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Correct Answer- B, C

1. The market for apples is in equilibrium. A shock occurs that causes the price of an apple to rise and the quantity of apples bought and sold to fall. Which of the following is a correct statement regarding the apple market? a) The price of bananas, a substitute good of apples, increased.

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Correct Answer- B, C

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  1. 1. The market for apples is in equilibrium. A shock occurs that causes the price of an apple to rise and the quantity of apples bought and sold to fall. Which of the following is a correct statement regarding the apple market? • a) The price of bananas, a substitute good of apples, increased. • b) The price of oatmeal, a complement good of apples, increased. • c) The price of labor in the apple industry rose. • d) Both a) and c) are correct. • e) Both b) and c) are correct. • f) None of the above is correct.

  2. 3. The market for breakfast cereal is in equilibrium. A shock occurs in the market that causes the price to fall and the quantity bought and sold to increase. Which of the following statements are correct, given this information? • The demand for cereal rose. • The demand for cereal fell. • The supply of cereal rose. • The supply of cereal fell. • The quantity of cereal demanded rose. • The quantity of cereal supplied rose. • At the previous price, there would have been a surplus of cereal. • At the previous price, there would have been a shortage of cereal.

  3. Correct Answer- B, C

  4. 5. The market for British pounds (as measured in US dollars) is in equilibrium at $1.6/£. A British firm invents a new gizmo that changes the computer industry. Which of the following statements is correct, based on this information? • The US dollar will appreciate in value relative to the British pound. • US exports to Britain will fall. • The demand for British pounds will rise. • Both a) and b) are correct. • Both a) and c) are correct. • None of the above is correct.

  5. 5. Mayor Quimby thinks that the price of apples is too high. Which of the following best explains the action Mayor Quimby might take in order to alleviate the concerns of apple producers? He will enact a price ceiling on apples that is above the equilibrium price. This action will cause a shortage to ensue. He will enact a price ceiling on apples that is below the equilibrium price. This action will cause a shortage to ensue. He will enact a price floor on apples that is above the equilibrium price. The action will cause a surplus to ensue. He will enact a price ceiling on apples that is below the equilibrium price. This action will cause a surplus to ensue.

  6. Chamber of Solitude • What might happen in a market to cause the price of the good to fall unequivocally and the quantity to remain unchanged? Be specific about the scenario you present and draw a supply/demand graph that supports your argument.

  7. Final Question • The market of gidgets is in equilibrium at a price of P* and a quantity bought and sold of Q*. The government decides to enact a per unit tax on gidget suppliers equal to τ. Draw a graph that depicts a market in which the price increase consumers face is about the same as the price decrease producers face. What condition, with regards to elasticity, would have to prevail in order for the equilibrium price to remain unchanged?

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