Question 1

In recent years, the consumption of orange juice in the United States has fallen but the price of orange juice has risen.This is because the supply of orange juice has ________ and the demand for orange juice has ________.
A)decreased; increased
B)decreased; also decreased
C)increased; decreased
D)increased; also increased

Accepted Answer

The price of orange juice has risen despite a fall in consumption, indicating a decrease in supply. Simultaneously, the demand has also decreased, leading to reduced consumption.

Question 2

Which of the following statements is true?
A)An increase in supply causes a change in equilibrium price; the change in price does not cause a further change in demand or supply.
B)A decrease in supply causes equilibrium price to rise; the increase in price then results in a decrease in demand.
C)If both demand and supply increase there must be an increase in equilibrium price; equilibrium quantity may either increase or decrease.
D)If demand decreases and supply increases one cannot determine if equilibrium price will increase or decrease without knowing which change is greater.

Accepted Answer

The answer of Which of the following statements is true?
A)An...

Question 3

"Because apples and oranges are substitutes, an increase in the price of oranges will cause the demand for apples to increase.This initial shift in demand for apples results in a higher price for apples; this higher price will cause the demand curve for apples to shift to the right." Which of the following correctly comments on this statement?
A)The statement will be true if consumer tastes for apples and oranges do not change.
B)The statement is false because a change in the price of apples would not change the demand for apples.
C)The statement is false because oranges are inferior goods; apples are normal goods.
D)The statement is false because one cannot assume that apples and oranges are substitutes for all consumers.

Accepted Answer

The answer of "Because apples and oranges are substitutes, an...

Question 4

Select the phrase that correctly completes the following statement."A positive change in technology caused an increase in the supply of flat-screen televisions.As a result ________."
A)the price of flat-screen televisions decreased and the demand for flat-screen televisions increased
B)the equilibrium quantity of flat-screen televisions decreased
C)the price of flat-screen televisions decreased and the quantity demanded of flat-screen televisions increased
D)the price of flat-screen televisions decreased. The lower price caused the supply of flat-screen televisions to decrease

Accepted Answer

An increase in supply would lead to a decrease in price and an increase in quantity demanded, which is consistent with option C. Option A is incorrect because an increase in supply would not cause an increase in demand, and option B is incorrect because an increase in supply would cause an increase in equilibrium quantity, not a decrease. Option D is incorrect because a decrease in price would increase the quantity supplied, not decrease it.

Question 5

Figure 3-8
 
-Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D₂ and S₁ (point C). Which of the following changes would cause the equilibrium to change to point B?
A)a positive change in the technology used to produce apples and decrease in the price of oranges, a substitute for apples
B)an increase in the wages of apple workers and an increase in the price of oranges, a substitute for apples
C)an increase in the number of apple producers and a decrease in the number of apple trees as a result of disease
D)a decrease in the wages of apple workers and an increase in the price of oranges, a substitute for apples

Accepted Answer

The answer of Figure 3-8
 
-Refer to Figure 3-8.The graph...

Question 6

What would happen in the market for laser eye surgery if insurance companies started to cover a portion of the price of voluntary procedures?
A)Demand will increase, but this will not shift the supply curve.
B)Supply will increase, but this will not shift the demand curve.
C)Demand and supply will both increase.
D)Demand will increase and supply will decrease.

Accepted Answer

If insurance companies cover a portion of the price of laser eye surgery, it will reduce the out-of-pocket expenses for patients and make the procedure more affordable. This will likely increase the demand for the surgery. However, it is unlikely to affect the supply of laser eye surgery providers in the market. Therefore, the demand curve will shift rightward, leading to an increase in quantity demanded and equilibrium price without affecting the supply curve.

Question 7

The following appeared in a Florida newspaper a week after a hurricane hit the state."Floridians are relieved that the storm produced no fatalities but homeowners face weeks, if not months, of rebuilding.Matters are made worse by the soaring prices of plywood and other building materials that always follow in a hurricane's path.Complaints of profiteering and price gouging have not deterred firms from raising their prices by over 100 percent." Which of the following offers the best explanation for the price increases referred to in the article?
A)The hurricane increased the number of suppliers of building materials.
B)The hurricane created an artificial shortage of building materials.
C)The hurricane caused an increase in the demand for building materials.
D)There was a reduction in supply as firms shipped plywood and other materials to locations not affected by the storm.

Accepted Answer

The hurricane increased the demand for building materials as homeowners needed to rebuild, leading to higher prices.

Question 8

"Because chips and salsa are complements, an increase in the price of chips will cause the demand for salsa to decrease.This initial shift in demand for chips results in a higher price for chips; this higher price will cause the demand curve for chips to shift to the right." Which of the following correctly comments on this statement?
A)The statement will be true if consumer tastes for chips and salsa do not change.
B)The statement is false because a change in the price of chips would not change the demand for chips.
C)The statement is false because salsa is an inferior good; chips are normal goods.
D)The statement is false because one cannot assume that chips and salsa are complements for all consumers.

