Question 1

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

The announcement by the Surgeon General about toxic mercury in the raw fish imported for making sushi is likely to cause a decrease in demand as consumers become aware of the potential health risks. However, since the supply remains unchanged, this will create a situation of surplus supply, causing the equilibrium price and quantity to decrease. Therefore, option A is the best choice.

Question 2

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 a more attractive option for consumers, leading to increased demand and potentially higher prices for electric cars. Technological advancements and an increase in competition among electric car manufacturers may lead to lower prices for electric cars, and a decrease in the price of lithium may lower production costs for electric car manufacturers, but neither of these events necessarily leads to an increase in the price or demand for electric cars.

Question 3

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 lower the cost of production, leading to an increase in supply (S increases) without directly affecting consumer demand (D no change). With more supply and the same demand, the equilibrium price (P) decreases to entice more consumers to buy, while the equilibrium quantity (Q) increases because more products are available at a lower price.

Question 4

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

The decrease in sales suggests that the demand for lawn care services has decreased. This means that consumers are not willing to buy as much lawn care services at the current price, leading to a decrease in sales. The law of supply has not necessarily been violated, as a decrease in demand can also result in a decrease in supply. The number of companies providing lawn care services is not necessarily relevant to the decrease in sales, and there is no evidence to suggest that lawn care services are deliberately charging low prices to discourage people from maintaining their own lawns.

Question 5

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 encourage people to buy more fuel-efficient vehicles, including electric cars. Therefore, it would have the opposite effect of what the electric car enthusiasts want. Technological advancements, an increase in the number of manufacturers, and a decrease in the price of lithium would all contribute to making electric cars more affordable and accessible, which is what the enthusiasts want.

Question 6

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 both demand and supply will cause an increase in the equilibrium quantity of peanuts. The change in the equilibrium price is not definite, as it depends on the degree of change in demand and supply. If the increase in demand is larger than the increase in supply, the price will increase. If the increase in supply is larger than the increase in demand, the price will decrease. Therefore, the equilibrium quantity will increase and the equilibrium price may either increase or decrease. Choice D correctly states this relationship.

Question 7

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

When both the price and sales of personal trainers rise, it indicates that the demand for personal trainers has increased. This goes in line with the law of demand, which states that as the price of a good or service increases, the demand for it decreases, and vice versa. Therefore, option C is the correct choice. Option A is incorrect because the law of demand has not been violated. Option B is irrelevant to the given information, and Option D is speculation and not supported by the information given.

Question 8

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, the main ingredient in ketchup, would cause the supply of ketchup to decrease and therefore shift the supply curve to the left. This would increase the equilibrium price of ketchup and decrease the equilibrium quantity of ketchup. A decrease in the price of tomatoes, as stated in choice A, would have the opposite effect on the equilibrium price and quantity of ketchup. Choices C and D both refer to factors that would not directly affect the demand or supply of ketchup, and therefore would not have an impact on the equilibrium price and quantity.

Question 9

Assume that airline tickets are a normal good.Prices of commercial airline tickets 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 right.
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

Since airline tickets are a normal good, a decrease in consumer income would lead to a decrease in demand for airline tickets, shifting the demand curve to the left. Additionally, an increase in jet fuel prices would increase the cost of production for airlines, shifting the supply curve to the left. However, the fact that airline ticket prices have fallen suggests that the decrease in demand may have been more significant than the decrease in supply, leading to a surplus of airline tickets and a downward pressure on prices. Therefore, the demand curve for airline tickets has likely shifted to the left more than the supply curve has shifted to the left.

Question 10

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

A decrease in consumer income would increase the demand for an inferior good like barley, leading to an increase in both equilibrium price and quantity.

Question 11

Figure 3-7 
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for blu-ray discs.Which panel best describes what happens in this market if there is a substantial increase in the price of blu-ray players?
A)Panel (a)
B)Panel (b)
C)Panel (c)
D)Panel (d)

Accepted Answer

The answer of Figure 3-7 
-Refer to Figure 3-7.Assume that...

