Question 1

Which of the following will reduce the supply of motorcycles?

Accepted Answer

An increase in taxes on motorcycle producers will increase the cost of producing motorcycles, which will reduce the supply of motorcycles in the market.

Question 2

Which of the following will lead to a decrease in supply of a good?

Accepted Answer

An increase in the price of an important resource used to produce the good will increase the cost of production and therefore decrease the supply of the good. A, B, and D are all factors that would lead to an increase in supply.

Question 3

In which statement(s) are "supply" and "quantity supplied" used correctly? (I) "An increase in the price of toasters will increase the quantity supplied of toasters."
(II) "A technological advance that lowers the cost of producing toasters will increase the supply of toasters."

Accepted Answer

In statement I, "quantity supplied" is used correctly to refer to the specific amount of toasters that producers are willing and able to sell at a given price. 
In statement II, "supply" is used correctly to refer to the overall amount of toasters that producers are willing and able to sell at various prices due to the decrease in production costs from the technological advance.

Question 4

In which statement(s) is "supply" used correctly? (I) "An increase in the price of flour will increase the supply of flour."
(II) "As the cost of producing flour rises, the supply of flour will tend to fall."

Accepted Answer

In statement II, "supply" is used correctly as it refers to the amount of flour that producers are willing and able to offer for sale at a given price. In statement I, "supply" is used incorrectly as an increase in price would decrease the quantity of flour supplied (i.e. decrease the quantity producers are willing and able to offer for sale at a given price), not increase it. The correct term to use in statement I would be "quantity supplied."

Question 5

Which of the following would most likely cause the supply of wheat to increase?

Accepted Answer

A technological advance that lowers the cost of producing wheat would make it easier and less expensive for farmers to produce wheat, leading to an increase in the supply of wheat. Choice A would not directly affect the supply of wheat, but may cause a shift in demand from corn to wheat. Choice C would cause a decrease in supply due to higher costs. Choice D relates to consumer preferences, which would impact demand rather than supply.

Question 6

Which of the following would reduce the supply of baseball hats?

Accepted Answer

Imposing a new tax on the producers of baseball hats would increase the cost of producing the hats, thus reducing the supply. An increase in demand or a reduction in the cost of production would increase the supply. Therefore, options A and C would not decrease the supply of baseball hats.

Question 7

How will a reduction in the price of cotton influence the market for blue jeans?

Accepted Answer

A reduction in the price of cotton would lower the cost of production for blue jeans, leading to a decrease in the supply curve for blue jeans. This would shift the supply curve for blue jeans to the right, as more blue jeans can be produced at each given price level. As a result, the equilibrium price for blue jeans would fall, and the quantity of blue jeans supplied and demanded in the market would increase.

Question 8

If a major hurricane were to destroy the sugarcane crop in Louisiana, there would be

Accepted Answer

A major hurricane destroying the sugarcane crop in Louisiana would lead to a decrease in the supply of sugarcane. This is because there would be less sugarcane available for sale and distribution in the market, which would ultimately lead to higher prices for the remaining supply.

Question 9

In a competitive market economy, a resource in short supply will be allocated

Accepted Answer

In a competitive market economy, resources in short supply will be allocated to those firms that can make the most profitable use of it. This is because businesses that can make a higher profit from the resource will be willing to pay more for it, which will drive the price up and discourage less efficient firms from using it. This market-based allocation system encourages businesses to be efficient and innovative in their use of scarce resources. This is in contrast to government regulation (option D) which involves the government directly controlling the allocation of resources, which can lead to inefficiencies and distortions in the market. Option A is not true because firms with less efficient processes will not be prioritized in the allocation of scarce resources. Option B is not accurate as the amount purchased before the shortage is irrelevant to the allocation of the resource in short supply.

Question 10

What impact would a severe drought that destroys the wheat crop in several areas of the United States have on the market for wheat?

