Question 1

Hurricane Juan hit Halifax in 2003.The storm did over $300 million in damage.In the effort to repair the damage done by the storm,the prices of basic building materials and contractors increased dramatically.Many residents complained of profiteering and price gouging by contractors and home improvement stores.Which of the following offers the best explanation of the price increases people were seeing?

Accepted Answer

The hurricane caused an increase in the demand for building materials, as many people needed to repair or rebuild their properties, leading to higher prices due to the surge in demand.

Question 2

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

Accepted Answer

An increase in supply would shift the supply curve to the right, causing a decrease in equilibrium price and an increase in equilibrium quantity. None of the other options result in an increase in equilibrium quantity.

Question 3

Explain how it would be possible for the equilibrium price and equilibrium quantity to both increase in the market for motorcycles if consumer preference for motorcycles increases and the number of motorcycle manufacturers decreases.

Accepted Answer

The answer of Explain how it would be possible for...

Question 4

If the demand for a product increases and the supply of the same product increases,the equilibrium price will increase.

Accepted Answer

When both demand and supply increase, the effect on the equilibrium price is uncertain without knowing the relative magnitudes of the changes in demand and supply. The price may increase, decrease, or remain unchanged depending on which effect is stronger.

Question 5

Photovoltaic cells (solar panels)have been in use since the 1970s.Recently,new technology has been developed which some think will allow regular windows to be replaced with solar panels.If this technology works as these people expect what will happen in the market for solar energy?

Accepted Answer

The new technology of replacing regular windows with solar panels will increase the supply of solar energy in the market. With an increase in supply, the price of solar energy is likely to fall as there will be more competition among suppliers. Therefore, choice A is the best answer.

Question 6

If the number of firms producing mouthwash increases and consumer preference for mouthwash increases,the equilibrium price of mouthwash will definitely increase.

Accepted Answer

While consumer preference increasing would tend to push the price up, the increase in the number of firms could increase supply, potentially offsetting the price increase or even leading to a price decrease, depending on the magnitude of each effect.

Question 7

Discuss the correct and incorrect economic analysis in the following statements.
"Unifor (the union that represents Canadian auto workers,among other industries)has successfully negotiated a 9 percent increase in wages for its workers.This increase in the wage rate causes an increase in demand for automobiles,since many consumers now have greater incomes,and also causes a decrease in supply of automobiles because the cost of production has increased.These effects cancel each other out resulting in no change in the equilibrium price and quantity in the automobile market."

Accepted Answer

The answer of Discuss the correct and incorrect economic analysis...

Question 8

A decrease in the equilibrium price for a product will result

Accepted Answer

A decrease in the equilibrium price for a product will occur when there is an increase in supply and a decrease in demand for the product. This is because the increase in supply means there is more of the product available in the market, which puts pressure on prices to decrease. At the same time, a decrease in demand means there are fewer buyers in the market, which further puts pressure on prices to decrease. The result is a new equilibrium price that is lower than before.

Question 9

Which of the following statements is true?

Accepted Answer

The answer of Which of the following statements is true?
...

Question 10

All else equal,a successful marketing campaign for energy drinks would cause the equilibrium price of energy drinks to ________ and the equilibrium quantity of energy drinks to ________.

Accepted Answer

A successful marketing campaign would increase demand for energy drinks, shifting the demand curve to the right. This would lead to an increase in both the equilibrium price and quantity of energy drinks.

Question 11

All else equal,an increase in the number of firms producing energy drinks will

Accepted Answer

The answer of All else equal,an increase in the number...

Question 12

"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?

Accepted Answer

The statement is incorrect because a change in the price of apples affects the quantity demanded, not the demand itself. The demand curve shifts due to factors other than the price of the good in question (e.g., income, tastes, prices of related goods).

