Question

Beer and Wine are substitutes. Favorable weather in California has produced a good harvest of grapes    (used to produce wine). What impact does this have on the consumer and producer surplus for BEER?

Select one:

a. Consumer surplus increases; Producer surplus decreases

b. Consumer surplus is ambiguous; Producer surplus decreases

c. Consumer surplus is ambiguous; Producer surplus increases

d. Consumer surplus is increases; Producer surplus is ambiguous

e. None of the above

When price rises by 10%, the quantity falls by 20%. The elasticity of demand for this good is 2.  

Select one:

True

False

Suppose Liquor Store had a Super Sale this past weekend. After the sale, its revenues were much lower than normal. This means that the demand for Liquor Store liquor is:

Select one:

a. Elastic

b. Perfectly Elastic

c. unit elastic

d. Inelastic

In traveling around New York City, most people use either buses or subways. Suppose all subway fares rise, but bus fares remain unchanged. How would the subway fare increase affect total revenues collected by the subway company and the bus company?

Select one:

a. They would increase for buses, but might increase or decrease for subways

b. They would increase for subways, and remain unchanged for buses

c. They would decrease for subways, but might rise or fall for buses

d. They would decrease for subways, and increase for buses

Due to little efforts in exploration, rubber has become more scarce. This has adversely affected the production of car tires, which use rubber as an input. What effect does the scarcity of rubber have on the equilibrium price and quantity for rims? (hint: rims and tires are complements).

Select one:

a. price decreases; quantity is ambiguous

b. price decreases; quantity decreases

c. price increases; quantity decreases

d. price is ambiguous; quantity decreases

Bagels and cream cheese are complements. You notice that the equilibrium price of cream cheese has decreased and the equilibrium quantity of bagels has decreased. This is due to the following event:

Select one:

a. An increase in the price of milk

b. A decrease in the price of flour

c. An increase in the price of flour

d. A decrease in the price of milk

Bagels and cream cheese are complements. You notice that the equilibrium price of bagels has increased, but the equilibrium quantity of cream cheese has decreased. This is due to the following event:

Select one:

a. An increase in the price of milk

b. An increase in the price of flour

c. A decrease in the price of milk

d. A decrease in the price of flour

Answer 1

1 - Option A

Consumer surplus increases , producer surplus decreases.

2 - True

This is because the change in quantity is double than of the change in price.

3 - Option D

Inelastic

4 - Option D

They would decrease for subways and increase for buses

This is because the demand for buses will increase and the demand for subways will decrease.

5 - Option C

Price increases , quantity decreases

As a result of the decrease in supply , price will rise and the quantity will fall.