Question 1

Figure 4.7
-If supply increases in Figure 4.7,then the equilibrium:

Accepted Answer

If supply increases, there will be a surplus of goods at the initial price, leading to a decrease in price to reach a new equilibrium point where quantity demanded equals quantity supplied. This will result in a lower price and a higher quantity, so the correct answer is C - price falls and quantity rises.

Question 2

Figure 4.7
-If demand and supply rise in Figure 4.7,then the equilibrium:

Accepted Answer

When both demand and supply rise, the equilibrium quantity will definitely increase. However, the effect on price is ambiguous. If the increase in demand is larger than the increase in supply, the price will rise. If the increase in supply is larger than the increase in demand, the price will fall. Therefore, the best choice is option C: quantity rises.

Question 3

If there is an advance in the technology used to produce a product,what is the likely effect it may have on the supply?

Accepted Answer

An advance in technology used to produce a product would likely make the manufacturing process more efficient and less expensive, resulting in a lower cost of production. This would allow the company to increase their supply of the product, as they can produce more at a lower cost, leading to a higher quantity supplied at any given price point. Therefore, the answer is D, it would increase the supply.

Question 4

If sellers have an expectation of lower future prices:

Accepted Answer

If sellers expect lower future prices, they may try to sell more of the good now to capture higher prices before they fall in the future. This would result in an increase in the current supply of the good.

Question 5

Peaches and cream are complements.When the price of peaches falls and the price of raw milk (used to make cream)rises:

Accepted Answer

When the price of peaches falls, demand for cream (a complement) increases, potentially raising its price. However, if the price of raw milk (an input for cream) rises, the supply of cream might decrease, increasing its price further. The quantity of cream could either rise due to increased demand or fall due to decreased supply, making the outcome uncertain.

Question 6

Figure 4.7
-If demand increases in Figure 4.7,then the equilibrium:

Accepted Answer

When demand increases, the demand curve shifts to the right, intersecting with the supply curve at a higher price and quantity. This means that both price and quantity will rise, resulting in a new equilibrium point.

Question 7

If sellers have an expectation of higher future prices:

Accepted Answer

If sellers have an expectation of higher future prices, they are likely to hold onto their current supply and wait for the price to increase before selling. This means that the current supply of that good will decrease.

Question 8

An increase in supply of a product results when:

Accepted Answer

An increase in supply of a product can result from any of the listed factors or a combination of them. When more companies produce the product, the overall supply of the product in the market increases. Reduced input costs for the producing companies can also lead to an increase in supply as they are able to produce more at a lower cost. Technological innovations can also increase the production efficiency of the companies, leading to an increased supply of the product. Therefore, all of the above factors can contribute to an increase in supply of a product.

Question 9

Figure 4.7
-If demand falls in Figure 4.7,then the equilibrium:

Accepted Answer

When demand falls, both the equilibrium price and quantity decrease. This is because a lower demand shifts the demand curve to the left, leading to a lower price and quantity at the new equilibrium point.

Question 10

Figure 4.5
-Figure 4.5 illustrates the supply of guitars.If firms expect the price of guitars to go up after Christmas,then before Christmas this would most likely cause a movement from:

Accepted Answer

If firms expect higher future prices, they may decrease current supply to sell more later, shifting the supply curve leftward from S1 to S2.

Question 11

Suppose that a new advertising campaign extolling the virtues of apple juice is successful and a major freeze destroys half of the country's apple crop.What happens to the price and quantity of apple juice?

Accepted Answer

With a successful advertising campaign, demand for apple juice increases. However, with the decrease in supply due to the crop freeze, the equilibrium price of apple juice rises. The equilibrium quantity of apple juice may rise or fall, as it depends on the magnitude of the increase in price and the responsiveness of demand. Nevertheless, the increase in price will likely lead to a decrease in quantity demanded by some consumers. Therefore, the most likely outcome is a rise in equilibrium price and a decrease in equilibrium quantity.

Question 12

Figure 4.5
-Figure 4.5 illustrates the supply of guitars.If the government offered a subsidy to guitar manufacturers for each guitar they produce,this would most likely cause a movement from:

Accepted Answer

A subsidy to guitar manufacturers would reduce the cost of production, leading to an increase in supply, represented by a shift from S1 to S2.

Question 13

Figure 4.7
-If demand decreases and supply increases in Figure 4.7,then the equilibrium:

Accepted Answer

When demand decreases and supply increases, the market will experience a surplus, causing prices to fall in order to increase demand and decrease supply until a new equilibrium is reached. This means that the quantity will also increase, as suppliers will be willing and able to produce more at a lower price.

Question 14

Figure 4.7
-If demand and supply decrease in Figure 4.7,then the equilibrium:

Accepted Answer

If both demand and supply decrease, the equilibrium point shifts to the left, resulting in a decrease in both price and quantity. Therefore, the best choice is D.

