Top Ramen is a brand of noodles that is widely considered to be an inferior good with a high salt content. What would happen to the equilibrium price and equilibrium quantity of Top Ramen if income went up and the price of salt decreased?

111.    Many consumer items eventually go out of style, and because fewer people want these items,
demand for them drops. When this happens, we usually see production of these items stop. What happens to the equilibrium price and equilibrium quantity in a market like this?
a.    The equilibrium price goes up and equilibrium quantity goes up.
b.    The equilibrium price is indeterminate and equilibrium quantity goes up.
c.    The equilibrium price goes down and equilibrium quantity is indeterminate.
d.    The equilibrium price is indeterminate and equilibrium quantity goes down.
e.    The equilibrium price goes up and equilibrium quantity is indeterminate.

   
ANS:    D    DIF:    Difficult    REF:    Changes in Both Demand and Supply
TOP:    IV.D.6.    MSC:    Applying

    112.    The change in equilibrium shown in the accompanying figure would be explained by a(n):
 
a.    increase in the price of an input and an increase in the price of a complement.
b.    decrease in the price of an input and an increase in the price of a complement.
c.    decrease in the price of an input and an increase the in price of a substitute.
d.    increase in the price of an input and a decrease in the price of a complement.
e.    increase in the price of an input and a increase in the price of a substitute.


ANS:    A    DIF:    Difficult    REF:    Changes in Both Demand and Supply
TOP:    IV.D.6.    MSC:    Analyzing

    113.    When supply shifts left and demand shifts right, the:
a.    equilibrium price always rises.
b.    equilibrium price always falls.
c.    equilibrium quantity always falls.
d.    equilibrium quantity always rises.
e.    equilibrium price is indeterminate.


ANS:    A    DIF:    Medium    REF:    Changes in Both Demand and Supply
TOP:    IV.D.7.    MSC:    Understanding       

    114.    When supply shifts right and demand shifts left, the:
a.    equilibrium price always rises.
b.    equilibrium price always falls.
c.    equilibrium quantity always falls.
d.    equilibrium quantity always rises.
e.    equilibrium price is indeterminate.


ANS:    B    DIF:    Medium    REF:    Changes in Both Demand and Supply
TOP:    IV.D.7.    MSC:    Understanding       

    115.    What happens to the equilibrium price and equilibrium quantity of a good if both the producers and the consumers of that good expect its price to be higher in the future?
a.    The equilibrium price will go up and equilibrium quantity will go up.
b.    The equilibrium price will go down and equilibrium quantity will be indeterminate.
c.    The equilibrium price will be indeterminate and equilibrium quantity will go up.
d.    The equilibrium price will go up and equilibrium quantity will be indeterminate.
e.    The equilibrium price will go up and equilibrium quantity will be indeterminate.


ANS:    D    DIF:    Difficult    REF:    Changes in Both Demand and Supply
TOP:    IV.D.7.    MSC:    Understanding       

    116.    Assume that the price of rubber increased at the same time that Michael Jordan, arguably the best NBA basketball player of all time, became famous. What do you expect to happen to the equilibrium price and equilibrium quantity of the basketball shoes that are promoted by Michael Jordan?
a.    Equilibrium price will go up and equilibrium quantity will go down.
b.    Equilibrium price will go up and equilibrium quantity will go up.
c.    Equilibrium price will go down and equilibrium quantity will be indeterminate.
d.    Equilibrium price will go down and equilibrium quantity will go up.
e.    Equilibrium price will go up and equilibrium quantity will be indeterminate.


ANS:    E    DIF:    Difficult    REF:    Changes in Both Demand and Supply
TOP:    IV.D.7.    MSC:    Applying

    117.    Shoes are considered to be a normal good. What would happen to the equilibrium price and equilibrium quantity of shoes if income increases and the cost of labor to produce shoes increases?
a.    The equilibrium price will go up and equilibrium quantity will go up.
b.    The equilibrium price will be indeterminate and equilibrium quantity will go up.
c.    The equilibrium price will go down and equilibrium quantity will be indeterminate.
d.    The equilibrium price will go up and equilibrium quantity will be indeterminate.
e.    The equilibrium price will be indeterminate and equilibrium quantity will go down.


ANS:    D    DIF:    Difficult    REF:    Changes in Both Demand and Supply
TOP:    IV.D.7.    MSC:    Applying

    118.    In agriculture, a “bumper crop” refers to a particularly productive harvest. If there is a bumper crop for wheat at the same time that more people become allergic to wheat and all else is held constant, what will happen to the equilibrium price and quantity for wheat?
a.    The equilibrium price will go up and equilibrium quantity will go up.
b.    The equilibrium price will be indeterminate and equilibrium quantity will go up.
c.    The equilibrium price will go down and equilibrium quantity will be indeterminate.
d.    The equilibrium price will go up and equilibrium quantity will be indeterminate.
e.    The equilibrium price will be indeterminate and equilibrium quantity will go down.


ANS:    C    DIF:    Difficult    REF:    Changes in Both Demand and Supply
TOP:    IV.D.7.    MSC:    Applying

    119.    Top Ramen is a brand of noodles that is widely considered to be an inferior good with a high salt content. What would happen to the equilibrium price and equilibrium quantity of Top Ramen if income went up and the price of salt decreased?
a.    The equilibrium price will go up and equilibrium quantity will go up.
b.    The equilibrium price will go down and equilibrium quantity will be indeterminate.
c.    The equilibrium price will be indeterminate and equilibrium quantity will go up.
d.    The equilibrium price will go up and equilibrium quantity will be indeterminate.
e.    The equilibrium price will be indeterminate and equilibrium quantity will go down.


ANS:    B    DIF:    Difficult    REF:    Changes in Both Demand and Supply
TOP:    IV.D.7.    MSC:    Applying

    120.    What would happen in the market for SUVs if the government started to subsidize the production of SUVs that get very few miles per gallon and the price of gasoline went up?
a.    The equilibrium price will go up and equilibrium quantity will go up.
b.    The equilibrium price will go down and equilibrium quantity will be indeterminate.
c.    The equilibrium price will be indeterminate and equilibrium quantity will go up.
d.    The equilibrium price will go up and equilibrium quantity will be indeterminate.
e.    The equilibrium price will be indeterminate and equilibrium quantity will go down.


ANS:    B    DIF:    Difficult    REF:    Changes in Both Demand and Supply
TOP:    IV.D.7.    MSC:    Applying