4-11. If the price of Smucker's jam rises due to higher manufacturing costs, what result do you foresee?
A. Incorrect. If the price of a substitute rises, the prices of other jams will rise as their demand rises.
B. Incorrect. If jam is a complement to bread, demand for bread will fall and the price of bread will fall.
C. Correct. If jam and peanut butter are complements, the demand for peanut butter will fall, and so will the price.
D. Incorrect. People will substitute other jams.
E. Incorrect. If jam is a complement to bread, demand for bread will fall and people will buy less bread.
4-12 If the cost of making Reverse Athletic Shoes falls, what result do you foresee?
A. While the price of Reverse shoes will fall, this is not all that will happen.
B. While the quantity of Reverse shoes sold will rise, this is not all that will happen.
C. While the price of Conbok shoes, a competing product, will fall, this is not all that will happen.
D. While the quantity sold of Conbok shoes, a competing product, will fall, this is not all that will happen.
4-13 If the cost of making Reverse Athletic Shoes falls, what result do you foresee?
A. Correct. As supply increases,the price of Reverse shoes will fall.
B. Incorrect. As supply increases,the quantity of Reverse shoes sold will rise.
C. Incorrect. As supply of Reverse increases, the price of Reverse will fall. The demand for Conbok shoes will thus fall, reducing their price.
D. Incorrect. As supply of Reverse increases, the price of Reverse will fall. The demand for Conbok shoes will thus fall, reducing their quantity sold.
E. Incorrect. Costs affect supply and thus price and quantity. This may affect other goods' demands as well.
4-14 The price of cigarettes has risen while the quantity of cigarettes smoked has fallen. What explanation can you suggest?
A. Incorrect. If both supply and demand rose, quantity would have risen while price stayed the same or changed very little.
B. If both supply and demand fell, quantity would have fallen while price stayed the same or changed very little. This might have happened (if price rose only slightly), but is not the best explanation.
C. Correct. If supply fell, that would explain the higher price and the lower quantity.
D. Incorrect. If demand fell, price would fall.
E. Incorrect. If demand rose, price would rise but so would quantity.
4-15 The supply of haxmatrivs has risen. Other things remaining the same, what will happen?
A. Incorrect. When supply changes, both price and quantity will be affected.
B. Incorrect. When supply changes, both price and quantity will be affected.
C. Incorrect. This is what we would expect if demand rose.
D. Correct. When supply increases, quantity sold will rise, but the price will fall.
E. Incorrect. This is what would happen if supply fell.
4-16 Changes in the demand for Purple Glop can occur because of all of the following except:
A. Incorrect. This is one of the factors influencing demand.
B. Correct. Changes in the price of Purple Glop will not change its demand, although they may change quantity demanded.
C. Incorrect. This is one of the factors influencing demand.
D. Incorrect. This is one of the factors influencing demand.
E. Incorrect. This is one of the factors influencing demand.
4-17 A good suddenly becomes fashionable. As a result, there will be
A. Incorrect. Changes in tastes will change demand, not just cause movement along the good's demand curve.
B. Incorrect. Changes in tastes will change demand, not just cause movement along the good's demand curve.
C. Correct. When a good is fashionable, the demand increases, causing a rightward shift in the demand curve for the good.
D. Incorrect. This makes no sense in terms of equilibrium.
E. Incorrect. Demand will increase, not decrease, as a leftward shift in the demand curve would imply.
4-18 The price of Purple Blop rises at the same time as the number of stores selling Purple Blop (and thus the quantity of Purple Blop sold) falls. Which is the best explanation?
A. Incorrect. If demand for Purple Blop has fallen, we would have seen the price fall and the quantity fall as well.
B. Incorrect. If the price of a substitute has risen, demand would have fallen, lowering both price and quantity.
C. Incorrect. If the price of a complement has fallen, demand would have fallen, lowering both price and quantity.
D. Correct.If the cost of producing Blop has risen, supply has fallen, thus increasing price and reducing quantity sold.
E. Incorrect. If the cost of producing Blop has fallen, supply would rise, causing the price to fall and quantity to rise.
4-19 Milk and Soft Dark Brown Snack Stuff are complements . If a change in supply causes the price of Soft Dark Brown Snack Stuff to rise, what will happen to the market for milk?
A. Incorrect. An increase in the price of a complement will not cause demand for milk will rise.
B. Correct. If a complement's price increases, demand for milk will fall.
C. Incorrect. Changes in a complement's price do not affect the supply of milk.
D. Incorrect. Changes in a complement's price do not affect the supply of milk.
E. Incorrect. Changes in a complement's price will affect demand.
4-20 Which of the following pairs is likely to be a pair of complements?
A. Incorrect. Aluminum foil and "Handi-Wrap" are substitutes.
B. Incorrect. Coca-Cola and Pepsi-Cola are substitutes.
C. Incorrect. Dryer's Ice Cream and Chevrolets are unrelated.
D. Incorrect. Twinkies and Snickers bars are probably substitutes.
E. Correct. Most people think Chips Ahoy Cookies and milk go together well.