Suppose there are seven coffee shops located on the same busy street. If two of the coffee shops

Suppose there are seven coffee shops located on the same busy street. If two of the coffee shops close, which of the following will occur, all else remaining the same?

Correct Answer(s)

The supply of coffee will decrease.

The price of coffee will increase.

Incorrect Answer(s)

The supply of coffee will increase, since the remaining shops will sell more than before.

The demand for coffee will decrease.

Suppose the government believes that there are too many cigarettes in the market. Which of the following policies could the government implement to decrease the supply of cigarettes?

Correct Answer(s)

Tax the tobacco crop.

Tax the manufacturing of cigarettes.

Incorrect Answer(s)

Subsidize tobacco farmers, thus lowering the price of tobacco.

Tax consumers on the purchase of cigarettes.

Place in order the stages of a market experiencing a shortage and then regaining equilibrium.

1)      A popular celebrity endorses a product.

2)      Demand for the product increases.

3)      More items are purchased than are being manufactured.

4)      Sellers raise prices, which causes a partial but not complete pullback of demand.

5)      Sellers use increased revenue to fund increased production.

6)      Supply again matches demand.