Price 10. Refer to the above Figure. At a price of $15 A) there would be a surpl

Question

Price 10. Refer to the above Figure. At a price of $15 A) there would be a surplus of 4 units B) there would be a shortage of 2 units. C) there would be a surplus of 6 units. D) there would be a shortage of 4 units 11. Which of the following would cause both the equilibrium price and equilibrium quantity of cotton (assume that cotton is a normal good) to increase? A) an increase in consumer income B) a drought that sharply reduces cotton output C) a decrease in consumer income D) unusually good weather that results in a bumper crop of cottorn 12. Which of the following would cause a decrease in the equilibrium price and an increase in the equilibrium quantity of salmon? A) a decrease in demand and an increase in supply B) an increase in supply C) an increase in supply and an increase in demand greater than the increase in supply D) a decrease in demand and a decrease in supply

Explanation / Answer

(10) (A)

When price is $15, quantity demanded = 2 and quantity supplied = 6. Therefore,

Surplus = 4 - 2 = 6

(11) (A)

Increase in consumer income will increase the demand, shifting demand curve rightward, increasing both price and quantity.

(12) (B)

Increase in supply will shift supply curve rightward, lowering price and increasing quantity.

(7) (C)

Decrease in price of complement will increase the demand for a good, shifting its demand curve rightward.

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