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Unformatted text preview: ECON 251 Exam 1 Fall 2007 1. An increase in the demand for plasma televisions can be caused by which of the following? a. a decrease in the price of televisions b. a decrease in the price of flat-screen CRT TVs (a substitute in consumption) c. a decrease in income (assuming plasma TVs are normal goods) d. a decrease in the price of surround sound systems (a complement in consumption) 2. Consider the market for the Microsoft Xbox 360, a gaming console. If the price of the Nintendo Wii (a substitute in consumption) decreases, then everything else constant, we would expect a. demand for Xbox 360s to shift to the right. b. demand for Xbox 360s to shift to the left. c. supply of Xbox 360s to shift to the left. d. Supply of Xbox 360s to shift to the right. 3. The equilibrium price of a jar of coffee falls. Which of the following is a possible cause? a. A fall in the price of coffee creamers, a complement to coffee b. A scientific discovery that the caffeine contained in coffee causes cancer c. An increase in the income of the average household, with coffee being a normal good d. A rise in the price of tea, a substitute to coffee 4. Consumers and producers in the market for furniture expect that prices will be higher in 6 months than they are currently. How will the current equilibrium change as a result of this change in price expectations? a. Equilibrium price will rise, and equilibrium quantity will fall. b. Equilibrium price will fall, and equilibrium quantity will rise. c. Equilibrium price will rise, and equilibrium quantity will be indeterminate. d. Equilibrium price will be indeterminate, and equilibrium quantity will rise. 5. Which of the following will increase the supply of plastic trash cans? a. an increase in the cost of producing trash cans b. an increase in the demand for trash cans c. a decrease in the price of plastic storage bins (a substitute in production) d. a decrease in the price of trash cans 6. An increase in supply is graphed as a. a leftward shift of the supply curve b. a rightward shift of the supply curve c. a movement down and to the left on a given supply curve d. a movement up and to the right on a given supply curve 7. When the price of coffee increases, the equilibrium quantity of chocolate increases. Which of the following could explain this? a. Coffee and chocolate are complements in consumption. b. Coffee and chocolate are substitutes in production. c. Coffee and chocolate are substitutes in consumption. d. Both b and c. 8. Look at the market for music CDs. When the price is $20.50 per CD, 9 CDs are bought. When the price decreases to $19.50, 11 CDs are bought. What is the price elasticity of demand in that case? a. 1 b. c. 2 d. 4 9. Consider a linear demand curve (i.e., a straight line). What can we say about the price elasticity of demand for such a demand curve?...
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