Accepted Answer

A change in the price of chips would not change the demand for chips; it would change the quantity demanded. Demand curves shift due to factors other than the price of the good itself, such as consumer preferences or income changes.

Question 9

Figure 3-8
 
-Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D₁ and S₁ (point A). If there is an increase in the wages of apple workers and an increase in the price of oranges, a substitute for apples, the equilibrium could move to which point?
A)none of the points shown
B)B
C)C
D)E

Accepted Answer

The answer of Figure 3-8
 
-Refer to Figure 3-8.The graph...

Question 10

Suppose the cost of growing organic corn has risen at the same time as consumer preference for organic corn has fallen.In the market for organic corn, this would be represented by the equilibrium price ________ and the equilibrium quantity ________.
A)increasing; increasing or decreasing
B)increasing or decreasing; decreasing
C)decreasing; increasing or decreasing
D)increasing or decreasing; increasing

Accepted Answer

The increase in cost shifts the supply curve left, raising prices, while the decrease in demand shifts the demand curve left, lowering prices. The net effect on price is uncertain, but the equilibrium quantity will definitely decrease.

Question 11

Figure 3-8
 
-Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D₂ and S₂ (point
A)a positive change in the technology used to produce apples and decrease in the price of oranges, a substitute for apples
B)an increase in the wages of apple workers and a decrease in the price of oranges, a substitute for apples
C)an increase in the number of apple producers and a decrease in the number of apple trees as a result of disease
D)a decrease in the wages of apple workers and an increase in the price of oranges, a substitute for apples
E). Which of the following changes would cause the equilibrium to change to point A?

Accepted Answer

A decrease in the wages of apple workers would reduce production costs, shifting the supply curve to the right. An increase in the price of oranges, a substitute, would increase demand for apples, shifting the demand curve to the right. Both changes would move the equilibrium to point A.

Question 12

Which of the following statements is true?
A)An increase in demand causes a change in equilibrium price; the change in price does not cause a further change in demand or supply.
B)A decrease in supply causes equilibrium price to rise; the increase in price then results in a decrease in demand.
C)If both demand and supply increase there must be an increase in equilibrium price; equilibrium quantity may either increase or decrease.
D)If demand decreases and supply increases one cannot determine if equilibrium price will increase or decrease without knowing which change is greater.

Accepted Answer

The answer of Which of the following statements is true?
A)An...

Question 13

Which of the following would definitely cause an increase in the equilibrium price and an increase in the equilibrium quantity of watermelons?
A)an increase in demand and an increase in supply
B)an increase in supply
C)an increase in supply and an increase in demand greater than the increase in supply
D)a decrease in demand and an increase in supply

Accepted Answer

An increase in demand greater than the increase in supply will push both the equilibrium price and quantity higher, as the demand shift has a stronger effect than the supply shift.

Question 14

A decrease in the equilibrium quantity for a product will result
A)when the quantity demanded for the product exceeds the quantity supplied.
B)when there is a decrease in supply and a decrease in demand for the product.
C)when there is an increase in supply and a decrease in demand for the product.
D)when there is a decrease in demand and an increase in the number of firms producing the product.

Accepted Answer

A decrease in both supply and demand will lead to a decrease in the equilibrium quantity, as both shifts reduce the quantity traded in the market.

Question 15

If more insurance companies decide to cover part of the price of voluntary laser eye surgery and more doctors decide to enter the field of laser eye surgery, what will happen in the market for laser eye surgery as a result of these two factors?
A)Demand will increase, but these two factors will not shift the supply curve.
B)Supply will increase, but these two factors will not shift the demand curve.
C)Demand and supply will both increase.
D)Demand will increase and supply will decrease.

Accepted Answer

If more insurance companies cover part of the price of voluntary laser eye surgery, it will lead to an increase in demand for the service because it will become more affordable for consumers. More doctors entering the field of laser eye surgery will increase the supply of the service. Therefore, both factors will work together to increase both demand and supply in the market for laser eye surgery.

Question 16

Select the phrase that correctly completes the following statement."An increase in input prices caused a decrease in the supply of baseballs.As a result ________."
A)the price of baseballs increased and the demand for baseballs decreased
B)the equilibrium quantity of baseballs increased
C)the price of baseballs increased and the quantity demanded of baseballs decreased
D)the price of baseballs increased. The higher price caused the supply of baseballs to increase

Accepted Answer

When input prices increase causing a decrease in supply, it results in an increase in price and a decrease in quantity demanded. Therefore, choice C correctly completes the statement. Choice A is incorrect because an increase in price would not cause a decrease in demand (the law of demand states that an increase in price results in a decrease in quantity demanded). Choice B is incorrect because a decrease in supply would lead to a decrease in the equilibrium quantity traded. Choice D is incorrect because the statement clearly states that an increase in input prices caused a decrease in supply, so it is not possible for the supply to increase as a result of higher prices.