Accepted Answer

A severe drought that destroys the wheat crop in several areas of the United States would decrease the supply of wheat, as there would be less wheat available for sale in the market. This would likely lead to an increase in the price of wheat, as consumers would be willing to pay more for the reduced supply. However, if the demand for wheat remains constant, the market for wheat would likely become more competitive as suppliers try to meet the demand with a smaller supply, potentially leading to long-term price increases for wheat.

Question 11

Graphically, what impact would an increase in the price of jet fuel have on the market for air travel?

Accepted Answer

An increase in the price of jet fuel would increase the costs of operating airlines and lead to a decrease in the profitability of offering air travel services. This would cause airlines to reduce their supply of air travel, shifting the supply curve to the left. As a result, the equilibrium price and quantity of air travel would both decrease. Therefore, the correct answer is B.

Question 12

How will an increase in lumber prices influence the home construction market?

Accepted Answer

An increase in lumber prices will increase the cost of building a home, which means that fewer homes will be constructed due to the higher production costs. This decrease in the supply of newly constructed homes will result in a decrease in the overall supply, making it more challenging for buyers to find an affordable home.

Question 13

A decrease in the price of leather used to make shoes would cause the

Accepted Answer

When the price of leather decreases, it becomes cheaper for shoe manufacturers to produce shoes. This leads to an increase in the supply of shoes as more can be produced and sold at a lower cost. As a result, the supply curve shifts to the right. This, in turn, will cause a decrease in the equilibrium price of shoes (assuming demand stays constant) and an increase in the quantity of shoes demanded. Therefore, the correct answer is D - a decrease in the price of leather used to make shoes would cause the supply of shoes to increase.

Question 14

Which of the following would increase the supply of laptop computers?

Accepted Answer

A technological improvement that lowers the cost of producing laptop computers would decrease the cost of production and therefore increase supply. Higher wage rates for workers would increase the cost of production and decrease supply. An increase in the price of computer chips would increase the cost of production and decrease supply.

Question 15

If the United Auto Workers union can obtain a substantial wage increase for auto workers, there will be

Accepted Answer

If the United Auto Workers union obtains a substantial wage increase for auto workers, it will increase the cost of production for automobile companies. As a result, automobile companies will have to increase the price of their vehicles to maintain their profit margins. This will lead to a decrease in the quantity demanded of automobiles, resulting in a shift to the left of the demand curve. As a result, there will be a decrease in the supply of automobiles, which is a shift to the left of the supply curve. Therefore, the correct answer is choice B.

Question 16

When economists say the quantity supplied of a product has decreased, they mean the

Accepted Answer

The answer of When economists say the quantity supplied of...

Question 17

In the orange market, what impact would an increase in the price of oil that orange growers burn to keep oranges from freezing in the winter have on the market?

Accepted Answer

An increase in the price of oil would increase the cost of production for orange growers, leading to a higher cost of producing oranges. This would cause a decrease in supply, hence, shifting the supply curve to the left. As a result, the equilibrium price would increase, leading to a decrease in demand.

Question 18

Which of the following occurs when a shortage occurs in the market for a good?

Accepted Answer

When a shortage occurs in the market for a good, quantity demanded exceeds quantity supplied. This leads to a situation where there are not enough goods to meet the demand, which in turn causes prices to rise. As prices rise, producers are encouraged to produce more to take advantage of the higher profit margins, while consumers are discouraged from consuming as much due to the higher prices. This leads to increased production and decreased consumption, eventually helping to resolve the shortage.

Question 19

Other things constant, which of the following would most likely cause the supply of garden hoses to decrease?

Accepted Answer

With an increase in the price of plastic used to make garden hoses, the cost of producing garden hoses will increase. Therefore, firms will likely find it unprofitable to produce as many garden hoses as before, leading to a decrease in their supply.

Question 20

Which of the following would most likely increase the supply of beef?

Accepted Answer

If the prices of grains used to feed cattle decrease, it becomes less expensive for farmers to produce beef. This makes it more profitable for them to produce and sell beef, which would increase the supply.

Quiz 3: Demand, Supply, and the Market Process