Question 15

Bananas and apples are substitutes.When the price of bananas rises and a technological advance in apple production occurs at the same time:

Accepted Answer

When the price of bananas rises, consumers will switch to apples, increasing the demand for apples. Simultaneously, a technological advance in apple production increases the supply of apples. The increased demand raises the price, while the increased supply tends to lower the price. The net effect on price is uncertain without more information. However, both effects lead to an increase in the equilibrium quantity of apples.

Question 16

Figure 4.7
-If supply decreases in Figure 4.7,then the equilibrium:

Accepted Answer

In Figure 4.7, a decrease in supply would result in a shift of the supply curve to the left, causing the equilibrium point to move from point A to point B. At point B, the price is higher than the original equilibrium price but the quantity is lower, indicating that price has risen and quantity has fallen. Therefore, the correct answer is B.

Question 17

Peaches and cream are complements.When the price of peaches rises and the price of raw milk (used to make cream)rises:

Accepted Answer

When the price of peaches rises, demand for cream (a complement) decreases, leading to a potential decrease in cream's price and quantity. A rise in the price of raw milk (an input for cream) increases production costs, potentially reducing supply, which might increase price but decrease quantity. Thus, the equilibrium quantity of cream falls, and the equilibrium price might rise or fall, reflecting the combined effects of changes in demand and supply.

Question 18

Bananas and apples are substitutes.When the price of bananas falls and a technological advancement in apple production occurs at the same time:

Accepted Answer

When the price of bananas falls, consumers will switch to bananas as a substitute for apples, causing the demand for apples to fall. At the same time, the technological advancement in apple production will increase the supply of apples. The decrease in demand and increase in supply will cause the equilibrium price of apples to fall. However, the effect on equilibrium quantity of apples is ambiguous and depends on the magnitude of the shift in demand and supply. Thus, the equilibrium quantity of apples might rise or fall.

Question 19

Suppose that a new study is released stating that consumption of orange juice (a substitute for apple juice)reduces the risk of cancer and a major freeze destroys half of the country's apple crop.What happens to the price and quantity of apple juice?

Accepted Answer

The new study that consumption of orange juice reduces the risk of cancer may lead some consumers to switch from apple juice to orange juice, which could decrease the demand for apple juice and lead to a fall in price. However, the major freeze that destroys half of the country's apple crop will decrease the supply of apple juice, which could lead to an increase in price. Therefore, the price of apple juice might rise or fall and the quantity of apple juice falls.

Question 20

Suppose that the government requires that farms use only animals instead of machinery when planting and harvesting corn.This will result in a(n):

Accepted Answer

Requiring farms to use only animals instead of machinery will increase the cost of production for farmers, making it more expensive to produce and supply corn. This will result in a decrease in the supply of corn because farmers will be less willing and able to produce and sell the same quantity of corn at a higher cost.

Quiz 4: Demand, supply, and Market Equilibrium

Figure 4.7 -If supply increases in Figure 4.7,then the equilibrium:

Figure 4.7 -If demand and supply rise in Figure 4.7,then the equilibrium:

If there is an advance in the technology used to produce a product,what is the likely effect it may have on the supply?

If sellers have an expectation of lower future prices:

Peaches and cream are complements.When the price of peaches falls and the price of raw milk (used to make cream) rises:

Figure 4.7 -If demand increases in Figure 4.7,then the equilibrium:

If sellers have an expectation of higher future prices:

An increase in supply of a product results when:

Figure 4.7 -If demand falls in Figure 4.7,then the equilibrium:

Figure 4.5 -Figure 4.5 illustrates the supply of guitars.If firms expect the price of guitars to go up after Christmas,then before Christmas this would most likely cause a movement from:

Suppose that a new advertising campaign extolling the virtues of apple juice is successful and a major freeze destroys half of the country's apple crop.What happens to the price and quantity of apple juice?

Figure 4.5 -Figure 4.5 illustrates the supply of guitars.If the government offered a subsidy to guitar manufacturers for each guitar they produce,this would most likely cause a movement from:

Figure 4.7 -If demand decreases and supply increases in Figure 4.7,then the equilibrium:

Figure 4.7 -If demand and supply decrease in Figure 4.7,then the equilibrium:

Bananas and apples are substitutes.When the price of bananas rises and a technological advance in apple production occurs at the same time:

Figure 4.7 -If supply decreases in Figure 4.7,then the equilibrium:

Peaches and cream are complements.When the price of peaches rises and the price of raw milk (used to make cream) rises:

Bananas and apples are substitutes.When the price of bananas falls and a technological advancement in apple production occurs at the same time:

Suppose that a new study is released stating that consumption of orange juice (a substitute for apple juice) reduces the risk of cancer and a major freeze destroys half of the country's apple crop.What happens to the price and quantity of apple juice?

Suppose that the government requires that farms use only animals instead of machinery when planting and harvesting corn.This will result in a(n) :