Question 1

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 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 new plastic and recycled plastic are substitutes, as the price of newly produced plastic decreases,
A)the demand curve for recycled plastic shifts to the left.
B)the demand curve for recycled plastic shifts to the right.
C)there is a movement up along the demand curve for recycled plastic.
D)there is a movement down along the demand curve for recycled plastic.

Accepted Answer

As the price of newly produced plastic decreases, consumers are more likely to choose newly produced plastic over recycled plastic since it is cheaper. This reduces the demand for recycled plastic, causing the demand curve to shift to the left.

Question 4

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 5

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, the demand for laser eye surgery will increase as more people will be able to afford it. Similarly, if more doctors enter the field of laser eye surgery, the supply of the service will increase. Both of these factors will result in an increase in demand and an increase in supply, leading to an increase in the quantity of laser eye surgeries performed in the market. Therefore, option C is the best choice.

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 started to cover a portion of the price of voluntary procedures, it would make laser eye surgery more affordable for consumers. This would likely increase the demand for the procedure, as more people would be willing and able to pay for it. However, since insurance companies would only cover a portion of the price, it is unlikely to affect the supply of laser eye surgery. As a result, the demand curve would shift to the right, but the supply curve would remain unchanged. Therefore, the best answer is A.

Question 7

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

An increase in supply and a decrease in demand for the product will result in a surplus of the product, which will put downward pressure on the price. As a result, the equilibrium price will decrease to the point where the quantity supplied equals the quantity demanded.

Question 8

Which of the following would 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 lead to a higher equilibrium price and quantity, as the demand shift will dominate, pushing both price and quantity up.

Question 9

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

A positive change in technology leads to an increase in supply, which would cause a decrease in price and an increase in quantity demanded (law of supply and demand). Therefore, option C is the correct choice as it describes the expected outcome of an increase in supply. The other options either do not accurately describe the relationship between supply, demand, and price, or are contradictory.

Question 10

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

The answer of A decrease in the equilibrium quantity for...

Question 11

"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

The answer of "Because chips and salsa are complements, an...

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

An increase in demand causes a shift in the demand curve, leading to a higher equilibrium price and quantity. However, the change in price does not further affect demand or supply. The law of demand states that as price increases, quantity demanded decreases, and the law of supply says that as price increases, quantity supplied increases. Therefore, a change in price will not affect demand or supply since they are already reflected in their respective curves.

Question 13

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 for apples, would increase the demand for apples, shifting the demand curve to the right. Both changes would move the equilibrium to point A.

Question 14

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 would cause a decrease in the equilibrium price and an increase in the equilibrium quantity, as the market becomes more saturated with salmon. The other options would either result in a decrease in equilibrium quantity or have conflicting effects on equilibrium price and quantity.

Question 15

The cost of raising beef cattle has risen at the same time as consumer preference for beef has fallen.In the market for beef, 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 cost increase shifts the supply curve left, raising prices, while decreased demand shifts the demand curve left, lowering prices. The equilibrium quantity decreases due to both shifts.

Question 16

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 reduced 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 17

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

An increase in input prices caused a decrease in the supply of baseballs, meaning there are fewer baseballs available for sale at each price level. This decrease in supply would put upward pressure on prices, leading to an increase in the price of baseballs. Additionally, with fewer baseballs available, the quantity demanded would decrease, further contributing to a rise in prices. Therefore, C is the correct choice as it states that the price of baseballs increased and the quantity demanded of baseballs decreased.

Question 18

All else equal, the decrease in the price of complementary products for the Apple Watch, such as Sensoria's wearable technology, would
A)shift the supply curve for the Apple Watch to the right.
B)shift the supply curve for the Apple Watch to the left.
C)shift the demand curve for the Apple Watch to the right.
D)shift the demand curve for the Apple Watch to the left.

Accepted Answer

A decrease in the price of complementary products, such as Sensoria's wearable technology, would increase the demand for the Apple Watch, shifting the demand curve to the right. This is because the decrease in price of the complementary product would make the use of the Apple Watch more desirable and increase the number of people willing to buy it. The supply curve is not affected in this scenario, as the decrease in the price of complementary products does not directly impact the production or supply of the Apple Watch.

Question 19

"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 20

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 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. The new equilibrium would be at point C, where the new supply curve (S3) intersects the new demand curve (D3).

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

Which of the following statements is true?

Because new plastic and recycled plastic are substitutes, as the price of newly produced plastic decreases,

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?

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?

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 decrease in the equilibrium price for a product will result

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

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 decrease in the equilibrium quantity for a product will result

Which of the following statements is true?

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

The cost of raising beef cattle has risen at the same time as consumer preference for beef has fallen.In the market for beef, this would be represented by the equilibrium price and the equilibrium quantity .

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 ________."

All else equal, the decrease in the price of complementary products for the Apple Watch, such as Sensoria's wearable technology, would

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?