1. The price of coffee increases and this decreases the demand for muffins. If the cross-price elasticity is negative that means these two goods are __________________.

a. Inputs in production

b. Complements

c. Inelastic

d. Substitutes

2.You go to a movie theater and want to order popcorn, but aren't sure about which size to get. The small popcorn is $5, the medium is $8 and the large is $9. If the movie theater wants you to buy the large popcorn, then the medium is the decoy.

a. False, there is no decoy size since all popcorn sizes will be purchased by different people.

b. False, the medium popcorn is the anchor price.

c. True, the medium is almost the same price, so the large seems like a better deal by comparison

d. False, the small size is the decoy since it is the cheapest

3. Consider the market for Cell Phones. If the cell phone factories are damaged in an earthquake and cannot produce as many phones, this will cause a _______, and prices will ______.

a. Shift supply to the right; decrease

b. Movement along the supply curve; increase

c. Shift supply to the left; increase

d. Movement along the supply curve; decrease