Please Explain in details why the answer is B for question (39). (39) Which of t
ID: 1099720 • Letter: P
Question
Please Explain in details why the answer is B for question (39).
(39)
Which of the following is consistent with an increase (rightward shift) in supply?
A) The state increases taxes on businesses.
B) The prices of other goods the seller produces is expected to fall.
C) Firms selling the goods go bankrupt and exit the market.
D) The costs of employing a key resource in production rises.
Please Explain why the answer is B for question (40)
(40)
A good is a normal good if:
A) normal people buy it when the price goes up.
B) the demand curve shifts out if income goes up.
C) the demand curve shifts back if income goes up.
D) the demand curve shifts only when the GDP changes.
Explanation / Answer
39) An increase in supply can be attributed to many different scenarios. Answer "A" is incorrect because when taxes increase on a business this has the potential to drive companies out of business. This would lead to a decrease in supply. Answer "C" is also incorrect since a firm who was selling the product exits the market their will be less of the product supplied. Answer "D" is also incorrect because supply will decrease due to the increase in price of production. Firms will be less likely to produce more since it costs more. Answer "B" is correct because if the price of a good the producer makes is expected to fall this will increase in the amount demanded by the customer which will result in an increase in supply.
40) A simple definition for a normal good is: if your income goes up or you make more money then the demand for a good increases. A good example of this is going out to a restaurant for a meal. When you make more money or your income increases the demand will increase for going out to eat due to excess money. Since this is the definition of a normal good Answer "B" is correct. The demand curve shifts out (increases) for this particular good when income rises which agrees with our definition. Answer "C" is incorrect since demand decreased or shifted back when income went up. Answer "D" does not make sense in the context of the question since other factors affect the demand curve. Answer "A" is also incorrect due to the definition of a normal good.