Question 1

Assume that the hourly price for the services of personal trainers has risen and sales of these services have also risen.One can conclude that
A)the law of demand has been violated.
B)the number of personal trainers has increased.
C)the demand for personal trainers has increased.
D)personal trainers are deliberately charging high prices because they provide services for wealthy clients.

Accepted Answer

The fact that sales of personal training services have also risen along with the increase in price suggests that demand for personal trainers has increased. This could be due to various reasons such as increased awareness of the benefits of having a personal trainer or higher disposable income among consumers who are willing to pay higher prices for this service.

Question 2

Electric car enthusiasts want to buy more electric cars at a lower price.All of the following events would have this effect except
A)technological advancement in the production of electric car batteries.
B)an increase in the number of manufacturers of electric cars.
C)a decrease in the price of lithium, which is used in the electric car batteries.
D)an increase in the price of gasoline.

Accepted Answer

An increase in the price of gasoline would make electric cars more attractive as an alternative to gas-powered vehicles, leading to an increase in demand and potentially higher prices for electric cars. Therefore, it would not lead to a lower price for electric cars. Conversely, the other options (A, B, and C) could lead to lower prices for electric cars by reducing production costs, increasing competition, and decreasing the cost of materials.

Question 3

Let D = demand,S = supply,P = equilibrium price,Q = equilibrium quantity.What happens in the market for sushi if the Surgeon General announces that a majority of the raw fish that is imported to make sushi contains high levels of toxic mercury?
A)D decreases, S no change, P and Q decrease
B)S decreases, D no change, P increases, Q decreases
C)D and S decrease, P and Q decrease
D)D no change, S increases, P decreases, Q decreases

Accepted Answer

If the Surgeon General announces that a majority of the raw fish that is imported to make sushi contains high levels of toxic mercury, the demand for sushi will decrease as people will be hesitant to consume it due to health concerns. However, the supply of sushi will not change as the announcement does not affect the ability of suppliers to provide sushi. As a result, the equilibrium price and quantity will both decrease due to the decrease in demand.

Question 4

Which of the following would cause the equilibrium price of apple juice to decrease and the equilibrium quantity of apple juice to increase?
A)a decrease in the price of apples
B)an increase in the price of apples
C)an increase in the price of orange juice, a substitute for apple juice
D)a decrease in the price of granola bars, a complement for apple juice

Accepted Answer

A decrease in the price of apples, which is a key ingredient in making apple juice, would decrease the cost of production for apple juice. This would result in an increase in the supply of apple juice, causing the equilibrium price to decrease, and the equilibrium quantity to increase.

Question 5

Studies have shown that drinking one glass of red wine per day may help prevent heart disease.Assume this is true,and a fungal disease destroys a large portion of the grape harvest of California vineyards.In the market for red wine,these two developments would
A)increase demand and increase supply, resulting in an increase in the equilibrium quantity and a decrease in the equilibrium price of red wine.
B)increase demand and decrease supply resulting in a decrease in both the equilibrium quantity and the equilibrium price of red wine.
C)increase demand and decrease supply, resulting in an increase in the equilibrium price and an uncertain effect on the equilibrium quantity of red wine.
D)increase demand and decrease supply, resulting in an increase in both the equilibrium price and the equilibrium quantity of red wine.

Accepted Answer

The statement implies that the demand for red wine may increase due to its potential health benefits. However, the decrease in grape harvest will decrease the supply of red wine. As a result, there will be an increase in the equilibrium price of red wine, but the effect on the equilibrium quantity is uncertain because it depends on the size of the shift in demand and supply.

Question 6

Electric car manufacturers want to sell more electric cars at a higher price.Which of the following events would have this effect?
A)technological advancement in the production of electric car batteries
B)an increase in the number of manufacturers of electric cars
C)a decrease in the price of lithium, which is used in the electric car batteries
D)an increase in the price of gasoline

Accepted Answer

An increase in the price of gasoline would make electric cars more attractive to consumers, as they would save money on fuel costs by switching to an electric car. This would increase demand for electric cars and allow manufacturers to charge a higher price. Technological advancements in battery production and an increase in the number of electric car manufacturers may increase supply and potentially lower prices, while a decrease in the price of lithium would decrease input costs for manufacturers but may not necessarily result in a higher price for consumers.

Question 7

Prices of smartphones (assume that this is a normal good)have fallen in recent years.Over this same period,the price of the components used to produce smartphones has also fallen and consumer incomes have risen.Which of the following best explains the falling prices of smartphones?
A)The supply curve for smartphones has shifted to the right while the demand curve for smartphones has shifted to the left.
B)The demand curve for smartphones has shifted to the right more than the supply curve has shifted to the right.
C)The demand curve and the supply curve for smartphones have both shifted to the left.
D)The supply curve for smartphones has shifted to the right more than the demand curve has shifted to the right.

