Question 1

-Refer to Figure 3-6. The figure above represents the market for canvas tote bags. Assume that the price of tote bags is $15. At this price,

Accepted Answer

At a price of $15, the quantity demanded exceeds the quantity supplied by 55 tote bags, leading to a shortage. This shortage will be eliminated when the price rises to $25, where quantity demanded will equal quantity supplied. Therefore, choice C is the correct answer. Choices A and D are incorrect because they imply that the price will rise to $25, which is not guaranteed. Choice B is incorrect because it suggests that consumers will offer to buy tote bags at a higher price, which is not possible as the price is fixed at $15.

Question 2

Market equilibrium occurs where supply equals demand.

Accepted Answer

The answer of Market equilibrium occurs where supply equals demand....

Question 3

-Refer to Figure 3-5. At a price of $20,

Accepted Answer

The answer of 
-Refer to Figure 3-5. At a price...

Question 4

A shortage is defined as the situation that exists when the quantity of a good supplied is greater than the quantity demanded.

Accepted Answer

A shortage is defined as the situation that exists when the quantity demanded is greater than the quantity supplied, not the other way around.

Question 5

Which of the following is evidence of a surplus of bananas?

Accepted Answer

If there is a surplus of bananas, firms will often lower the price in order to increase sales and clear their inventories. Choice A is incorrect because firms would not raise the price if there is a surplus of bananas. Choice C is incorrect because an increase in demand would cause the equilibrium price to rise, but a surplus means there is excess supply, not excess demand. Choice D is incorrect because if the quantity demanded is greater than the quantity supplied, this would indicate a shortage, not a surplus.

Question 6

-Refer to Figure 3-4. If the current market price is $15, the market will achieve equilibrium by

Accepted Answer

The answer of 
-Refer to Figure 3-4. If the current...

Question 7

-Refer to Figure 3-5. At a price of $5, the quantity sold

Accepted Answer

The answer of 
-Refer to Figure 3-5. At a price...

Question 8

-Refer to Figure 3-5. In a free market such as that depicted above, a surplus is eliminated by

Accepted Answer

The answer of 
-Refer to Figure 3-5. In a free...

Question 9

A surplus occurs when the actual selling price is above the market equilibrium price.

Accepted Answer

A surplus occurs when the quantity supplied exceeds the quantity demanded at the current market price, which typically results in the actual selling price being above the market equilibrium price.

Question 10

-Refer to Figure 3-5. At a price of $10, the quantity sold

Accepted Answer

The answer of 
-Refer to Figure 3-5. At a price...

Question 11

-Refer to Figure 3-5. At a price of $15,

Accepted Answer

The answer of 
-Refer to Figure 3-5. At a price...

Question 12

If, for a product, the quantity supplied exceeds the quantity demanded, the market price will fall until

Accepted Answer

In this situation, there is excess supply in the market. As a result, the price will fall until the quantity demanded equals the quantity supplied. This is the definition of the equilibrium price, which is where the market clears. Therefore, the correct choice is D, where the market price will equal the equilibrium price at the new quantity supplied and demanded.

Question 13

-Refer to Figure 3-6. The figure above represents the market for canvas tote bags. Assume that the market price is $35. Which of the following statements is true?

Accepted Answer

The answer of 
-Refer to Figure 3-6. The figure above...

Question 14

A shortage occurs when the market price is lower than the equilibrium price.

Accepted Answer

The answer of A shortage occurs when the market price...

Question 15

In response to a surplus, the market price of a good will fall; as the price falls, the quantity demanded will increase and quantity supplied will decrease until equilibrium is reached.

Accepted Answer

This is the basic law of supply and demand that drives market equilibrium. When there is a surplus of a good, meaning there is more supply than demand, the market price will fall as suppliers try to sell their excess inventory. As the price falls, consumers are incentivized to buy more of the good, increasing demand. At the same time, some suppliers may reduce production or sell less of the good, decreasing supply. This process continues until the price reaches a level where the quantity demanded by consumers equals the quantity supplied by producers, creating a state of equilibrium.

Question 16

-Refer to Figure 3-6. The figure above represents the market for canvas tote bags. Compare the conditions in the market when the price is $50 and when the price is $35. Which of the following describes how the market differs at these prices?

Accepted Answer

When the price is $50, the quantity demanded is 200 bags and the quantity supplied is 100 bags, resulting in a difference of 100 bags (surplus). When the price is $35, the quantity demanded is 300 bags and the quantity supplied is 200 bags, resulting in a difference of 100 bags (still a surplus). However, the difference (or surplus) is greater at a higher price of $50 compared to $35. Therefore, B is the correct answer.

Question 17

Which of the following is evidence of a shortage of walnuts?

Accepted Answer

If the quantity demanded of walnuts is greater than the quantity supplied, it means that there is a shortage of walnuts. This is because there are not enough walnuts available to meet the demand, which drives up the price of walnuts. Option A (firms lowering the price of walnuts) does not necessarily indicate a shortage as firms may lower the price for other reasons. Option B (lowering the price of cashews) is not a reliable indicator of a walnut shortage as firms may lower the price of cashews for other reasons. Option C (fall in equilibrium price) could indicate a decrease in demand but not necessarily a shortage as it could also be caused by an increase in supply.

Question 18

Assume there is a shortage in the market for digital music players. Which of the following statements correctly describes this situation?

Accepted Answer

The answer of Assume there is a shortage in the...

Question 19

Scarcity is defined as the situation that exists when the quantity demanded for a good is greater than the quantity supplied.

Accepted Answer

The answer of Scarcity is defined as the situation that...

Question 20

In a perfectly competitive market, there are ________ buyers and ________ sellers.

Accepted Answer

In a perfectly competitive market, there are many buyers and many sellers. This means that no single buyer or seller has the power to influence the market price. The market is characterized by a large number of small firms, each producing an identical product, and all firms have perfect information about the market.

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

-Refer to Figure 3-6. The figure above represents the market for canvas tote bags. Assume that the price of tote bags is $15. At this price,

Market equilibrium occurs where supply equals demand.

-Refer to Figure 3-5. At a price of $20,

A shortage is defined as the situation that exists when the quantity of a good supplied is greater than the quantity demanded.

Which of the following is evidence of a surplus of bananas?

-Refer to Figure 3-4. If the current market price is $15, the market will achieve equilibrium by

-Refer to Figure 3-5. At a price of $5, the quantity sold

-Refer to Figure 3-5. In a free market such as that depicted above, a surplus is eliminated by

A surplus occurs when the actual selling price is above the market equilibrium price.

-Refer to Figure 3-5. At a price of $10, the quantity sold

-Refer to Figure 3-5. At a price of $15,

If, for a product, the quantity supplied exceeds the quantity demanded, the market price will fall until

-Refer to Figure 3-6. The figure above represents the market for canvas tote bags. Assume that the market price is $35. Which of the following statements is true?

A shortage occurs when the market price is lower than the equilibrium price.

In response to a surplus, the market price of a good will fall; as the price falls, the quantity demanded will increase and quantity supplied will decrease until equilibrium is reached.

-Refer to Figure 3-6. The figure above represents the market for canvas tote bags. Compare the conditions in the market when the price is $50 and when the price is $35. Which of the following describes how the market differs at these prices?

Which of the following is evidence of a shortage of walnuts?

Assume there is a shortage in the market for digital music players. Which of the following statements correctly describes this situation?

Scarcity is defined as the situation that exists when the quantity demanded for a good is greater than the quantity supplied.

In a perfectly competitive market, there are buyers and sellers.