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17. Which of the following changes will most likely result in c. The price of vanilla ice cream increases.
a decrease in the supply of guitars? d. New freezer technology lowers the cost of producing
a. The popularity of guitar music increases. ice cream.
b. Consumer incomes decrease. e. The price of ice cream toppings decreases.
c. A new firm enters the guitar industry. 24. Which of the following events will increase both the
d. The guitar-making process is reengineered to be price and the quantity of pizza?
more efficient. a. The price of mozzarella cheese increases.
e. The wages of guitar makers increase. b. New health hazards of eating pizza are widely
18. Which of the following will most likely result in a publicized.
decrease in the quantity of lemons demanded? c. The price of pizza ovens rises.
a. an increase in the price of lemons d. Consumers expect the price of pizza to fall next
b. an increase in the price of limes week.
c. an increase in the price of lemonade e. Consumer income falls and pizza is an inferior good.
d. an increase in the number of lemonade stands Use the following situation and diagram to answer Question 25.
e. a decrease in consumer income
19. Which of the following will occur if consumer incomes Price of corn
increase? (per bushel) S
a. The demand for inferior goods will increase. $5
b. The demand for normal goods will increase. 4
c. The demand for all goods will increase.
d. The demand for normal goods will decrease. 3 E
e. The demand for all goods will decrease. 2
20. If two goods are complements, an increase in the price 1
of one good will cause which of the following? D
a. a decrease in the demand for the other 0 800 1,000 1,200
b. a decrease in the quantity demanded of the other Quantity of corn (bushels)
c. an increase in the demand for the other
d. an increase in the quantity demanded of the other 25. What are the equilibrium price and quantity in the
e. no change in the demand for the other market for corn?
21. An increase in the wages of workers producing a good Price Quantity
will most likely lead to which of the following? a. $1 800
a. a decrease in the quantity of the good supplied b. $1 1,200
b. a decrease in the supply of the good c. $3 1,000
c. an increase in the quantity of the good supplied d. $5 800
d. an increase in the supply of the good e. $5 1,200
e. no change in the supply of the good
22. Which of the following is true at the equilibrium price Free-Response Questions
in a market? 1. Suppose the country of Lunchland produces only
a. Consumers who purchase the good may be better off peanut butter and jelly using resources that are not
buying something else instead. equally useful for producing both goods.
b. The market has not yet cleared. a. Draw a correctly labeled production possibilities
c. There is a tendency for the price to decrease over time. curve graph for Lunchland and label the following:
d. There may be either a surplus or a shortage of the good. i. point A, indicating an inefficient use of
e. The quantity demanded of the good equals the resources.
quantity supplied. ii. point B, indicating quantities of peanut butter
23. A survey indicated that chocolate is America’s favorite and jelly that are currently not possible.
ice cream flavor. Which of the following will lead to a b. Identify two things that could happen to enable
decrease in the price of chocolate ice cream? Lunchland to produce or consume the quantities
a. A drought in the Midwest causes farmers to reduce identified in part a (ii). (5 points)
the number of dairy cows they raise.
b. A new report from the American Medical Association
concludes that chocolate has significant health
benefits.

60 Macro • Unit 1 Basic Economic Concepts
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