1. Suppose the price of cherries decreases at the same time Mrs. Smith’s introdu
ID: 1131274 • Letter: 1
Question
1.Suppose the price of cherries decreases at the same time Mrs. Smith’s introduces a new and better-tasting cherry pie that consumers love. How will these changes impact the quantity and price levels in the market for cherry pies?
Quantity/price
Increase/indeterminate
Increase/Decrease
Indeterminate/Decrease
Decrease/ Increase
Decrease/Indeterminate
2.The market for tennis shoes is in equilibrium. If the government increases business taxes, then we would expect to see a(n)
Increase in supply
Increase in quantity supplied
Decrease in supply
Decrease in quantity supplied
Shortage in the market
*PLEASE BRIEFLY EXPLAIN*.
Explanation / Answer
Answer:- Suppose the price of cherries decreases at the same time Mrs. Smith’s introduces a new and better-tasting cherry pie that consumers love. How will these changes impact the quantity and price levels in the market for cherry pies?
Correct Answer:- Increase/Intermediate
Reason:- When the price of the cherries decreases, the cost of production of cherry pie will reduce and therefore the producer will produce more quantities and thus improving the supply. As Mrs. Smith is the only seller who introduced the new cherry pie, this will have a medium impact on the price level.
Answer:- The market for tennis shoes is in equilibrium. If the government increases business taxes, then we would expect to see a
Decrease in supply
Reason:- As the government imposes the business taxes, the additional taxes have to be bear by the business and thus due to increased burden on producers, they will produce less and thus supply will fall.
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