Question 1

The market for chewing gum is in equilibrium with a current price of 50 cents per pack and a quantity of 100,000 packs per day. Which of the following events is most likely to result in a new equilibrium price of 75 cents and a new equilibrium quantity of 125,000 packs, the supply curve for chewing gums remaining unchanged?

Accepted Answer

An increase in the price of other kinds of candy would likely cause consumers to substitute towards chewing gum, increasing the demand for chewing gum. This would result in a higher equilibrium price and quantity if the supply remains unchanged.

Question 2

Suppose the market for coffee is initially in equilibrium. If the tea harvest is bad in a particular year, then identify the most likely impact on the equilibrium price and quantity of coffee.

Accepted Answer

A bad tea harvest would likely increase the demand for coffee as a substitute, leading to an increase in both the equilibrium price and quantity of coffee.

Question 3

Suppose the market for a good is initially in equilibrium. For a given upward-sloping supply curve, all other things remaining unchanged, an increase in demand will typically _____

Accepted Answer

An increase in demand shifts the demand curve to the right. This results in a new equilibrium point with a higher quantity demanded and a higher price. Therefore, both the equilibrium quantity and equilibrium price increase.

Question 4

Suppose the market for a good is initially in equilibrium. Which of the following is most likely to occur if both the demand for and the supply of the good increases during a particular point in time?

Accepted Answer

An increase in both demand and supply will result in an increase in the equilibrium quantity, as both factors push the market towards producing and consuming more of the good. The effect on equilibrium price is uncertain and will depend on the relative magnitude of the increases in demand and supply. If the increase in demand is relatively larger than the increase in supply, we would expect an increase in both equilibrium price and quantity. If the increase in supply is relatively larger, we would expect a decrease in equilibrium price and an increase in equilibrium quantity. However, since the question does not provide information on the relative magnitudes of the shifts, it is safest to choose the answer that is more certain, which is C.

Question 5

Exhibit 4.6
 
-For a given downward-sloping demand curve, all other things remaining constant, a decrease in supply will cause a(n) _____

Accepted Answer

A decrease in supply leads to a higher equilibrium price, causing a movement along the demand curve, resulting in a decrease in quantity demanded.

Question 6

Exhibit 4.6
 
-For a downward-sloping demand curve, all other things remaining constant, a rightward shift of the supply curve _____

Accepted Answer

A rightward shift of the supply curve will decrease the equilibrium price and increase the equilibrium quantity for a downward-sloping demand curve. This is because the increase in supply will cause a surplus, which leads to a decrease in price until the market reaches a new equilibrium point with a higher quantity demanded.

Question 7

Exhibit 4.6
 
-Suppose the market for kids' shoes is initially in equilibrium. For a given upward-sloping supply curve, other things being equal, an increase in the price of Velcro which is used as fasteners for kids' shoes will result in a(n) _____

Accepted Answer

An increase in the price of Velcro will increase the cost of production for shoe manufacturers. As a result, the supply curve will shift upward, leading to a higher equilibrium price and a lower equilibrium quantity of shoes. Therefore, the correct answer is an increase in the equilibrium price but a decrease in the equilibrium quantity of shoes (Choice C).

Question 8

Suppose the price of compact disks (CDs) increases, other things equal. Which of these is most likely to occur in the market for DVDs, a substitute?

Accepted Answer

If the price of CDs increases, consumers would switch to buying DVDs instead, since they are substitutes. This would lead to an increase in demand for DVDs, as more people are willing to buy them at the higher price of CDs.

Question 9

Exhibit 4.6
 
-The Exhibit given below shows the market for a good. D and S are the demand curve and the supply curve, respectively. Which of the following is least likely to shift the demand curve from D to D'?

Accepted Answer

A shift in the demand curve (from D to D') is caused by factors other than the price of the good itself. A decrease in the price of the good in question would move along the demand curve, not shift it.

Question 10

Exhibit 4.6
 
-A new cattle feed has been found to increase the amount of milk each cow produces. Which of the following is likely to be the impact on the market for milk if this cattle feed is used by most dairies?

Accepted Answer

The use of a cattle feed that increases milk production will lead to an increase in the supply of milk, as each cow is producing more. This will shift the supply curve of milk to the right, resulting in a higher quantity of milk at each price level, and potentially lower prices for consumers.

Question 11

Attempts are being made to develop a biodegradable plastic using agricultural produce such as potatoes. Identify a likely impact on the equilibrium price and quantity of potatoes if such attempts are successful, all other things remaining constant.

Accepted Answer

If the attempts to develop biodegradable plastic from potatoes are successful, it would increase the demand for potatoes as a raw material. This increased demand, with supply remaining constant, would lead to an increase in both the equilibrium price and quantity of potatoes.

Question 12

Suppose the market for a good is in equilibrium. Which of the following is most likely to occur if both the demand for and the supply of the good decrease during a particular point in time?

Accepted Answer

If both the demand for and the supply of a good decrease, then the equilibrium point will shift leftward, resulting in a decrease in both equilibrium price and quantity. Therefore, the best choice is D, which states that the equilibrium quantity will decrease.

