A new technology for harvesting/processing apples would shift the supply curve outward, which would necessarily result in a lower market price for apples.

Incorrect answers:

• Talk show host increases demand => higher price
• Price of substitute increases => higher demand => higher price
• Wages increase => lower supply. Lower incomes => lower demand. Net result is lower quantity, ambiguous change in price.

Inferior goods are those which a consumers uses less of when his income increases. They tend to be goods which have a higher-quality substitute that becomes affordable as income increases. For John, the train ride may be a faster or more comfortable alternative to the bus ride.

Carol's income has increased and she subsequently buys more apples and oranges. Therefore, apples and oranges are normal goods for her.

The first sentence is also true for superior goods. However, a superior good is one in which the proportion of a consumer's budget for a certain good increases with an increase in income. Carol received a 25% raise and subsequently bought 25% more apples and 20% more oranges. Thus, they are normal goods but not superior goods.

You can infer simply from the decreasing market price that the firm is a price-setter and thus not a price-taker nor in a perfectly competitive market. Of the choices given, that would imply a monopoly, which we would expect to make both an accounting profit and an economic profit.

You can even calculate the marginal revenue so that the MR curve would be declining as characteristic of a monopolist.

In any market structure, firms will produce where marginal revenue = marginal cost. You can use total variable cost and price to deduce both of these figures for this firm (fixed costs are not relevant in the production decision).

The firm's average total costs are decreasing throughout this range. Therefore, there are increasing returns to scale within this range.

This question refers to Alex's opportunity cost of producing apple juice. If he specialized completely in apple juice he could make twice as much as if he specialized completely in orange juice. Therefore, each gallon of apple juice costs him 1/2 gallon of foregone production in orange juice.

If they both produce only one type of juice, Alex can produce more for both apple juice and orange juice. Therefore he has an absolute advantage in for both and neither of the answers dealing with absolute advantage fit.

Let's look at Alex and Carl's relative cost of producing each juice:

Opportunity cost to Alex of producing:

Apple juice - 1/2 gallon orange juice

Orange Juice - 2 gallons apple juice

Opportunity cost to Carl of producing:

Apple juice - 4/3 gallon of orange juice

Orange juice - 3/4 gallon of apple juice

While Alex is more efficient at producing both types of juice from an absolute perspective, it costs him 2 gallons of apple juice to produce 1 gallon of orange juice, compared to Carl, who forgoes only 3/4 gallon of apple juice to produce a gallon of orange juice. Carl has the comparative advantage in producing orange juice. (Alex has the comparative advantage in apple juice, 1/2 gallon vs. 4/3 gallons.)

Electric guitars are a likely substitute for acoustic guitars. If the price of electric guitars goes down, more consumers are likely to buy them instead of acoustic and fewer acoustic guitars will be demanded at any price.

This is an inward shift of the demand curve, which results in a lower equilibrium price and quantity when you graph it.