Question 17

A decrease in the equilibrium price for a product will result
A)when the quantity demanded for the product exceeds the quantity supplied.
B)when there is a decrease in supply and a decrease in demand for the product.
C)when there is an increase in supply and a decrease in demand for the product.
D)when there is a decrease in demand and a decrease in the number of firms producing the product.

Accepted Answer

When there is an increase in supply and a decrease in demand for the product, the equilibrium price will decrease. This is because there is a greater amount of supply available in the market relative to the amount of demand, which creates downward pressure on prices. This is the only option that matches these conditions. A is incorrect because an excess in demand would result in an increase in price, not a decrease. B is incorrect because a decrease in both supply and demand would not necessarily result in a decrease in price, as it depends on the magnitude of each decrease. D is incorrect because a decrease in the number of firms producing the product would result in a decrease in supply, but not necessarily a decrease in price unless demand also decreased.

Question 18

Figure 3-8
 
-Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D₁ and S₂ (point B). Which of the following changes would cause the equilibrium to change to point C?
A)a positive change in the technology used to produce apples and decrease in the price of oranges, a substitute for apples
B)an increase in the wages of apple workers and an increase in the price of oranges, a substitute for apples
C)an increase in the number of apple producers and a decrease in the number of apple trees as a result of disease
D)a decrease in the wages of apple workers and an increase in the price of oranges, a substitute for apples

Accepted Answer

A positive change in the technology used to produce apples and a decrease in the price of oranges, a substitute for apples, would cause the equilibrium to change to point C. This is because the increase in technology would shift the supply curve to the right, and the decrease in the price of oranges would shift the demand curve to the right.

Question 19

Which of the following would cause a decrease in the equilibrium price and an increase in the equilibrium quantity of salmon?
A)a decrease in demand and an increase in supply
B)an increase in supply
C)an increase in supply and an increase in demand greater than the increase in supply
D)a decrease in demand and a decrease in supply

Accepted Answer

An increase in supply will lead to a decrease in the equilibrium price and an increase in the equilibrium quantity, as there is now more supply available at any given price level. Option A and D involve a decrease in demand, which would lead to a decrease in both equilibrium price and quantity. Option C involves an increase in both supply and demand, but as the increase in demand is greater than the increase in supply, it would lead to an increase in both equilibrium price and quantity.

Question 20

Suppose that McDonald's successfully implements self-serve kiosks in their restaurants, which allows the company to reduce the number of employees at each location.All else equal, this technological improvement would
A)shift the supply curve for its products to the right.
B)shift the supply curve for its products to the left.
C)shift the demand curve for its products to the right.
D)shift the demand curve for its products to the left.

Accepted Answer

The implementation of self-serve kiosks reduces labor costs, which decreases production costs, leading to an increase in supply, thus shifting the supply curve to the right.

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

In recent years, the consumption of orange juice in the United States has fallen but the price of orange juice has risen.This is because the supply of orange juice has and the demand for orange juice has .

Which of the following statements is true?

Select the phrase that correctly completes the following statement."A positive change in technology caused an increase in the supply of flat-screen televisions.As a result ________."

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D₂ and S₁ (point C) . Which of the following changes would cause the equilibrium to change to point B?

What would happen in the market for laser eye surgery if insurance companies started to cover a portion of the price of voluntary procedures?

Suppose the cost of growing organic corn has risen at the same time as consumer preference for organic corn has fallen.In the market for organic corn, this would be represented by the equilibrium price and the equilibrium quantity .

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D₂ and S₂ (point

Which of the following statements is true?

Which of the following would definitely cause an increase in the equilibrium price and an increase in the equilibrium quantity of watermelons?

A decrease in the equilibrium quantity for a product will result

If more insurance companies decide to cover part of the price of voluntary laser eye surgery and more doctors decide to enter the field of laser eye surgery, what will happen in the market for laser eye surgery as a result of these two factors?

Select the phrase that correctly completes the following statement."An increase in input prices caused a decrease in the supply of baseballs.As a result ________."

A decrease in the equilibrium price for a product will result

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D₁ and S₂ (point B) . Which of the following changes would cause the equilibrium to change to point C?

Which of the following would cause a decrease in the equilibrium price and an increase in the equilibrium quantity of salmon?

Suppose that McDonald's successfully implements self-serve kiosks in their restaurants, which allows the company to reduce the number of employees at each location.All else equal, this technological improvement would