Accepted Answer

The fall in the price of components used to produce smartphones has resulted in a decrease in the cost of production for smartphone manufacturers, leading to a shift in the supply curve to the right. At the same time, rising consumer incomes have increased the demand for smartphones, resulting in a shift in the demand curve to the right. However, the supply curve has shifted to the right more than the demand curve, resulting in falling prices of smartphones.

Question 8

Which of the following would cause both the equilibrium price and equilibrium quantity of barley (assume that barley is an inferior good)to increase?
A)an increase in consumer income
B)a drought that sharply reduces barley output
C)a decrease in consumer income
D)unusually good weather that results in a bumper crop of barley

Accepted Answer

The answer of Which of the following would cause both...

Question 9

A decrease in input costs in the production of LCD televisions caused the price of LCD televisions to decrease.Holding everything else constant,how would this affect the market for video game consoles (a complement to LCD televisions)?
A)The supply of video game consoles would increase and the equilibrium price of video game consoles would decrease.
B)The demand for video game consoles would decrease and the equilibrium price of video game consoles would decrease.
C)The demand for video game consoles would decrease because consumers could afford to buy fewer LCD televisions and video game consoles.
D)The demand for video game consoles would increase and the equilibrium price of video game consoles would increase.

Accepted Answer

When the price of LCD televisions decreases, it makes LCD TVs more affordable, leading to an increase in their demand. Since video game consoles are complements to LCD TVs, the demand for video game consoles would also increase as more people buy LCD TVs and want consoles to use with them. This increased demand for video game consoles would likely lead to an increase in their equilibrium price, as the demand curve shifts to the right.

Question 10

Let D = demand,S = supply,P = equilibrium price,Q = equilibrium quantity.What happens in the market for solar panels if the government offers tax breaks to encourage manufacturers to produce more solar panels?
A)D increases, S no change, P and Q increase
B)S increases, D no change, P decreases, Q increases
C)D and S increase, P and Q decrease
D)D no change, S increases, P decreases, Q decreases

Accepted Answer

Tax breaks for manufacturers will increase their incentive to produce more solar panels, which will increase the supply (S) of solar panels. However, a tax break will not directly affect the demand (D) for solar panels, so it will remain unchanged. With an increase in supply and no change in demand, the equilibrium price (P) will decrease, while the equilibrium quantity (Q) will increase. This matches option B, where S increases, D remains the same, and P decreases while Q increases.

Question 11

Assume that the price for lawn care has fallen and sales of lawn care services have also fallen.One can conclude that
A)the law of supply has been violated.
B)the number of lawn care service companies has increased.
C)the demand for lawn care service has decreased.
D)lawn care services are deliberately charging low prices because they want to discourage people from maintaining their own lawns.

Accepted Answer

According to the law of demand, when the price of a good/service falls, the quantity demanded decreases. Therefore, if the price for lawn care has fallen and sales have fallen as well, it can be concluded that the demand for lawn care service has decreased. This is because people are less willing to pay for lawn care at a lower price, resulting in a decrease in the quantity demanded. The other options are not supported by the given information.

Question 12

Hurricane Katrina damaged a large portion of oil refining and pipeline capacity in the Gulf coast states.In the market for gasoline
A)the supply curve shifted to the left resulting in an increase in the equilibrium price.
B)the supply curve shifted to the right resulting in an increase in the equilibrium price.
C)the demand curve shifted to the left resulting in a decrease in the equilibrium price.
D)the demand curve shifted to the right resulting in an increase in the equilibrium price.

Accepted Answer

Hurricane Katrina damaged oil refining and pipeline capacity, which reduced the supply of gasoline. This caused the supply curve to shift to the left, resulting in an increase in the equilibrium price.

Question 13

A decrease in the demand for eggs due to changes in consumer tastes,accompanied by a decrease in the supply of eggs as a result of an outbreak of Avian flu,will result in
A)a decrease in the equilibrium quantity of eggs and no change in the equilibrium price.
B)a decrease in the equilibrium price of eggs and no change in the equilibrium quantity.
C)a decrease in the equilibrium price of eggs; the equilibrium quantity may increase or decrease.
D)a decrease in the equilibrium quantity of eggs; the equilibrium price may increase or decrease.

Accepted Answer

A decrease in both demand and supply will lead to a decrease in the equilibrium quantity of eggs. The equilibrium price may increase or decrease depending on the extent to which the decrease in supply outweighs the decrease in demand. If the decrease in supply is more than the decrease in demand, the equilibrium price will increase. On the other hand, if the decrease in demand is more than the decrease in supply, the equilibrium price will decrease. Therefore, the equilibrium quantity of eggs is expected to decrease, while the equilibrium price may increase or decrease.

