Question 1

When supply and demand for a product increase simultaneously,we
A)can predict that both the market clearing price and the equilibrium quantity will increase.
B)can predict that both the market clearing price and the equilibrium quantity will decrease.
C)cannot predict the market clearing price,but know that the equilibrium quantity will increase.
D)cannot predict the change in either the equilibrium quantity or the market clearing price.

Accepted Answer

When both supply and demand increase, the equilibrium quantity will definitely increase because more is being supplied and more is being demanded. However, the effect on the market clearing price is uncertain without knowing the relative magnitudes of the shifts in supply and demand.

Question 2

If both buyers and sellers expect the price of a commodity to rise in the future,it is likely that the market clearing price ________ and the equilibrium quantity ________.
A)will fall,cannot be predicted
B)will rise,cannot be predicted
C)cannot be predicted,will fall
D)cannot be predicted,will rise

Accepted Answer

When both buyers and sellers expect the price of a commodity to rise in the future, the demand for the commodity increases and the supply decreases. This results in a shortage at the current market price, which in turn drives up the price to a new equilibrium level where the quantity demanded equals the quantity supplied. Therefore, the market clearing price will likely rise and the equilibrium quantity cannot be predicted based on the information given.

Question 3

If the demand for a product remains the same and the supply falls,
A)the market clearing price will fall and the equilibrium quantity will rise.
B)the market clearing price will rise and the equilibrium quantity will fall.
C)both the market clearing price and the equilibrium quantity will fall.
D)both the market clearing price and the equilibrium quantity will rise.

Accepted Answer

When the supply falls but the demand remains the same, a shortage occurs in the market, leading to an increase in the market clearing price. This increase in price will result in a decrease in the quantity demanded, and an increase in the quantity supplied. As a result, the equilibrium quantity will fall while the market clearing price will rise.

Question 4

Suppose that the market for coffee is in equilibrium at a price of $1.50 per pound and a monthly quantity of 20 million pounds.News of a freeze in Brazil arrives so that people know that the supply of coffee months from now will be sharply reduced.What,if anything,will happen in the coffee market now? Explain.

Accepted Answer

The answer of Suppose that the market for coffee is...

Question 5

If the demand for a product falls and the supply stays the same,
A)the market clearing price will fall and the equilibrium quantity will rise.
B)the market clearing price will rise and the equilibrium quantity will fall.
C)both the market clearing price and the equilibrium quantity will fall.
D)both the market clearing price and the equilibrium quantity will rise.

Accepted Answer

When demand for a product decreases while supply remains constant, the market clearing price will fall because sellers are willing to accept lower prices to sell their products. The equilibrium quantity will also fall because there is less demand for the product at any given price, leading to fewer transactions.

Question 6

If the demand for a product rises and the supply stays the same
A)the market clearing price will fall and the equilibrium quantity will rise.
B)the market clearing price will rise and the equilibrium quantity will fall.
C)both the market clearing price and the equilibrium quantity will fall.
D)both the market clearing price and the equilibrium quantity will rise.

Accepted Answer

With an increase in demand and no change in supply, the market becomes more competitive, and suppliers can charge a higher price for their products. This leads to an increase in the market clearing price and the equilibrium quantity, as suppliers seek to sell more products to meet the higher demand. Therefore, option D is the correct answer.

Question 7

When the supply and/or demand curve shift,the new market clearing price is
A)reached instantaneously.
B)reached only after the government intervenes in the market.
C)reached after some period of adjustment.
D)never reached.

Accepted Answer

When the supply and/or demand curve shifts, it takes some time for the market to adjust to the new equilibrium. Price changes gradually, as buyers and sellers react to the new information. Therefore, the new market clearing price is reached after some period of adjustment.

Question 8

Using a graph,show a market equilibrium.Suppose the costs of inputs increase.How is this shown on the graph? Explain what is happening in the market.

Accepted Answer

The answer of Using a graph,show a market equilibrium.Suppose the...

