Question 1

A government subsidy to the producers of a product:

Accepted Answer

A government subsidy to producers increases the profitability of producing the product, which encourages them to increase their supply of the product. Therefore, the correct choice is option B which states that a government subsidy increases product supply.

Question 2

Refer to the above table.If demand is represented by columns (3)and (2)and supply is represented by columns (3)and (5),equilibrium price and quantity will be:

Accepted Answer

Equilibrium occurs where demand equals supply. At a price of $8, the quantity demanded is 60 units and the quantity supplied is also 60 units. Therefore, the equilibrium price and quantity are $8 and 60 units, respectively.

Question 3

Other things equal,if the price of a key resource used to produce product X falls,the:

Accepted Answer

If the price of a key resource used in producing product X falls, the cost of production decreases and the profitability of producing product X increases. This leads to an expansion in the quantity supplied and the product supply curve shifts to the right.

Question 4

Increasing marginal cost of production explains:

Accepted Answer

Increasing marginal cost of production means that it becomes more expensive to produce each additional unit of a good. This leads to higher prices and a lower quantity supplied, resulting in an upsloping supply curve.

Question 5

An increase in the excise tax on cigarettes raises the price of cigarettes by shifting the:

Accepted Answer

An increase in the excise tax on cigarettes would increase the cost of production for cigarette producers, leading to a decrease in supply. This would shift the supply curve for cigarettes leftward, resulting in a higher equilibrium price and a lower equilibrium quantity. Therefore, the correct choice is D.

Question 6

Assume a drought in the Great Plains reduces the supply of wheat.Since wheat is a basic ingredient in the production of bread and potatoes are a consumer substitute for bread,we would expect the price of wheat to:

Accepted Answer

A reduction in the supply of wheat would lead to an increase in its price. This increase in wheat price would then increase the cost of producing bread, leading to a decrease in the supply of bread. As bread becomes more expensive, consumers may switch to potatoes as a substitute, leading to an increase in the demand for potatoes. Therefore, the price of wheat would rise, the supply of bread would decrease, and the demand for potatoes would increase.

Question 7

An improvement in production technology will:

Accepted Answer

An improvement in production technology will make it easier for firms to produce more output at a lower cost, leading to a shift in the supply curve to the right. This will increase the quantity of goods available in the market and exert downward pressure on prices, potentially leading to a decrease in equilibrium price.

Question 8

Suppose that at prices of $5,$4,$3,$2,and $1 for product Z,the corresponding quantities supplied are 3,4,5,6,and 7 units,respectively.Which of the following would increase the quantities supplied of Z to,say,6,8,10,12,and 14 units at these prices?

Accepted Answer

Improved technology for producing Z would increase the productivity of the resources used to make Z, resulting in an increase in the quantities supplied at each price level without increasing the cost of production. Therefore, it would be the best choice to increase the quantities supplied of Z at each price level. Option B would increase the cost of production, and therefore, the price of Z, which would decrease the quantities supplied of Z. Option C would also increase the price of Z and reduce the quantities supplied of Z. Option D might increase demand, but it would not affect the supply curve of Z.

Question 9

A leftward shift of a product supply curve might be caused by:

Accepted Answer

A leftward shift of a product supply curve suggests a decrease in the quantity supplied at every price level. This could be caused by some firms leaving the industry, which reduces the overall supply of the product. An improvement in the relevant technique of production or a decline in the prices of needed inputs would cause a rightward shift (increase) in the product supply curve. An increase in consumer incomes would likely increase demand for the product, but it would not affect the supply curve directly.

Question 10

When the price of oil declines significantly,the price of gasoline also declines.The latter occurs because of a(n):

Accepted Answer

When the price of oil declines significantly, the cost of producing gasoline decreases. Therefore, the supply of gasoline increases, leading to a decrease in its price.

Question 11

The supply curve shows the relationship between:

Accepted Answer

The supply curve shows how much of a good or service producers are willing and able to sell at each price. Therefore, the relationship is between price and quantity supplied.

Question 12

The upward slope of the supply curve reflects the:

Accepted Answer

The law of supply states that as the price of a good or service increases, the quantity of that good or service that suppliers are willing and able to offer for sale will increase as well. This positive relationship between price and quantity supplied is reflected in the upward slope of the supply curve. Therefore, choice B is the correct answer. Choices A, C, and D are not accurate descriptions of the upward slope of the supply curve.

Question 13

The location of the supply curve of a product depends on:

Accepted Answer

The supply curve of a product depends on all of the factors listed in the answer choices. The technology used in production affects the efficiency and cost of production, which can affect the willingness of sellers to supply the product at different prices. The prices of resources used in production also affect the cost of production and therefore the supply curve. Finally, the number of sellers in the market can affect the overall supply of the product and the competitiveness among sellers. Therefore, all of these factors are key determinants of the location of the supply curve.

Question 14

Because of unseasonably cold weather,the supply of oranges has substantially decreased.This statement indicates that:

Accepted Answer

The statement mentions a decrease in supply, which means that there will be fewer oranges available at various prices. This does not necessarily mean that the demand for oranges will rise, nor does it imply that the equilibrium quantity or price of oranges will change.

Question 15

Refer to the above table.In relation to column (3),a change from column (5)to column (4)would indicate a(n):

Accepted Answer

The answer of  Refer to the above table.In relation...

Question 16

Refer to the above table.In relation to column (3),a change from column (2)to column (1)would indicate a(n):

Accepted Answer

The answer of  Refer to the above table.In relation...

Question 17

The law of supply:

Accepted Answer

The law of supply states that producers offer more of a good or service as its price increases and less as its price decreases. This reflects the amounts that producers want to offer at each price in a series of prices. Therefore, choice A is correct. 
B is incorrect because the downsloping supply curve is a graphical representation of the law of supply, not the law itself. 
C is incorrect because the law of supply does not make any claim about the relationship between producer revenue and quantity supplied. 
D is incorrect because the law of supply is not related to the income and substitution effects of a price change.

Question 18

If the price of a product increases,we would expect:

Accepted Answer

The answer of If the price of a product increases,we...

Question 19

Suppose that corn prices rise significantly.If farmers expect the price of corn to continue rising relative to other crops,then we would expect:

Accepted Answer

If farmers expect the price of corn to continue rising relative to other crops, they would likely shift their production towards corn in order to take advantage of the higher prices. This would result in an increase in the supply of corn, as farmers plant more crops.

Question 20

Refer to the above table.If demand is represented by columns (3)and (1)and supply is represented by columns (3)and (4),equilibrium price and quantity will be:

Accepted Answer

The answer of  Refer to the above table.If demand...

Quiz 3: Demand, Supply, and Market Equilibrium