Question 14

During the 1990s positive technological change in the production of chicken caused the price of chicken to fall.Holding everything else constant,how would this affect the market for pork (a substitute for chicken)?
A)The supply of pork would increase and the equilibrium price of pork would decrease.
B)The demand for pork would decrease and the equilibrium price of pork would decrease.
C)The demand for pork would increase because consumers could afford to buy more chicken and pork.
D)The demand for pork would decrease and the equilibrium price of pork would increase.

Accepted Answer

When the price of chicken falls due to positive technological changes, consumers are likely to substitute chicken for pork, leading to a decrease in the demand for pork. As demand decreases, the equilibrium price of pork would also decrease.

Question 15

Prices of commercial airline tickets (assume that this is a normal good)have fallen in recent months.Over this same period,the price of jet fuel has risen and consumer incomes have fallen.Which of the following best explains the falling prices of airline tickets?
A)The supply curve for airline tickets has shifted to the left while the demand curve for airline tickets has shifted to the left.
B)The demand curve for airline tickets has shifted to the left more than the supply curve has shifted to the left.
C)The demand curve and the supply curve for airline tickets have both shifted to the right.
D)The supply curve for airline tickets has shifted to the left more than the demand curve has shifted to the left.

Accepted Answer

The decrease in consumer incomes and increase in jet fuel prices have likely caused a decrease in the demand for airline tickets, shifting the demand curve to the left. However, the fact that prices of airline tickets have fallen suggests that the supply curve has also shifted to the right, possibly due to increased competition among airlines. Option A is incorrect because if the demand curve shifted to the left while the supply curve also shifted to the left, the equilibrium price would remain the same or increase rather than fall. Option C is incorrect because both the demand and supply curves cannot shift to the right simultaneously unless there was a significant increase in income levels or a decrease in the cost of production. Option D is incorrect because the falling prices of airline tickets suggest that the supply curve has shifted to the right more than the demand curve has shifted to the left, which would result in a decrease in equilibrium price.

Question 16

Which of the following would cause the equilibrium price of ketchup to increase and the equilibrium quantity of ketchup to decrease?
A)a decrease in the price of tomatoes
B)an increase in the price of tomatoes
C)an increase in the price of mustard, a substitute for ketchup
D)an increase in the price of french fries, a complement for ketchup

Accepted Answer

An increase in the price of tomatoes, a key ingredient in ketchup, would increase the cost of producing ketchup, leading to a decrease in supply and an increase in price. This would also lead to a decreased quantity demanded, resulting in a decrease in the equilibrium quantity of ketchup.

Question 17

An increase in the demand for peanuts due to changes in consumer tastes,accompanied by an increase in the supply of peanuts as a result of favorable growing conditions,will result in
A)an increase in the equilibrium quantity of peanuts and no change in the equilibrium price.
B)an increase in the equilibrium price of peanuts and no change in the equilibrium quantity.
C)an increase in the equilibrium price of peanuts; the equilibrium quantity may increase or decrease.
D)an increase in the equilibrium quantity of peanuts; the equilibrium price may increase or decrease.

Accepted Answer

An increase in demand and an increase in supply will result in an increase in the equilibrium quantity, as both factors are pushing in the same direction. The change in equilibrium price cannot be determined without additional information about the magnitude of the shifts in demand and supply. Therefore, D is the best answer.

Question 18

In recent years the cost of producing wines in the U.S.has increased largely due to rising rents for vineyards.At the same time,more and more Americans prefer wine over beer.Which of the following best explains the effect of these events in the wine market?
A)The supply curve has shifted to the left and the demand curve has shifted to the right.As a result there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price.
B)Both the supply and demand curves have shifted to the right.As a result, there has been an increase in the equilibrium price and an uncertain effect on the equilibrium quantity.
C)Both the supply and demand curves have shifted to the right.As a result, there has been an increase in both the equilibrium price and the equilibrium quantity.
D)The supply curve has shifted to the left and the demand curve has shifted to the right.As a result, there has been an increase in the equilibrium price and an uncertain effect on the equilibrium quantity.

Accepted Answer

The rising rents for vineyards have increased the cost of production, which will shift the supply curve to the left. At the same time, the increasing preference for wine over beer will shift the demand curve to the right. Therefore, there will be an increase in the equilibrium price and an uncertain effect on the equilibrium quantity, making choice D the best option.

Question 19

Which of the following would cause both the equilibrium price and equilibrium quantity of oysters (assume that oysters are a normal good)to decrease?
A)an increase in consumer income
B)an oil spill that sharply reduces oyster output
C)a decrease in consumer income
D)a technological advancement in the production of oysters

Accepted Answer

The answer of Which of the following would cause both...

