Question 1

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

Accepted Answer

An increase in both demand and supply of peanuts will likely result in an increase in the equilibrium quantity, but the equilibrium price may either increase, decrease, or stay the same depending on the magnitude of the shifts in demand and supply. So, there will be an increase in the equilibrium quantity of peanuts, and the equilibrium price may increase, decrease, or stay the same. Option D is the only option that reflects this possibility.

Question 2

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

Accepted Answer

The news about the health benefits of red wine will increase the demand for red wine. However, the decrease in grape harvest will result in a decrease in the supply of red wine. As a result, the equilibrium price of red wine will increase, but the effect on the equilibrium quantity is uncertain because it depends on the relative magnitude of the increase in demand and decrease in supply.

Question 3

Which of the following would cause both the equilibrium price and equilibrium quantity of barley (assume that barley is an inferior good)to increase?

Accepted Answer

The answer of Which of the following would cause both...

Question 4

Figure 3-7 
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for laptop computers.Which panel best describes what happens in this market when the price of computer hard drives falls?

Accepted Answer

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

Question 5

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?

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 6

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

Accepted Answer

A decrease in both demand and supply will lead to a decrease in the equilibrium quantity of eggs. However, the equilibrium price may increase or decrease depending on the magnitude of the shifts in demand and supply. If the decrease in demand is relatively larger than the decrease in supply, then the equilibrium price will decrease. Alternatively, if the decrease in supply is relatively larger than the decrease in demand, then the equilibrium price will increase. Therefore, the answer is D as it correctly identifies a decrease in the equilibrium quantity of eggs and acknowledges the uncertainty regarding the equilibrium price.

Question 7

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

Accepted Answer

A decrease in the price of apples, the main ingredient in apple juice, will lead to a decrease in the cost of producing apple juice. This will cause the supply of apple juice to increase, shifting the supply curve to the right. As a result, the new equilibrium price will be lower, and the equilibrium quantity will increase.

Question 8

Prices of commercial airline tickets (assume that this is a normal good)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?

Accepted Answer

The decrease in consumer incomes and increase in jet fuel prices suggest a decrease in demand and increase in supply for airline tickets, which would typically result in a lower equilibrium price. However, the fact that prices "have fallen in recent months" suggests that the decrease in demand was greater than the increase in supply, indicating a leftward shift in the demand curve that was greater than the leftward shift of the supply curve.

Question 9

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

Accepted Answer

If the price of the service increases and the sales also increase, it means that the quantity demanded has increased. This suggests that there is an increase in demand for personal trainers.

Question 10

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

Accepted Answer

An increase in the price of gasoline would make electric cars relatively more attractive to consumers, as a cheaper and more environmentally friendly alternative. This would likely increase demand for electric cars and allow manufacturers to sell them at a higher price. A technological advancement in the production of electric car batteries or an increase in the number of manufacturers of electric cars could make electric cars more competitive, but would also increase supply and potentially reduce prices. A decrease in the price of lithium would reduce the cost of producing electric car batteries, but would not necessarily translate into higher prices for the cars themselves.

Question 11

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?

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 12

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?

Accepted Answer

The increase in rent for vineyards has led to higher production costs, which shifts the supply curve to the left. On the other hand, the increasing preference for wine over beer shifts the demand curve to the right. The result is an increase in the equilibrium price and an uncertain effect on the equilibrium quantity. Therefore, the correct answer is D.

Question 13

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

Accepted Answer

An increase in the price of gasoline would not directly affect the price of electric cars. Therefore, it would not lead to a decrease in the price of electric cars, even though it might increase demand for electric cars.

Question 14

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?

Accepted Answer

When the Surgeon General announces the news about toxic mercury in raw fish, the demand for sushi is likely to decrease due to health concerns. However, the supply of sushi will not immediately decrease as the announcement affects only the raw fish that is imported. Therefore, there will be a decrease in demand (D), no change in supply (S), leading to a decrease in equilibrium price (P) and quantity (Q).

Question 15

Assume that the price for lawn care has fallen and sales of lawn care services have also fallen.One can conclude that

Accepted Answer

When the price of a good or service decreases, all else being equal, it leads to a decrease in demand. Therefore, the decrease in sales of lawn care services can be explained by a decrease in demand for these services, not a violation of the law of supply, an increase in the number of companies, or a deliberate strategy by lawn care service providers.

Question 16

Prices of smartphones (assume that this is a normal good)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?

Accepted Answer

The falling prices of smartphones can be explained by the fact that the supply curve for smartphones has shifted to the right more than the demand curve has shifted to the right. This is because the price of the components used to produce smartphones has fallen, reducing the cost of production and allowing suppliers to produce smartphones at a lower cost. Additionally, consumer incomes have risen, increasing the demand for smartphones. As a result, the quantity demanded has increased and the quantity supplied has increased even more, leading to falling prices.

Question 17

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?

Accepted Answer

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

Question 18

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

Accepted Answer

An increase in the price of tomatoes, which is a key input in the production of ketchup, would result in a decrease in the supply of ketchup, shifting the supply curve to the left. This decrease in supply, combined with a constant demand for ketchup, would result in an increase in the equilibrium price and a decrease in the quantity of ketchup exchanged in the market.

Question 19

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

Accepted Answer

Hurricane Katrina damaged refining and pipeline capacity, which caused a decrease in supply. The decrease in supply caused a leftward shift of the supply curve, resulting in a higher equilibrium price for gasoline.

Question 20

Which of the following would cause both the equilibrium price and equilibrium quantity of oysters (assume that oysters are a normal good)to decrease?

Accepted Answer

The answer of Which of the following would cause both...

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