1. Suppose that demand and supply can be represented by the equations Q^D = 35 - P and Q^S = -5 + 3P, respectively. If the price is currently equal to $15, then there exists ________ and the price is likely to ________.

A) a shortage; rise

B) a shortage; fall

C) equilibrium; remain the same

D) a surplus; rise

E) a surplus; fall

2. You own a bookstore, and you can sell 55 copies per day of the latest Margaret Atwood novel when the price is $40. If you lower the price to $30, this will increase the quantity sold to 65 books per day. The demand for the Margaret Atwood novel is ________ and total expenditure will ________ if the price is lowered.

A) inelastic; fall

B) elastic; rise

C) inelastic; rise

D) elastic; fall

E) unit elastic; stay the same

3. Refer to the figure below.