27. Imagine a free market in equilibrium. After a sudden decrease supply (but be
ID: 1106961 • Letter: 2
Question
27. Imagine a free market in equilibrium. After a sudden decrease supply (but before the price can adjust), the market experiences a: A) shortage. B) surplus. C) its initial equilibrium. D) a new equilibrium. 28. Following the release of a new study showing even more benefits to drinking red wine economists expect A) a shortage of red wine until the price rises. B) a surplus of red wine until the price falls. C) that both the price and quantity of red wine will decrease. D) the supply of red wine will increase immediately 29. Which of the following factors causes a decrease in supply? A) a decrease in demand B) a decrease in the price of the product C) an increase in the price of the product D) new taxes on output 30. Which of the following would cause the current supply of iPods to increase? an economic boom, which increases the amount that people are willing to spend on personal electronics a decrease in the price of songs on iTunes the expectation that the future price of iPods will decrease an increase in the wages offered to manufacturers of iPods A) B) C) D) 31. Imagine a free market in which at a price of $10 quantity supplied is 50 units and quantity demanded is 40 units. Equilibrium price in this market: A) is equal to $10. B) is less than $10. C) is greater than $10 D) differs from $10 in an indeterminate direction. 32. Since the demand for illegal drugs is quite inelastic, an increase in drugs: A) increases seller revenues B) decreases seller revenues C) does not affect seller revenues D) The change in revenue depends on supply elasticity.Explanation / Answer
27 (A)) shortage
When supply is lower then demand then shortage will occur to fulfill the demand so market will experience the shortage of goods.
28 (A)
As demand for red wine will increase but supply is constant until the price increase.
29 (d)
Increase in new tax will cause the production process costly leads to fall in the supply.
30 (C)
As price and current supply ( quantity supply ) is positively related so fall in the future price will decrease the supply in future but it will increase the current supply as iPods become as cheaper goods. due to fall in the price.
31 (B)
This is reason being at price of 10 QD < QS so fall in price will equate the supply and demand mean equilibrium price is will be less than 10
32 (A)
As demand is inelastic so rise in price of drugs will increase in total revenue of supplier as he would be ready to sell more as customer increase the demand for drugs
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