Question 1

(Figure: Market for Juice) Use the figure to answer the question.
You are studying the demand for Minute Maid and Tropicana orange juice. Minute Maid improves the taste of its juice and people start preferring Minute Maid over Tropicana. Which graph depicts the impact of these changes on both Minute Maid and Tropicana?

Accepted Answer

Graph A shows an increase in demand for Minute Maid due to the improvement in taste. This is represented by a shift in the demand curve to the right. Graph B shows the decrease in demand for Tropicana as consumers switch to Minute Maid, as represented by a shift in the demand curve to the left. Therefore, Graph B shows what happens in the market for Minute Maid and Tropicana.

Question 2

(Figure: Market for Cars) Use the figure to answer the question.
In 2011, Japan suffered a major earthquake and tsunami. Honda parts that were sourced from Japan could no longer be produced, which caused Honda to cut its production of cars. Which graph shows the effect of this shortfall?

Accepted Answer

The answer of (Figure: Market for Cars) Use the figure...

Question 3

(Figure: Market for Canadian Goods with US Inputs) Use the figure to answer the question.
The Canadian dollar has strengthened against the US dollar, meaning that it takes fewer Canadian dollars to purchase a US dollar. What will happen to the supply of Canadian goods that use inputs made in the US? Choose the graph that correctly depicts your answer.

Accepted Answer

The answer of (Figure: Market for Canadian Goods with US...

Question 4

(Figure: Market for Canadian Goods with US Inputs) Use the figure to answer the question.
The Canadian dollar has weakened against the US dollar, meaning that it takes more Canadian dollars to purchase a US dollar. What will happen to the supply of Canadian goods that use inputs made in the US? Choose the graph that correctly depicts your answer.

Accepted Answer

When the Canadian dollar weakens against the US dollar, it becomes more expensive for Canadian firms to purchase inputs made in the US, causing the cost of production to increase. As a result, the supply of Canadian goods that use inputs from the US will decrease, shifting the supply curve to the left, as shown in Graph C.

Question 5

(Figure: Canadian Demand for Floridian Cruises) Use the figure to answer the question.
The Canadian dollar has weakened against the US dollar, meaning that it takes more Canadian dollars to purchase a US dollar. What will happen to the Canadian demand for US cruises from Florida? Choose the graph that correctly depicts your answer.

Accepted Answer

The answer of (Figure: Canadian Demand for Floridian Cruises) Use...

Question 6

(Figure: Canadian Demand for US designer goods) Use the figure to answer the question.
Canadians who live in border towns sometimes cross the border into the United States to buy goods and services from there. You find the Canadian dollar has strengthened against the US dollar, meaning that it takes fewer Canadian dollars to buy a US dollar. What would happen to the Canadian demand for US designer goods sold in the US? Choose the graph that depicts your answer.

Accepted Answer

The answer of (Figure: Canadian Demand for US designer goods)...

Question 7

You are studying the international market for coffee. The world production of coffee beans increases, and at the same time, consumers worldwide start favoring tea over coffee. What is the effect on the equilibrium price and the equilibrium quantity in the coffee market?

Accepted Answer

The increase in world production of coffee beans will shift the supply curve to the right, leading to a decrease in price and an increase in quantity. However, the change in consumer preferences towards tea will shift the demand curve for coffee to the left, causing a decrease in both the equilibrium price and quantity. The net effect is a decrease in the equilibrium price, but the change in equilibrium quantity is ambiguous as the two opposing factors are affecting it in different ways.

Question 8

A growing number of utility companies are using drones for site inspections. What is the effect of these changes on the equilibrium price and quantity, in the market for drones?

Accepted Answer

The growing use of drones by utility companies increases the demand for drones. As demand increases, both the equilibrium price and quantity of drones in the market will rise, assuming supply remains constant.

Question 9

A new study discovers the health benefits of eating fish regularly. At the same time, some consumers decide to become vegetarians. What is the effect of these events on the equilibrium price and quantity in the fish market?

Accepted Answer

The answer of A new study discovers the health benefits...

Question 10

What happens to the equilibrium price and equilibrium quantity when demand and supply increase simultaneously, but the relative size of the shifts are not known?

Accepted Answer

When both demand and supply increase simultaneously, the equilibrium quantity will definitely rise because more is being supplied and demanded. However, the change in equilibrium price is ambiguous because it depends on the relative sizes of the shifts in demand and supply. If the increase in demand is larger than the increase in supply, the price will rise. If the increase in supply is larger, the price will fall. If they increase by the same amount, the price might stay the same.