Question 12

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 will decrease the production cost of apple juice and will increase its supply. This will cause a shift in the supply curve to the right, resulting in a lower equilibrium price and a higher equilibrium quantity of apple juice.

Question 13

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

With the increase in rents for vineyards, the cost of producing wines in the US has increased, causing a leftward shift in the supply curve. Meanwhile, as more Americans prefer wine over beer, there has been a rightward shift in the demand curve. As a result, the equilibrium price has increased, but the effect on the equilibrium quantity is uncertain. Therefore, the best choice is D.

Question 14

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 news about the health benefits of red wine would increase demand for it, while the fungal disease reduces the supply. This would cause an increase in the equilibrium price of red wine, but the effect on the equilibrium quantity is uncertain as it depends on the extent of the decrease in supply and the extent of the increase in demand.

Question 15

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 a significant portion of oil refining and pipeline capacity in the Gulf coast states, resulting in a decrease in the supply of gasoline. As a result, there was an increase in the equilibrium price, as the demand for gasoline remained relatively constant but the quantity supplied fell. Therefore, choice A, which indicates that the supply curve shifted to the left, resulting in an increase in the equilibrium price, is the best option.

Question 16

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 cost due to technological improvements causes a rightward shift in the supply curve. The increasing preference for microbrew beer over wine causes a rightward shift in the demand curve. Therefore, both the supply and demand curves have shifted to the right. This results in an increase in the equilibrium quantity of microbrew beer, but the effect on the equilibrium price is uncertain as it depends on the magnitude of the shift of both curves. Therefore, choice B is the best explanation.

Question 17

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

A decrease in consumer income would lead to a decrease in demand for normal goods like oysters, causing both the equilibrium price and quantity to decrease.

Question 18

Table 3-3
 
-Refer to Table 3-3.The table contains information about the sorghum market.Use the table to answer the following questions.
a.What are the equilibrium price and quantity of sorghum?
b.Suppose the prevailing price is $6 per bushel.Is there a shortage or a surplus in the market?
c.What is the quantity of the shortage or surplus?
d.How many bushels will be sold if the market price is $6 per bushel?
e.If the market price is $6 per bushel,what must happen to restore equilibrium in the market?
f.At what price will suppliers be able to sell 36,000 bushels of sorghum?
g.Suppose the market price is $14 per bushel.Is there a shortage or a surplus in the market?
h.What is the quantity of the shortage or surplus?
i.How many bushels will be sold if the market price is $14 per bushel?
j.If the market price is $14 per bushel,what must happen to restore equilibrium in the market?

Accepted Answer

The answer of Table 3-3
 
-Refer to Table 3-3.The table...

Question 19

Assume that smartphones are a normal good,and that the prices of smartphones 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 falling prices of smartphones can be explained by the shift of the supply curve to the right, which is due to the falling prices of components used to produce smartphones. This increase in supply, combined with the fact that consumer incomes have risen, has led to a shift of the demand curve to the right as well. However, the shift of the supply curve has been greater than the shift of the demand curve, leading to an overall decrease in price.

Question 20

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

When there is a decrease in both demand and supply, the equilibrium quantity will definitely decrease. However, the impact on the equilibrium price will depend on the extent of the decrease in demand and supply. If the decrease in demand is more than the decrease in supply, then the equilibrium price will decrease. On the other hand, if the decrease in supply is more than the decrease in demand, then the equilibrium price will increase. Therefore, the equilibrium quantity of eggs will decrease, and the equilibrium price may increase or decrease depending on the relative magnitudes of changes in demand and supply.

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

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?

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

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

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

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

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

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

Assume that airline tickets are a normal good.Prices of commercial airline tickets 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 both the equilibrium price and equilibrium quantity of barley (assume that barley is an inferior good) to increase?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for blu-ray discs.Which panel best describes what happens in this market if there is a substantial increase in the price of blu-ray players?

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

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?

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

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

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?

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 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