Question 13

Figure 3.14 Alt text for Figure 3.14: In figure 3.14,a graph plotting intersecting demand and supply curves represents the change in equilibrium point in the apple market with the decrease in the price of a substitute fruit,orange and the increase in the wages of apple workers. Long description for Figure 3.14: The x-axis is labelled,Quantity and the y-axis is labelled,Price.Curve D1 is a straight line which slopes down from the top left corner to the bottom right corner.Curve D2 is parallel with curve D1,but is plotted to the left.Curve S1 is a straight line which slopes up from the bottom right corner to the top left corner.Curve S2 is parallel to curve S1,but is plotted to the left.The 4 curves intersect at 4 points; A,B,on the right side of the lines,and C and D,on the left sides of the lines. -Refer to Figure 3.14.The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D₂ and S₂ (point

Accepted Answer

A positive change in the technology used to produce apples would likely increase supply, moving the supply curve to the right, not necessarily leading to point A as described. An increase in wages of apple workers (cost of production) would likely decrease supply, moving the supply curve to the left. An increase in the number of producers could increase supply, but a decrease in the number of apple trees (a factor limiting production) could decrease supply, making the net effect uncertain without more information. A decrease in the wages of apple workers would decrease the cost of production, likely increasing supply and moving the supply curve to the right. An increase in the price of oranges, a substitute, would likely increase the demand for apples, moving the demand curve to the right. Both of these changes would lead to a new equilibrium at a higher quantity and potentially a higher price, which matches the description of moving to point A.

Question 14

If the demand curve for a product shifts to the left and the supply curve for the product shifts to the left,the equilibrium quantity will decrease.

Accepted Answer

When both the demand and supply curves shift to the left, the equilibrium point moves along with it, resulting in a decrease in the equilibrium quantity.

Question 15

If provinces 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?

Accepted Answer

If provinces cover part of the price of voluntary laser eye surgery, then it will become more affordable for consumers, increasing the demand for the service. If more doctors enter the field of laser eye surgery, then there will be more suppliers, increasing the supply of the service. Therefore, both demand and supply will increase in the market for laser eye surgery.

Question 16

The demand for lobster is higher at Christmas than in February.If the equilibrium price of lobster is lower at Christmas than in February,then

Accepted Answer

If demand is higher at Christmas than in February, but the equilibrium price is higher in February, then there must be a difference in supply between the two times. If the equilibrium price is higher in February when demand is lower, it suggests that there is a greater supply of lobster at that time. Therefore, the supply of lobster must be lower in February than at Christmas if the equilibrium price is lower at Christmas.

Question 17

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

Accepted Answer

When provincial health plans cover a portion of the price of voluntary procedures like laser eye surgery, it effectively lowers the out-of-pocket cost for consumers, making the surgery more affordable. This increase in affordability leads to an increase in demand as more people are willing and able to undergo the procedure. The supply curve does not shift in response to this change; instead, the quantity supplied would adjust to meet the new demand at a new equilibrium price and quantity.

Question 18

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,________."

Accepted Answer

An increase in supply typically leads to a decrease in price and an increase in quantity demanded. Therefore, the correct statement is "the price of flat-screen televisions decreased and the quantity demanded of flat-screen televisions increased." A decrease in the equilibrium quantity of flat-screen televisions (option B) would be a contradictory outcome to an increase in supply. Option A is partially correct as it correctly identifies the decrease in price but incorrectly suggests an increase in demand. Option D is incorrect as it suggests a decrease in supply which is contradictory to the initial statement.

Question 19

Figure 3.14 Alt text for Figure 3.14: In figure 3.14,a graph plotting intersecting demand and supply curves represents the change in equilibrium point in the apple market with the decrease in the price of a substitute fruit,orange and the increase in the wages of apple workers. Long description for Figure 3.14: The x-axis is labelled,Quantity and the y-axis is labelled,Price.Curve D1 is a straight line which slopes down from the top left corner to the bottom right corner.Curve D2 is parallel with curve D1,but is plotted to the left.Curve S1 is a straight line which slopes up from the bottom right corner to the top left corner.Curve S2 is parallel to curve S1,but is plotted to the left.The 4 curves intersect at 4 points; A,B,on the right side of the lines,and C and D,on the left sides of the lines. -Refer to Figure 3.14.The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D₁and 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?

Accepted Answer

The graph does not indicate any initial competitive equilibrium point at any of the points A, B, C, or D.

Question 20

As the number of firms in a market decreases,the supply curve will shift to the left and the equilibrium price will rise.

Accepted Answer

If the number of firms in a market decreases, there is a decrease in supply. This will cause the supply curve to shift to the left, resulting in a higher equilibrium price. Conversely, an increase in the number of firms would lead to an increase in supply, resulting in a shift to the right and a lower equilibrium price.

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