Homework 1

# Homework 1 - Econ 201 (Spring 2009) Homework 1 (Due on...

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Econ 201 (Spring 2009) April 8 th , 2009 Homework 1 (Due on April 15 th in class) Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. ____ 1. Suppose the government decides that every family should own its own home. To bring this about, the government decides to subsidize the home-construction industry by giving the home- construction companies \$10,000 for every house that they build. As a result of this, a. the supply curve of new houses would shift leftward, since it now costs \$10,000 more for builders to produce a house. b. the demand curve for new houses would shift rightward, since now every family would want to buy a house. c. the demand curve for new houses would shift leftward. d. the supply curve of new houses would shift rightward, since builders would be willing to produce and sell more houses at each given price. e. c and d ____ 2. At a price above equilibrium price, there is a. a shortage. b. a surplus. c. excess demand. d. super-equilibrium. e. none of the above D D Price (dollars) Z W V 1 2 Quantity 1 2 3 4 5 6 ____ 3. Refer to the exhibit above. A shift in demand from D 1 to D 2 can NOT occur from a change in a. population. b. price of a substitute. c. income. d. the good’s own price.

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D Price (dollars) S 5 10 15 20 25 Quantity 2 4 6 8 ____ 4. Refer to the exhibit above. A price of \$6 in the market will result in a a. shortage of 10 units. b. surplus of 10 units. c. surplus of 5 units. d. shortage of 5 units. ____ 5. Refer to the exhibit above. If an increase in the price of good Y causes the demand for good X to shift from D 1 to D 2 , goods X and Y are a. normal goods. b. inferior goods. c. substitutes. d. complements. e. neutral goods.
____ 6. Refer to the exhibit above. Price P 1 a. can be an effective price ceiling. b. can be an effective price floor. c. is the equilibrium price. d. both a and c e. none of the above ____ 7. Refer to the exhibit above. In the exhibit, a. there is a shortage of doctors at fee F 1 . b. there is a surplus of doctors at fee F 1 . c. Q 3 doctors are employed at fee F 1 . d. Q 2 doctors are employed at fee F 1 . e. both a and c ____ 8. An economist says, "Technological advances have the power to lower the prices of many of the goods we buy." Here is how this works: a. Technological advances lead to lower demand, which leads to lower prices.

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