decrease.

2. If the government imposes a $50 excise subsidy on the production of textbooks, then from the perspective of consumers (students), the “effective” or after-subsidy supply curve for textbooks will shift

up vertically by exactly $50.

down vertically by more than $50.

right horizontally by more than $50.

down vertically by less than $50.

down vertically by exactly $50.

left horizontally by exactly $50.

3. Which of the following would decrease the quantity supplied of smartphones, ceteris paribus?

An increase in the price of HDTVs, assuming that smartphones and HDTVs are substitutes in production.

A decrease in the number of smartphone producers.

A decrease in consumer income, assuming that smartphones are normal goods.

An increase in the wages of smartphone production workers.

All of the changes listed for this question will decrease the quantity supplied of smartphones.

4. According to the law of supply, a(n) _____ in price of good X will _____ of good X, ceteris paribus.

decrease, increase the quantity demanded.

decrease, increase the supply.

increase, increase the quantity supplied.

increase, decrease the quantity supplied.

increase, increase the supply.

increase, decrease the demand.

5. If the government imposes an excise tax of $2 per pizza on the consumption of pizza, then from the perspective of pizza producers, the “effective” or after-tax demand curve for pizza will shift

up vertically by less than $2.

up vertically by more than $2.

left horizontally by less than $2.

right horizontally by less than $2.

up vertically by exactly $2.

down vertically by exactly $2.

Answer 1

If a price of pizza decrease the demand for pizza will increase and demand for burritos will decrease. Since the demand for burritos decreased the equilibrium quantity will fall and equilibrium price will also fall.