Multiple Choice and Explanation
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1. C 2. C 3. C 4. A 5. C |
6. E 7. C 8. A 9. B 10. A |
11. D 12. B 13. C 14. C 15. B |
Short
Answer and Analysis
a) ABC’s price is too low – results in shortage
b) Raise price of bins to eliminate shortage (between $35 and $40)
c) Rise in price of bins will not affect demand
for its bins, but the quantity of bins demanded
will fall.
(movement up along demand curve)
d) Other storage bins are substitutes for ABC’s bins. If competitors’ raise price of their bins, consumers switch to relatively cheaper ABC bins and the demand for ABC bins subsequently increases. (demand for ABC bins shifts out to the right - which raises equilibrium price and quantity supplied. Even though question indicates a fixed number of bins exist, there will be adjustment in next time frame - which you'll recall is what demand and supply graphs illustrate (a point in time).