Question 20

Assume that in recent years the cost of producing microbrew beer in the U.S.has decreased largely due to technological improvements.At the same time,more and more Americans prefer microbrew beer over wine.Which of the following best explains the effect of these events in the microbrew beer market?
A)The supply curve has shifted to the right and the demand curve has shifted to the left.As a result there has been a decrease in the equilibrium quantity and an uncertain effect on the equilibrium price.
B)Both the supply and demand curves have shifted to the right.As a result, there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price.
C)Both the supply and demand curves have shifted to the right.As a result, there has been an increase in both the equilibrium price and the equilibrium quantity.
D)The supply curve has shifted to the left and the demand curve has shifted to the right.As a result, there has been an increase in the equilibrium price and an uncertain effect on the equilibrium quantity.

Accepted Answer

The decrease in production costs due to technological improvements will shift the supply curve to the right, increasing the quantity supplied at any given price. The increase in preference for microbrew beer over wine will shift the demand curve to the right as well, increasing the quantity demanded at any given price. Therefore, both supply and demand curves will shift to the right, resulting in an increase in the equilibrium quantity. The effect on equilibrium price is uncertain as it depends on how much each curve shifts relative to the other, but it is likely that the price will remain relatively stable or decrease slightly due to the increase in supply. Therefore, only option B correctly identifies both the shifts in the supply and demand curves, as well as the resulting increase in equilibrium quantity with an uncertain effect on equilibrium price.

Quiz 3: Where Prices Come From: the Interaction of Demand and Supply

Assume that the hourly price for the services of personal trainers has risen and sales of these services have also risen.One can conclude that

Electric car enthusiasts want to buy more electric cars at a lower price.All of the following events would have this effect except

Let D = demand,S = supply,P = equilibrium price,Q = equilibrium quantity.What happens in the market for sushi if the Surgeon General announces that a majority of the raw fish that is imported to make sushi contains high levels of toxic mercury?

Which of the following would cause the equilibrium price of apple juice to decrease and the equilibrium quantity of apple juice to increase?

Studies have shown that drinking one glass of red wine per day may help prevent heart disease.Assume this is true,and a fungal disease destroys a large portion of the grape harvest of California vineyards.In the market for red wine,these two developments would

Electric car manufacturers want to sell more electric cars at a higher price.Which of the following events would have this effect?

Prices of smartphones (assume that this is a normal good) have fallen in recent years.Over this same period,the price of the components used to produce smartphones has also fallen and consumer incomes have risen.Which of the following best explains the falling prices of smartphones?

Which of the following would cause both the equilibrium price and equilibrium quantity of barley (assume that barley is an inferior good) to increase?

A decrease in input costs in the production of LCD televisions caused the price of LCD televisions to decrease.Holding everything else constant,how would this affect the market for video game consoles (a complement to LCD televisions) ?

Let D = demand,S = supply,P = equilibrium price,Q = equilibrium quantity.What happens in the market for solar panels if the government offers tax breaks to encourage manufacturers to produce more solar panels?

Assume that the price for lawn care has fallen and sales of lawn care services have also fallen.One can conclude that

Hurricane Katrina damaged a large portion of oil refining and pipeline capacity in the Gulf coast states.In the market for gasoline

A decrease in the demand for eggs due to changes in consumer tastes,accompanied by a decrease in the supply of eggs as a result of an outbreak of Avian flu,will result in

During the 1990s positive technological change in the production of chicken caused the price of chicken to fall.Holding everything else constant,how would this affect the market for pork (a substitute for chicken) ?

Prices of commercial airline tickets (assume that this is a normal good) have fallen in recent months.Over this same period,the price of jet fuel has risen and consumer incomes have fallen.Which of the following best explains the falling prices of airline tickets?

Which of the following would cause the equilibrium price of ketchup to increase and the equilibrium quantity of ketchup to decrease?

An increase in the demand for peanuts due to changes in consumer tastes,accompanied by an increase in the supply of peanuts as a result of favorable growing conditions,will result in

In recent years the cost of producing wines in the U.S.has increased largely due to rising rents for vineyards.At the same time,more and more Americans prefer wine over beer.Which of the following best explains the effect of these events in the wine market?

Which of the following would cause both the equilibrium price and equilibrium quantity of oysters (assume that oysters are a normal good) to decrease?

Assume that in recent years the cost of producing microbrew beer in the U.S.has decreased largely due to technological improvements.At the same time,more and more Americans prefer microbrew beer over wine.Which of the following best explains the effect of these events in the microbrew beer market?