Question 9

If both buyers and sellers expect the price of a commodity to fall in the future,it is likely that the market clearing price ________ and the equilibrium quantity ________.
A)will fall,cannot be predicted
B)will rise,cannot be predicted
C)cannot be predicted,will fall
D)cannot be predicted,will rise

Accepted Answer

If both buyers and sellers expect the price of a commodity to fall in the future, this creates a situation of downward pressure on the equilibrium price. This means that the market clearing price will likely fall. The equilibrium quantity, however, cannot be predicted based solely on the expectation of a future price decrease. It will depend on other factors affecting supply and demand, which may lead to an increase or decrease in the equilibrium quantity.

Question 10

Economists assume that when there is a change in supply and/or demand,the market clearing price returns to the equilibrium
A)quickly.
B)slowly.
C)after a protracted negotiation process.
D)after an adjustment period.

Accepted Answer

The market clearing price returns to equilibrium after an adjustment period, as the market needs time to react and adjust to the change in supply and/or demand. This adjustment period can vary in length depending on the nature and magnitude of the change.

Question 11

Suppose there is a simultaneous increase in demand and increase in supply.Given this information,we know with certainty that
A)both the equilibrium price and the equilibrium quantity will increase.
B)the equilibrium price will increase,and the equilibrium quantity will increase.
C)the equilibrium quantity will increase.
D)the equilibrium price will increase.

Accepted Answer

When there is a simultaneous increase in demand and supply, the equilibrium quantity will definitely increase because both forces push the quantity in the same direction. However, the effect on price is uncertain without knowing the relative magnitudes of the shifts in demand and supply.

Question 12

Suppose that initially a market is in equilibrium at a price of $10 and a quantity of 5000 units per day.Several months later,the market is in a new equilibrium at a price of $5 and a quantity of 5000 units per day.What happened in the market?

Accepted Answer

The answer of Suppose that initially a market is in...

Question 13

If one day it was discovered that lime juice caused cancer,which of the following would likely result?
A)The supply curve for lime juice would shift to the right.
B)The supply curve for lime juice would shift to the left.
C)The demand curve for lime juice would shift to the right.
D)The demand curve for lime juice would shift to the left.

Accepted Answer

If lime juice were discovered to cause cancer, it would likely decrease the demand for lime juice, resulting in a leftward shift of the demand curve. Consumers would be less willing to purchase lime juice, and thus the quantity demanded would decrease. The supply curve would not be affected, as lime juice producers would still be able to supply the same amount of lime juice as before.

Question 14

Describe the market process that should occur if the price of a product is below its equilibrium price;now describe what would occur if the price is above its equilibrium price,assuming no market interference.

Accepted Answer

The answer of Describe the market process that should occur...

Question 15

In the market for domestic avocados,what would happen to the market clearing price and the equilibrium quantity if there was a drought in avocado growing areas?
A)The market clearing price would rise,and the equilibrium quantity would rise.
B)The market clearing price would fall,and the equilibrium quantity would rise.
C)The market clearing price would rise,and the equilibrium quantity would fall.
D)The market clearing price would fall,and the equilibrium quantity would fall.

Accepted Answer

A drought in avocado growing areas would decrease the supply of domestic avocados, causing the supply curve to shift leftward. This would result in a higher market clearing price and a lower equilibrium quantity.

Question 16

When supply and demand for a product decrease simultaneously,we
A)can predict that both equilibrium price and quantity will increase.
B)can predict that both equilibrium price and quantity will decrease.
C)cannot predict equilibrium price,but know that equilibrium quantity will decrease.
D)cannot predict the change in either the equilibrium quantity or equilibrium price.

Accepted Answer

When both supply and demand decrease simultaneously, the equilibrium quantity will decrease as the quantity supplied and demanded will both go down. However, the change in equilibrium price cannot be predicted, as it will depend on the magnitude of the shifts in supply and demand.