Question 11

What happens to the equilibrium price and quantity when demand decreases and at the same time supply increases, but the relative size of the shifts are not known?

Accepted Answer

When demand decreases and supply increases, it is certain that the equilibrium quantity will increase, but the equilibrium price may rise, fall, or remain unchanged, depending on the relative sizes of the shifts. However, since the question states that the relative sizes of the shifts are not known, it is ambiguous to predict the direction of the change in the equilibrium price. Therefore, the best choice is B, which states that the equilibrium price falls while the change in the equilibrium quantity is ambiguous.

Question 12

What happens to the equilibrium price and quantity when demand increases and simultaneously supply decreases, and the relative size of the shifts is not known?

Accepted Answer

When demand increases, the equilibrium price will tend to rise. On the other hand, when supply decreases, the equilibrium price will tend to rise as well. Thus, the two effects work in opposite directions, and it is not possible to predict the overall effect on the equilibrium price without knowledge of the relative magnitude of the two shifts. However, the increase in demand will definitely cause an increase in equilibrium quantity, while the decrease in supply will decrease the equilibrium quantity. Therefore, the change in the equilibrium quantity is ambiguous.

Question 13

What happens to the equilibrium price and quantity when demand increases and at the same time supply decreases, but the demand shift is larger than the supply shift?

Accepted Answer

When demand increases more significantly than the decrease in supply, the equilibrium price will rise due to higher demand. The equilibrium quantity will also rise because the effect of the increase in demand on quantity is greater than the effect of the decrease in supply.

Question 14

What happens to the equilibrium price and quantity when demand increases and at the same time supply decreases, but the demand shift is smaller than the supply shift?

Accepted Answer

When the demand increases and supply decreases, it leads to an increase in the equilibrium price and a decrease in the equilibrium quantity. However, if the demand shift is smaller than the supply shift, the decrease in supply will have a greater impact on the equilibrium than the increase in demand, leading to a net decrease in quantity and a net increase in price. Therefore, the best choice is A, where the equilibrium price rises, and the equilibrium quantity falls.

Question 15

What happens to the equilibrium price and quantity when demand decreases and at the same time supply increases, but the demand shift is relatively larger than the supply shift?

Accepted Answer

When demand decreases more significantly than supply increases, the equilibrium price will fall due to lower demand. The equilibrium quantity will also fall because the decrease in demand is larger than the increase in supply, leading to a net decrease in the quantity demanded and supplied.

Question 16

What happens to the equilibrium price and quantity when demand decreases and at the same time supply increases, and the demand shift is relatively smaller than the supply shift?

Accepted Answer

When demand decreases and supply increases, the equilibrium price generally falls due to the increased supply and decreased demand. The equilibrium quantity rises because the increase in supply, especially when it is larger than the decrease in demand, pushes the quantity available in the market up.

Question 17

Shifts in supply

Accepted Answer

When there is a shift in supply, the supply curve moves either to the left or right, causing a change in the quantity supplied at every price level. This change in quantity supplied affects the equilibrium point, resulting in a movement along the demand curve. As a result, the price and quantity move in opposite directions; when the supply shifts to the right, the equilibrium price decreases while the equilibrium quantity increases, and vice versa when the supply shifts to the left.

Question 18

Shifts in demand

Accepted Answer

Shifts in demand cause both price and quantity to move in the same direction. If demand increases, both price and quantity increase; if demand decreases, both price and quantity decrease.

Question 19

Saudi Arabia is a member of the Organization of the Petroleum Exporting Countries (OPEC). The countries in OPEC produce oil according to preset amounts (quotas). When Saudi Arabia cuts oil production, the

Accepted Answer

When Saudi Arabia cuts oil production, the supply of crude oil falls, resulting in a decrease in the global supply. This, in turn, leads to an increase in oil prices in the world market due to the high demand for oil and its limited supply.

Question 20

Fish farmers find that a form of bacteria is negatively affecting the reproductive capability of the fish in the fish farms. Which graph depicts what will happen in the market for farmed fish?

Accepted Answer

The answer of Fish farmers find that a form of...

Quiz 4: Equilibrium: Where Supply Meets Demand

(Figure: Market for Cars) Use the figure to answer the question. In 2011, Japan suffered a major earthquake and tsunami. Honda parts that were sourced from Japan could no longer be produced, which caused Honda to cut its production of cars. Which graph shows the effect of this shortfall?