Practice Test 1
1. Computer hardware and software are complements. Both goods are traded in perfectly
competitive markets. Suppose there is a reduction in the costs of making microchips for
computer hardware. The consequence of this change on the hardware and software markets will
be:
a) An increase in the equilibrium price of hardware, and decrease in equilibrium quantity of
software traded
b) A decrease in equilibrium price of hardware, and an increase in equilibrium price of software
c) An increase in equilibrium quantity of hardware traded, and a decrease in equilibrium
quantity of software traded
d) A decrease in equilibrium quantity of hardware traded, and a decrease in equilibrium
quantity of software traded
e) A decrease in equilibrium price of hardware, and a decrease in equilibrium quantity of
software traded
2. Suppose beer is an inferior good, and wine is a normal good and both goods are traded in
perfectly competitive markets. If there is a decrease in consumer income, what would be the
likely effect of this change on the beer and wine markets?:
