Question 1

Suppose that in 2006,8 million cars were purchased at $15,000 each,while in 2007,10 million cars were purchased at $12,000 each.What might have caused this change?

Accepted Answer

An advance in automobile manufacturing technology could lead to a decrease in production costs, allowing manufacturers to sell more cars at a lower price, which explains the increase in quantity sold and the decrease in price from 2006 to 2007.

Question 2

As a result of advances in technology,cellular telephones have become cheaper to produce.Illustrate the effect of this change on the market for cellular telephones.

Accepted Answer

The answer of As a result of advances in technology,cellular...

Question 3

Suppose that a natural disaster substantially increases the cost of producing cheese.We would predict that the equilibrium quantity of cheese will ________ and the equilibrium price of cheese will ________.

Accepted Answer

With the increased cost of production, firms will supply less cheese at each price level, leading to a decrease in equilibrium quantity. This decrease in supply will also cause the equilibrium price of cheese to increase. Therefore, the correct answer is C, where the equilibrium quantity of cheese will decrease and the equilibrium price of cheese will increase.

Question 4

In the Application,what did the Justice Department identify as the explanation for why (illegal)drug prices have been dropping?

Accepted Answer

The answer of In the Application,what did the Justice Department...

Question 5

In the Application,what should we observe before we can undoubtedly attribute the lower drug prices to an increase in supply?

Accepted Answer

An increase in supply would lead to a shift in the supply curve to the right, which would result in a new equilibrium point with a higher quantity and potentially lower prices. Therefore, an increase in the equilibrium quantity would be an observation consistent with lower drug prices resulting from an increase in supply. A shortage (B) would indicate that the increase in supply was not sufficient to meet demand at the current prices, while a decrease in the equilibrium quantity (C) or a surplus (D) would not be consistent with lower drug prices resulting from an increase in supply.

Question 6

Additional factors beyond supply and consumer purchasing desire can affect demand.

Accepted Answer

Some additional factors that can affect demand include changes in consumer income, market trends, advertising and marketing campaigns, availability of related goods and services, and government policies and regulations.

Question 7

Suppose that the price of fertilizer,an input in the production of corn,rises.We would predict that the equilibrium quantity of corn will ________ and the equilibrium price of corn will ________.

Accepted Answer

An increase in the price of fertilizer will increase the cost of production of corn. Since the supply curve will shift to the left, the equilibrium quantity of corn will decrease. Since the demand curve remains the same, the equilibrium price of corn will increase.

Question 8

In the Application,what should we observe before we can undoubtedly attribute the lower drug prices to a decrease in demand?

Accepted Answer

If there has been a decrease in demand for the drug, we would expect to see a decrease in the equilibrium quantity. This is because at a lower price, there will be less demand for the drug and therefore less of it will be sold, resulting in a lower equilibrium quantity. A shortage or surplus may be indicative of other factors affecting the market, but are not necessarily related to changes in demand alone. An increase in the equilibrium quantity would not support the idea of lower drug prices being attributed to a decrease in demand.

Question 9

Suppose that a technological advancement substantially reduces the cost of producing cheese.We would predict that the equilibrium quantity of cheese will ________ and the equilibrium price of cheese will ________.

Accepted Answer

A technological advancement that reduces the cost of producing cheese would lead to an increase in the supply of cheese. This increase in supply, assuming demand remains constant, would result in a higher equilibrium quantity (as more cheese is available at every price level) and a lower equilibrium price (as suppliers are willing to accept lower prices to sell the increased quantity of cheese).

Question 10

If the equilibrium price of a good increases and the equilibrium quantity of the good decreases,we can conclude that:

Accepted Answer

An increase in equilibrium price and a decrease in equilibrium quantity indicates a decrease in supply. This is because at a higher price, producers are willing to supply more, but are only able to supply less due to a decrease in available inputs or other factors that limit production.

Question 11

Draw a graph to illustrate the effect of an increase in demand on the price and quantity in a market.

Accepted Answer

The answer of Draw a graph to illustrate the effect...

Question 12

In the Application,what did Ted Koppel identify as the explanation for why (illegal)drug prices have been dropping?

Accepted Answer

Ted Koppel identified an increase in the supply as the reason for the drop in illegal drug prices.

Question 13

If the equilibrium price of a good decreases and the equilibrium quantity of the good decreases,we can conclude that:

Accepted Answer

If the equilibrium price and quantity of a good both decrease, it generally indicates that demand has decreased. This could be due to a variety of factors, such as a decrease in consumer income or a shift in consumer preferences towards substitute goods.

Question 14

Suppose that in October the price of a cup of cafe latte was $1.50 and 400 lattes were consumed.In November the price of a latte was $2.00 and 200 lattes were consumed.What might have caused this change?

Accepted Answer

The increase in the price of the cafe latte and the decrease in its consumption suggest that the supply of cafe latte has reduced. The rise in the price of an input such as coffee beans used in the production of cafe lattes could lead to a decrease in its supply and thereby an increase in the price of cafe lattes. Therefore, option C, the rise in the price of coffee beans, is the best choice to explain the given scenario.

Question 15

Suppose that in October the price of a cup of cafe latte was $1.50 and 400 lattes were consumed.In November the price of a latte was $2.00 and 600 lattes were consumed.What might have caused this change?

Accepted Answer

The increase in price and quantity demanded of cafe lattes in November suggests that there was a shift in the demand curve for cafe lattes. One possible explanation for this shift could be that the price of tea (a substitute for cafe lattes) rose, making cafe lattes a relatively more attractive option for consumers. Alternatively, it could be due to an increase in consumer preferences for cafe lattes, leading to an increase in quantity demanded even at a higher price. However, the information given in the question does not provide any evidence for options C and D, as there is no information about changes in the costs of production of cafe lattes.

Question 16

Draw a graph to illustrate the effect of higher gasoline prices on the demand for large SUVs.What is the relationship between gasoline and SUVs?

Accepted Answer

The answer of Draw a graph to illustrate the effect...

Question 17

Lettuce and spinach are substitute goods.All else equal,if a spinach beetle destroys half of the nation's spinach crop,we predict that the equilibrium price of lettuce will ________ and the equilibrium quantity of spinach will ________.

Accepted Answer

Since lettuce and spinach are substitute goods, if the price of spinach increases due to a decrease in supply (caused by the beetle), consumers will switch to buying more lettuce instead. As a result, the demand for lettuce will increase, causing the price of lettuce to rise. However, the decrease in supply of spinach will cause its equilibrium quantity to fall as well.

Question 18

Lettuce and spinach are substitute goods.All else equal,if a spinach beetle destroys half of the nation's spinach crop,we predict that the equilibrium price of lettuce will ________ and the equilibrium price of spinach will ________.

Accepted Answer

Since lettuce and spinach are substitute goods, a decrease in the supply of spinach (due to the beetle destruction) will increase the demand for lettuce, raising its price. Simultaneously, the reduced supply of spinach will also increase its price.

Question 19

Suppose that in 2006,12 million cars were purchased at $15,000 each,while in 2007,10 million cars were purchased at $12,000 each.What might have caused this change?

Accepted Answer

A decrease in the price of airplane tickets, which are substitutes for cars, could lead to a decrease in car purchases as people might prefer flying over driving.

Question 20

If the cost of producing a good goes down,this will cause the equilibrium price of the good to go down and the equilibrium quantity of the good to go up.

Accepted Answer

When the cost of producing a good goes down, the supplier can offer the good at a lower price without reducing their profit margin. This will cause an increase in the quantity supplied, leading to a shift rightward in the supply curve. As a result, the equilibrium price of the good will decrease while the equilibrium quantity of the good will increase.

Quiz 4: Demand, supply, and Market Equilibrium

Suppose that in 2006,8 million cars were purchased at $15,000 each,while in 2007,10 million cars were purchased at $12,000 each.What might have caused this change?

As a result of advances in technology,cellular telephones have become cheaper to produce.Illustrate the effect of this change on the market for cellular telephones.

Suppose that a natural disaster substantially increases the cost of producing cheese.We would predict that the equilibrium quantity of cheese will and the equilibrium price of cheese will .

In the Application,what did the Justice Department identify as the explanation for why (illegal) drug prices have been dropping?

In the Application,what should we observe before we can undoubtedly attribute the lower drug prices to an increase in supply?

Additional factors beyond supply and consumer purchasing desire can affect demand.

Suppose that the price of fertilizer,an input in the production of corn,rises.We would predict that the equilibrium quantity of corn will and the equilibrium price of corn will .

In the Application,what should we observe before we can undoubtedly attribute the lower drug prices to a decrease in demand?

Suppose that a technological advancement substantially reduces the cost of producing cheese.We would predict that the equilibrium quantity of cheese will and the equilibrium price of cheese will .