Page 112 - Krugmans Economics for AP Text Book_Neat

Tackle the Test: Multiple-Choice Questions
1. Which of the following will decrease the supply of good “X”? c. an increase in textbook supply
a. There is a technological advance that affects the production d. a movement along the supply curve for textbooks
of all goods. e. an increase in textbook prices
b. The price of good “X” falls.
4. Which of the following is true at equilibrium?
c. The price of good “Y” (which consumers regard as a
a. The supply schedule is identical to the demand schedule at
substitute for good “X”) decreases.
every price.
d. The wages of workers producing good “X” increase.
b. The quantity demanded is the same as the quantity
e. The demand for good “X” decreases.
supplied.
2. An increase in the demand for steak will lead to an increase in c. The quantity is zero.
which of the following? d. Every consumer who enjoys the good can consume it.
a. the supply of steak e. Producers could not make any more of the product
b. the supply of hamburger (a substitute in production) regardless of the price.
c. the supply of chicken (a substitute in consumption)
5. The market price of a good will tend to rise if
d. the supply of leather (a complement in production)
a. demand decreases.
e. the demand for leather
b. supply increases.
3. A technological advance in textbook production will lead to c. it is above the equilibrium price.
which of the following? d. it is below the equilibrium price.
a. a decrease in textbook supply e. demand shifts to the left.
b. an increase in textbook demand

Tackle the Test: Free-Response Questions

1. Draw a correctly labeled graph showing the market for tomatoes 2. Draw a correctly labeled graph showing the market for oranges
in equilibrium. Label the equilibrium price “P E ” and the in equilibrium. Show on your graph how a hurricane that
equilibrium quantity “Q E .” On your graph, draw a horizontal line destroys large numbers of orange groves in Florida will affect
indicating a price, labeled “P C ”, that would lead to a shortage of supply and demand, if at all.
tomatoes. Label the size of the shortage on your graph.

Answer (6 points)
Price
S

P E
E
P
C
Shortage D

Q Quantity
E
1 point: Graph with the vertical axis labeled “Price” or “P” and the horizontal
axis labeled “Quantity” or “Q”

1 point: Downward sloping demand curve labeled “Demand” or “D”
1 point: Upward sloping supply curve labeled “Supply” or “S ”
1 point: Equilibrium price “P E ” labeled on the vertical axis and quantity “Q E ”
labeled on the horizontal axis at the intersection of the supply and demand curves
1 point: Price line at a price “P C ” below the equilibrium price
1 point: Correct indication of the shortage, which is the horizontal distance
between the quantity demanded and the quantity supplied at the height of P C

70 section 2 Supply and Demand