Page 850 - Krugmans Economics for AP Text Book_Neat

S-4 SOLUTIONS TO AP REVIEW QUESTIONS

c. The demand for roses increases the week of Valentine’s c. Demand increases, so the demand curve for second-hand
Day. This is a rightward shift of the demand curve. snowblowers shifts rightward. At the original equilibrium
d. The quantity of gasoline demanded falls in response to a price, the quantity of second-hand snowblowers demand-
rise in price. This is a movement along the demand curve. ed exceeds the quantity supplied. This is a case of short-
Tackle the Test: age. The equilibrium price of second-hand snowblowers
will rise.
Multiple-Choice Questions
1. e Tackle the Test:
2. a Multiple-Choice Questions
3. c 1. d
4. d 2. d
5. a 3. c
Tackle the Test: 4. b
Free-Response Question 5. d
2. Price of apples
Tackle the Test:
Free-Response Question
2. Price of
oranges S 2
S 1

P 2 E 2
D 2
P 1 E 1
D 1
Quantity of apples
D
Module 6
Q 2 Q 1 Quantity of oranges
Check Your Understanding
1. a. The quantity of houses supplied rises as a result of an Module 7
increase in prices. This is a movement along the supply
curve. Check Your Understanding
b. The quantity of strawberries supplied is higher at any
given price. This is an increase in supply, which shifts the 1. a. The decrease in the price of gasoline caused a rightward
supply curve to the right. shift in the demand for large cars. As a result of the
c. The quantity of labor supplied is lower at any given wage. shift, the equilibrium price of large cars rose and the
This is a decrease in supply, which shifts the supply curve equilibrium quantity of large cars bought and sold
leftward compared to the supply curve during school also rose.
vacation. So, in order to attract workers, fast-food chains b. The technological innovation has caused a rightward shift
have to offer higher wages. in the supply of fresh paper made from recycled stock. As
d. The quantity of labor supplied rises in response to a rise a result of this shift, the equilibrium price of fresh paper
in wages. This is a movement along the supply curve. made from recycled stock has fallen and the equilibrium
e. The quantity of cabins supplied is higher at any given quantity bought and sold has risen.
price. This is an increase in supply, which shifts the supply c. The fall in the price of pay-per-view movies causes a left-
curve to the right. ward shift in the demand for movies at local movie the-
aters. As a result of this shift, the equilibrium price of
2. a. This is an increase in supply, so the supply curve shifts
rightward. At the original equilibrium price of the year movie tickets falls and the equilibrium number of people
before, the quantity of grapes supplied exceeds the quan- who go to the movies also falls.
tity demanded, and the result is a surplus. The price of 2. Upon the announcement of the new chip, the demand
grapes will fall. curve for computers using the earlier chip shifts leftward
b. This is a decrease in demand, so the demand curve (demand decreases), and the supply curve for these com-
shifts leftward. At the original equilibrium price, the puters shifts rightward (supply increases).
quantity of hotel rooms supplied exceeds the quantity a. If demand decreases relatively more than supply
demanded. The result is a surplus. The rates for hotel increases, then the equilibrium quantity falls, as shown
rooms will fall. here: