Question 1

An increase in demand and a decrease in supply will lead to _____ in equilibrium quantity and _____ in equilibrium price.

Accepted Answer

An increase in demand raises the equilibrium price and quantity, while a decrease in supply raises the equilibrium price but lowers the equilibrium quantity. The net effect on quantity is indeterminate without knowing the magnitude of shifts, but the price will definitely increase.

Question 2

It is certain that the equilibrium price will fall when:

Accepted Answer

When the supply curve shifts to the right and the demand curve shifts to the left, supply will increase and demand will decrease. This will result in a surplus of the product, causing sellers to lower the price to clear the excess supply. Thus, the equilibrium price will fall.

Question 3

Suppose the local real estate market is in equilibrium. A recession causes local household incomes to decline. At the same time, construction of a large subdivision of new homes has just been completed. Given these two changes and assuming that real estate is a normal good, we can predict that the price of real estate will _____ and the quantity of real estate bought and sold will _____.

Accepted Answer

The decrease in household incomes would likely decrease demand for real estate and therefore, real estate prices would fall. However, the completion of the new subdivision would increase the supply of real estate, which could cause the quantity of real estate bought and sold to either rise or fall depending on the magnitude of the decrease in demand compared to the increase in supply. Therefore, we can predict that the price of real estate will fall and the quantity of real estate bought and sold will either rise or fall.

Question 4

Suppose that more police and security workers become aware that wearing bulletproof vests can protect them from injury and decide to start wearing bulletproof vests. At the same time, the price of ceramics used to produce the vests falls. The equilibrium price of bulletproof vests _____ and the equilibrium quantity produced _____.

Accepted Answer

With more police and security workers wearing bulletproof vests, the demand for vests will increase. At the same time, the fall in price of ceramics used to produce vests will lower the cost of production, which will increase the supply of vests. Hence, both the demand and supply will increase, resulting in an increase in equilibrium quantity produced. However, the effect on equilibrium price is ambiguous because the increase in demand and supply may offset each other or not depending on the magnitude of change in each.

Question 5

Consider the market for iPods. What happens if a fantastic new alternative MP3 player is developed and at the same time a boat carrying a large shipment of iPods is attacked by pirates and sunk?

Accepted Answer

The development of a fantastic new alternative MP3 player will increase competition in the market, which will likely lead to a decrease in demand for iPods. On the other hand, the pirate attack and sinking of the shipment of iPods will decrease the supply of iPods. The net effect on price and quantity is uncertain, but if the decrease in supply is greater than the decrease in demand, then price will increase and quantity will decrease. However, if the decrease in demand is greater than the decrease in supply, then price will decrease and quantity will decrease. Therefore, the change in price is indeterminate, but quantity is likely to decrease.

Question 6

Consider the market for corn. What happens if there is an increased demand for corn tortillas and at the same time a new corn seed becomes available that dramatically increases the yield per acre?

Accepted Answer

The increased demand for corn tortillas will lead to an increase in the price of corn, while the new corn seed that increases the yield per acre will lead to a decrease in the price of corn. The net effect on price is therefore indeterminate. However, the increased yield per acre will lead to an increase in the quantity of corn supplied, while the increased demand for corn tortillas will lead to an increase in the quantity of corn demanded. The net effect on quantity is therefore an increase.

Question 7

If the United States increases tariffs on imports of lumber from Canada (which raises the price of lumber in the United States), the equilibrium price of new homes in the United States will _____ and the equilibrium quantity of new homes in the United States will _____.

Accepted Answer

Increasing tariffs on lumber imports from Canada would raise the cost of lumber in the United States. Since lumber is a primary material in home construction, this would increase the cost of building new homes, leading to a higher equilibrium price for new homes. However, the higher costs would likely reduce the quantity of new homes built, leading to a decrease in the equilibrium quantity of new homes.

Question 8

The price of microchips used to produce computers falls. As a result, the equilibrium price of computers _____ and the equilibrium quantity _____.

Accepted Answer

According to the law of supply and demand, the decrease in the price of microchips used to produce computers will cause a decrease in the cost of production for computers. This will lead to an increase in the supply of computers in the market, resulting in a decrease in the equilibrium price of computers and an increase in the equilibrium quantity.

Question 9

Suppose that supply increases and demand decreases. What is the most likely effect on price and quantity?

Accepted Answer

When supply increases and demand decreases, there will be an excess supply of the product in the market, leading to a decrease in price. However, the change in quantity is uncertain since the decrease in demand may offset the increase in supply or vice versa. Therefore, the quantity may increase, decrease, or remain unchanged.

Question 10

The market for milk is initially in equilibrium. Milk producers successfully advertise to encourage milk drinking. At the same time, more milk producers enter the market. Standard demand and supply analysis tells us that:

Accepted Answer

When milk producers successfully advertise to encourage milk drinking, the demand for milk will increase, leading to a new equilibrium quantity of milk. However, with more milk producers entering the market, the supply of milk will also increase, which will put downward pressure on the equilibrium price of milk. Therefore, the equilibrium quantity of milk will rise, but we can't determine how the equilibrium price will be affected.

Question 11

An ambiguous change in price and a decrease in quantity are most likely caused by:

Accepted Answer

An ambiguous change in price means that it could be caused by either a shift in supply or demand or a combination of both. However, the decrease in quantity implies that there is a decrease in demand. Therefore, the only option that fits this scenario is a shift to the left in supply and a shift to the left in demand, which is option B.

Question 12

A recent news story reported that the Organization of Petroleum Exporting Countries is expected to decrease the supply of oil next summer. Summer is traditionally a time of increased demand for oil because of vacation travel. What would be the combined effect of these two events on the summer market for gasoline?

Accepted Answer

The decrease in oil supply by OPEC and the increased demand during summer would lead to an increase in gasoline prices due to the higher demand and lower supply. However, the change in quantity is unpredictable because it depends on the extent of the supply decrease and demand increase, as well as how consumers and other producers respond to the price change.

Question 13

Customers used to pay inside before pumping gas. When gas stations introduced paying at the pump, thus decreasing production costs, there was a shift to the _____ in the _____ curve and _____ pressure on gas prices.

Accepted Answer

When production costs decrease, the supply curve shifts to the right. This means that there is a larger quantity of gas supplied at any given price level. As a result, there is less pressure on gas prices to increase, and prices may even ease. Therefore, choice A is the correct answer.

Question 14

Many public utilities burn oil to generate electricity. If the price of oil increases, we expect a shift to the _____ in the _____ curve for _____ and a _____ price for electricity

Accepted Answer

If the price of oil increases, it will lead to an increase in the cost of production for utilities burning oil to generate electricity. This will cause a decrease in the supply of electricity at each price level, shifting the supply curve to the left. As a result, the equilibrium price of electricity will increase. Therefore, the correct choice is B.

Question 15

An increase in the price and an ambiguous change in quantity is most likely caused by:

Accepted Answer

An increase in price with an ambiguous change in quantity is likely due to a leftward shift in supply (decreasing supply) and a rightward shift in demand (increasing demand), which both push the price up but have opposing effects on quantity.

Question 16

Suppose the market for gasoline is in equilibrium. You have heard that the price of crude oil is falling because of new oil discoveries. You are also aware that the number of car and truck drivers is steadily rising. Knowing this, you predict that the price of gasoline will _____ and the quantity of gasoline bought and sold will _____.

Accepted Answer

The decrease in the price of crude oil may lead to a decrease in the price of gasoline, which could potentially lead to an increase in the quantity of gasoline bought and sold. However, the steady increase in the number of car and truck drivers would increase the demand for gasoline, which would result in an increase in the price of gasoline and an increase in the quantity of gasoline bought and sold. Therefore, the price of gasoline may either rise or fall, but the quantity of gasoline bought and sold will mostly likely rise.

Question 17

You notice that the price of Blu-ray players falls and the quantity of Blu-ray players sold increases. You suspect that _____ Blu-ray players shifts to the _____.

Accepted Answer

When the price of Blu-ray players falls and the quantity sold increases, it suggests that the supply of Blu-ray players has increased, shifting the supply curve to the right. This is because suppliers are willing and able to offer more Blu-ray players at each price level.

Question 18

The cost of sensors used in making digital cameras falls, while a successful ad campaign makes digital cameras more fashionable. As a result, the equilibrium price of digital cameras _____ and the equilibrium quantity _____.

Accepted Answer

The answer of The cost of sensors used in making...

Question 19

A decrease in demand and a decrease in supply will lead to _____ in equilibrium quantity and _____ in equilibrium price.

Accepted Answer

When both demand and supply decrease, the equilibrium quantity will definitely decrease. However, the change in equilibrium price is indeterminate because it depends on the relative magnitudes of the shifts in demand and supply.

Question 20

In the local market for coffee, a normal good, the price will _____ and the quantity will _____ if new coffee shops open and consumers' incomes decrease because of a recession.

Accepted Answer

With the opening of new coffee shops, the supply of coffee will increase, which will lead to a decrease in price. Also, with a decrease in consumers' incomes due to a recession, the demand for coffee will decrease, resulting in a decrease in quantity. Therefore, the price will decrease while the quantity will be indeterminate, but likely to decrease as well.

Quiz 3: Supply and Demand

An increase in demand and a decrease in supply will lead to _ in equilibrium quantity and _ in equilibrium price.

It is certain that the equilibrium price will fall when:

Consider the market for iPods. What happens if a fantastic new alternative MP3 player is developed and at the same time a boat carrying a large shipment of iPods is attacked by pirates and sunk?

Consider the market for corn. What happens if there is an increased demand for corn tortillas and at the same time a new corn seed becomes available that dramatically increases the yield per acre?

If the United States increases tariffs on imports of lumber from Canada (which raises the price of lumber in the United States) , the equilibrium price of new homes in the United States will _ and the equilibrium quantity of new homes in the United States will _.

The price of microchips used to produce computers falls. As a result, the equilibrium price of computers _ and the equilibrium quantity _.

Suppose that supply increases and demand decreases. What is the most likely effect on price and quantity?

The market for milk is initially in equilibrium. Milk producers successfully advertise to encourage milk drinking. At the same time, more milk producers enter the market. Standard demand and supply analysis tells us that:

An ambiguous change in price and a decrease in quantity are most likely caused by:

Customers used to pay inside before pumping gas. When gas stations introduced paying at the pump, thus decreasing production costs, there was a shift to the ___ in the _ curve and ___ pressure on gas prices.

Many public utilities burn oil to generate electricity. If the price of oil increases, we expect a shift to the ___ in the _ curve for _ and a ___ price for electricity

An increase in the price and an ambiguous change in quantity is most likely caused by:

You notice that the price of Blu-ray players falls and the quantity of Blu-ray players sold increases. You suspect that _ Blu-ray players shifts to the _.

The cost of sensors used in making digital cameras falls, while a successful ad campaign makes digital cameras more fashionable. As a result, the equilibrium price of digital cameras _ and the equilibrium quantity _.

A decrease in demand and a decrease in supply will lead to _ in equilibrium quantity and _ in equilibrium price.

In the local market for coffee, a normal good, the price will _ and the quantity will _ if new coffee shops open and consumers' incomes decrease because of a recession.

Quiz 3: Supply and Demand

An increase in demand and a decrease in supply will lead to _____ in equilibrium quantity and _____ in equilibrium price.

It is certain that the equilibrium price will fall when:

Consider the market for iPods. What happens if a fantastic new alternative MP3 player is developed and at the same time a boat carrying a large shipment of iPods is attacked by pirates and sunk?

Consider the market for corn. What happens if there is an increased demand for corn tortillas and at the same time a new corn seed becomes available that dramatically increases the yield per acre?

If the United States increases tariffs on imports of lumber from Canada (which raises the price of lumber in the United States) , the equilibrium price of new homes in the United States will _____ and the equilibrium quantity of new homes in the United States will _____.

The price of microchips used to produce computers falls. As a result, the equilibrium price of computers _____ and the equilibrium quantity _____.

Suppose that supply increases and demand decreases. What is the most likely effect on price and quantity?

The market for milk is initially in equilibrium. Milk producers successfully advertise to encourage milk drinking. At the same time, more milk producers enter the market. Standard demand and supply analysis tells us that:

An ambiguous change in price and a decrease in quantity are most likely caused by:

Customers used to pay inside before pumping gas. When gas stations introduced paying at the pump, thus decreasing production costs, there was a shift to the _____ in the _____ curve and _____ pressure on gas prices.

Many public utilities burn oil to generate electricity. If the price of oil increases, we expect a shift to the _____ in the _____ curve for _____ and a _____ price for electricity

An increase in the price and an ambiguous change in quantity is most likely caused by:

You notice that the price of Blu-ray players falls and the quantity of Blu-ray players sold increases. You suspect that _____ Blu-ray players shifts to the _____.

The cost of sensors used in making digital cameras falls, while a successful ad campaign makes digital cameras more fashionable. As a result, the equilibrium price of digital cameras _____ and the equilibrium quantity _____.

A decrease in demand and a decrease in supply will lead to _____ in equilibrium quantity and _____ in equilibrium price.

In the local market for coffee, a normal good, the price will _____ and the quantity will _____ if new coffee shops open and consumers' incomes decrease because of a recession.

An increase in demand and a decrease in supply will lead to _ in equilibrium quantity and _ in equilibrium price.

If the United States increases tariffs on imports of lumber from Canada (which raises the price of lumber in the United States) , the equilibrium price of new homes in the United States will _ and the equilibrium quantity of new homes in the United States will _.

The price of microchips used to produce computers falls. As a result, the equilibrium price of computers _ and the equilibrium quantity _.

Customers used to pay inside before pumping gas. When gas stations introduced paying at the pump, thus decreasing production costs, there was a shift to the ___ in the _ curve and ___ pressure on gas prices.

Many public utilities burn oil to generate electricity. If the price of oil increases, we expect a shift to the ___ in the _ curve for _ and a ___ price for electricity

You notice that the price of Blu-ray players falls and the quantity of Blu-ray players sold increases. You suspect that _ Blu-ray players shifts to the _.

The cost of sensors used in making digital cameras falls, while a successful ad campaign makes digital cameras more fashionable. As a result, the equilibrium price of digital cameras _ and the equilibrium quantity _.

A decrease in demand and a decrease in supply will lead to _ in equilibrium quantity and _ in equilibrium price.

In the local market for coffee, a normal good, the price will _ and the quantity will _ if new coffee shops open and consumers' incomes decrease because of a recession.