Question 17

Suppose the price of lumber decreases.In the market for new homes,we would expect which of the following to occur?
A)the market clearing price will fall and the equilibrium quantity will rise.
B)the market clearing price will rise and the equilibrium quantity will fall.
C)both the market clearing price and the equilibrium quantity will fall.
D)both the market clearing price and the equilibrium quantity will rise.

Accepted Answer

If the price of lumber decreases, the cost of building a new home will also decrease, leading to a decrease in the market clearing price. This decrease in price will then lead to an increase in the quantity demanded, as new homes become more affordable for consumers. Therefore, the equilibrium quantity will rise.

Question 18

If producers must receive a higher price to be induced to produce any quantity,we can conclude that
A)supply decreased.
B)demand decreased.
C)both supply and demand increased.
D)demand increased.

Accepted Answer

When producers must receive a higher price to produce any quantity, it indicates that the cost of production has increased or the supply of factors of production needed to produce the good has decreased. This results in a decrease in supply, as producers are only willing to supply at the higher price. Therefore, the correct answer is A) supply decreased.

Question 19

Suppose the price of crude oil used to produce gasoline rises significantly.At the same time,consumers purchase hybrid cars in great numbers.In the market for gasoline,the market clearing price ________ and the equilibrium quantity ________.
A)definitely falls,is indeterminate
B)is indeterminate,definitely falls
C)definitely falls,definitely rises
D)definitely rises,is indeterminate

Accepted Answer

The answer of Suppose the price of crude oil used...

Question 20

When supply increases and at the same time demand decreases,we
A)can predict that both equilibrium price and quantity will increase.
B)can predict that both equilibrium price and quantity will decrease.
C)cannot predict equilibrium quantity,but know that equilibrium price will decrease.
D)cannot predict the change in either the equilibrium quantity or equilibrium price.

Accepted Answer

When supply increases and demand decreases, it is certain that the equilibrium quantity will increase, but the impact on equilibrium price is uncertain. However, we know that the decrease in demand will put a downward pressure on the price, whereas the increase in supply will put an upward pressure on the price. Hence, we can predict that the equilibrium price will decrease, but we cannot say for sure how much it will decrease or if it will increase or stay the same.

Quiz 4: Extensions of Demand and Supply Analysis

When supply and demand for a product increase simultaneously,we

If both buyers and sellers expect the price of a commodity to rise in the future,it is likely that the market clearing price and the equilibrium quantity .

If the demand for a product remains the same and the supply falls,

If the demand for a product falls and the supply stays the same,

If the demand for a product rises and the supply stays the same

When the supply and/or demand curve shift,the new market clearing price is

Using a graph,show a market equilibrium.Suppose the costs of inputs increase.How is this shown on the graph? Explain what is happening in the market.

If both buyers and sellers expect the price of a commodity to fall in the future,it is likely that the market clearing price and the equilibrium quantity .

Economists assume that when there is a change in supply and/or demand,the market clearing price returns to the equilibrium

Suppose there is a simultaneous increase in demand and increase in supply.Given this information,we know with certainty that

Suppose that initially a market is in equilibrium at a price of $10 and a quantity of 5000 units per day.Several months later,the market is in a new equilibrium at a price of $5 and a quantity of 5000 units per day.What happened in the market?

If one day it was discovered that lime juice caused cancer,which of the following would likely result?

Describe the market process that should occur if the price of a product is below its equilibrium price;now describe what would occur if the price is above its equilibrium price,assuming no market interference.

In the market for domestic avocados,what would happen to the market clearing price and the equilibrium quantity if there was a drought in avocado growing areas?

When supply and demand for a product decrease simultaneously,we

Suppose the price of lumber decreases.In the market for new homes,we would expect which of the following to occur?

If producers must receive a higher price to be induced to produce any quantity,we can conclude that

Suppose the price of crude oil used to produce gasoline rises significantly.At the same time,consumers purchase hybrid cars in great numbers.In the market for gasoline,the market clearing price and the equilibrium quantity .

When supply increases and at the same time demand decreases,we