Question 13

If supply decreases for a given demand curve, ______

Accepted Answer

If supply decreases for a given demand curve, the quantity supplied will be less than the quantity demanded at the previous equilibrium price. This will create an excess quantity demanded in the market, resulting in an increase in the equilibrium price and a decrease in the equilibrium quantity. This is because buyers are willing and able to pay a higher price to purchase the limited supply, while sellers have an incentive to raise the price to capture more revenue from the scarce supply.

Question 14

Suppose the market for cookies is initially in equilibrium. For a given upward-sloping supply curve, other things being equal, the equilibrium price and equilibrium quantity of cookies is most likely to decline when _____

Accepted Answer

When the price of a complement (like milk for cookies) increases, demand for the primary good (cookies) decreases because the two are often consumed together. This leads to a lower equilibrium price and quantity for cookies.

Question 15

Exhibit 4.6
 
-The following Exhibit shows the market for a good. D' and S are the demand curve and the supply curve, respectively. Which of the following is most likely to shift the demand curve from D' to D?

Accepted Answer

A decline in consumers' income would decrease the demand for a normal good, shifting the demand curve from D' to D.

Question 16

Exhibit 4.6
 
-Identify the effect of a reduction in the price of steel on the equilibrium price and quantity of automobiles for a given demand curve.

Accepted Answer

A reduction in the price of steel would decrease the cost of production for automobiles. This would shift the supply curve to the right, leading to a decrease in the equilibrium price and an increase in the equilibrium quantity. Thus, choice D correctly identifies the effect of a reduction in the price of steel on the equilibrium price and quantity of automobiles for a given demand curve.

Question 17

Suppose the market for beef cattle was initially in equilibrium. An increase in the price of the fodder used to feed cattle would cause _____

Accepted Answer

An increase in the price of fodder would increase the cost of production for cattle farmers and reduce their profit margins. As a result, some of them may exit the market or reduce their output, leading to a decrease in the supply of beef cattle in the long run. This would cause the price of beef to increase as the market adjusts to the new equilibrium. In the short run, the price of beef may not change much as farmers may try to absorb some of the increase in fodder prices by reducing their profit margins. Therefore, option B is the most accurate statement.

Question 18

Exhibit 4.6
 
-In the market for chewing gum, the current price is 50 cents per pack and 100,000 packs are sold. Which of the following events is most likely to result in a new equilibrium price of 60 cents and quantity of 90,000 packs?

Accepted Answer

An increase in the prices of the ingredients used to make chewing gum will cause an increase in the cost of production for the gum manufacturers, leading to a decrease in supply as the manufacturers might not be able to produce as much gum as before due to the increase in costs. This decrease in supply would cause an increase in the equilibrium price and a decrease in the equilibrium quantity, leading to a new equilibrium price of 60 cents and a quantity of 90,000 packs. None of the other events listed would directly result in this specific change in equilibrium price and quantity.

Question 19

Suppose the market for a good is initially in equilibrium. Which of the following is most likely to happen if supply increases by a smaller amount than the increase in demand?

Accepted Answer

When demand increases more than supply, it puts upward pressure on both the price and quantity, as the increased demand raises the willingness to pay, and the smaller increase in supply cannot fully accommodate the higher demand, leading to both higher prices and quantities sold.

Question 20

Which of the following is the effect of a decrease in the price of potato chips on the market for pretzels, a substitute good, that is initially in equilibrium?

Accepted Answer

A decrease in the price of potato chips, a substitute for pretzels, will lead to a decrease in the demand for pretzels as consumers switch to the cheaper substitute. This results in a decrease in both the equilibrium price and quantity of pretzels.

Quiz 4: Demand, Supply, and Markets.

Suppose the market for coffee is initially in equilibrium. If the tea harvest is bad in a particular year, then identify the most likely impact on the equilibrium price and quantity of coffee.

Suppose the market for a good is initially in equilibrium. For a given upward-sloping supply curve, all other things remaining unchanged, an increase in demand will typically _____

Suppose the market for a good is initially in equilibrium. Which of the following is most likely to occur if both the demand for and the supply of the good increases during a particular point in time?

Exhibit 4.6 -For a given downward-sloping demand curve, all other things remaining constant, a decrease in supply will cause a(n) _____

Exhibit 4.6 -For a downward-sloping demand curve, all other things remaining constant, a rightward shift of the supply curve _____

Exhibit 4.6 -Suppose the market for kids' shoes is initially in equilibrium. For a given upward-sloping supply curve, other things being equal, an increase in the price of Velcro which is used as fasteners for kids' shoes will result in a(n) _____

Suppose the price of compact disks (CDs) increases, other things equal. Which of these is most likely to occur in the market for DVDs, a substitute?

Exhibit 4.6 -The Exhibit given below shows the market for a good. D and S are the demand curve and the supply curve, respectively. Which of the following is least likely to shift the demand curve from D to D'?

Exhibit 4.6 -A new cattle feed has been found to increase the amount of milk each cow produces. Which of the following is likely to be the impact on the market for milk if this cattle feed is used by most dairies?