Quiz 3 1 Refer to graph 1 A decrease in demand an increase in supply will always result in a lower equilibrium quantity False False True False 2 Refer to graph 1 Higher costs of inputs may have caused the shift of the S curve 3 Refer to graph 1 An increase in the price of a complementary good may have caused the shift of the D curve 4 Refer to graph 1 If the shift of the D curve was due to a weak economy in lower incomes for buyers then the good in this graph would be an inferior good 5 Refer to graph A Which of the following statements about the market for pizzas is false In a free competitive market the prize of the pizza would be 3 At the market equilibrium the opportunity cost to produce the last unit of pizza was 3 If the price of pizzas were 3 buyers with a reservation price higher than 3 would not buy pizzas If the price of pizzas were 3 sellers with a reservation price higher than 3 would not produce sell pizzas 6 Refer to graph A If the authorities were to establish a price floor the price of pizzas would be higher than 3 the price of pizzas would be lower than 3 the quantity of pizzas bought would be more than 12 000 slices day there will be a shortage of pizzas 7 The downward sloping D curve reflects increasing reservation prices of buyers is explained by the substitution real income effects is due to the decreasing opportunity costs in producing higher quantities of pizzas is caused by increasing quantities of pizzas supplied by sellers in the market 8 A buyer allocated a budget of 100 for his weekly supermarket expenditure Lettuce was much cheaper than broccoli so he bought more lettuce less broccoli This scenario best reflects the substitution effect in action an increase in the buyer s reservation price for lettuce the income effect in action a drop in the buyer s reservation price for broccoli 9 Which of the following statements about price controls is untrue Rent controls is an example of a price ceiling A price ceiling typically will result in shortages or excess demand in a market A price floor is set at a level above the market equilibrium price A minimum wage would be an example of a price ceiling in the labour market 10 Which statement about a market demand curve is true The curve represents the reservation prices of buyers of the good in a market The curve shows a direct relationship between price quantity ceteris paribus The curve reflects the opportunity cost of producing the good The curve shows the interaction of buyers sellers of a good in the market