ECON 6001 Economic Principles

Q2.    Imagine that, ceteris paribus, a cyclone has an adverse impact on the market for tomatoes. Consider the following statements and decide which are true. Record the correct combination from the possibilities listed below the list of statements

1. We can expect the post-cyclone price to be higher and quantity demanded of tomatoes to be lower.
2. We can expect the post-cyclone price and quantity of tomatoes to be lower.
3. We can expect the demand curve to shift to a lower level as a consequence of the rise in price brought about by the cyclone.
4. We can expect the quantity supplied to rise as a consequence of the rise in price.
5. The steeper the slope of the demand curve, the greater the rise in price that would result from the cyclone.
6. The new equilibrium will involve a move up and along the demand curve which means that the quantity demanded of tomatoes will fall.
7. The cyclone will cause a shortage of tomatoes at the pre-cyclone price.
8. We can expect the post-cyclone quantity to fall but price to remain constant.
9. A return to the original supply and demand conditions would create a surplus at the post-cyclone price.
10. The cyclone will result in a shift of both demand and supply curves. There is less supply because of the cyclone and less demand because prices rise.
11. If the government fixes the price at the pre-cyclone level after the cyclone occurs, a shortage will exist at that price.
12. The supply curve will become horizontal as a consequence of the cyclone.
13. If the supply curve is vertical, the cyclone will still lead to a rise in price and a fall in quantity demanded.
14. A cyclone coupled with a simultaneous rise in demand would definitely raise price but quantity would be indeterminate.
15. The cyclone will cause a surplus of tomatoes at the pre-cyclone price.

Choose the combination of statements that you think contains the largest number of TRUE statements.

A 1 3 7 9 12 13 14 15
B 1 5 6 7 9 11 13 14
C 1 4 5 6 9 10 11 13
D 2 3 4 6 7 8 14 15
E 2 3 5 7 10 11 12 14
F 2 3 4 6 8 10 12 15

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