Question 1

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?
A)Panel (a)
B)Panel (b)
C)Panel (c)
D)Panel (d)

Accepted Answer

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

Question 2

Table 3-3
 
-Refer to Table 3-3.The table contains information about the sorghum market.Use the table to answer the following questions.
a.What are the equilibrium price and quantity of sorghum?
b.Suppose the prevailing price is $6 per bushel.Is there a shortage or a surplus in the market?
c.What is the quantity of the shortage or surplus?
d.How many bushels will be sold if the market price is $6 per bushel?
e.If the market price is $6 per bushel,what must happen to restore equilibrium in the market?
f.At what price will suppliers be able to sell 36,000 bushels of sorghum?
g.Suppose the market price is $14 per bushel.Is there a shortage or a surplus in the market?
h.What is the quantity of the shortage or surplus?
i.How many bushels will be sold if the market price is $14 per bushel?
j.If the market price is $14 per bushel,what must happen to restore equilibrium in the market?

Accepted Answer

The answer of Table 3-3
 
-Refer to Table 3-3.The table...

Question 3

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
A)the law of demand has been violated.
B)the number of personal trainers has increased.
C)the demand for personal trainers has increased.
D)personal trainers are deliberately charging high prices because they provide services for wealthy clients.

Accepted Answer

If both the price and sales of personal trainer services have risen, it suggests an increase in demand. This means that people are willing to pay the higher price because they see value in the service provided by personal trainers. Therefore, the correct option is C - the demand for personal trainers has increased. The law of demand has not been violated because as the price has gone up, the quantity demanded has also gone up, indicating a normal upward-sloping demand curve. The number of personal trainers is not mentioned, so it cannot be concluded that it has increased. It cannot be assumed that personal trainers are deliberately charging high prices as there could be other factors (such as increased costs) driving the price increase.

Question 4

Which of the following would cause the equilibrium price of apple juice to decrease and the equilibrium quantity of apple juice to increase?
A)a decrease in the price of apples
B)an increase in the price of apples
C)an increase in the price of orange juice,a substitute for apple juice
D)a decrease in the price of granola bars,a complement for apple juice

Accepted Answer

A decrease in the price of apples, the main ingredient in apple juice, would decrease the cost of production for apple juice, leading to a decrease in the equilibrium price. Additionally, the increase in the supply of apples would lead to an increase in the quantity of apple juice produced and sold, leading to an increase in the equilibrium quantity.

Question 5

Which of the following would cause both the equilibrium price and equilibrium quantity of oysters (assume that oysters are a normal good)to decrease?
A)an increase in consumer income
B)an oil spill that sharply reduces oyster output
C)a decrease in consumer income
D)a technological advancement in the production of oysters

Accepted Answer

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

Question 6

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?
A)The supply curve for airline tickets has shifted to the left while the demand curve for airline tickets has shifted to the right.
B)The demand curve for airline tickets has shifted to the left more than the supply curve has shifted to the left.
C)The demand curve and the supply curve for airline tickets have both shifted to the right.
D)The supply curve for airline tickets has shifted to the left more than the demand curve has shifted to the left.

Accepted Answer

The increase in jet fuel prices and decrease in consumer incomes would both cause a decrease in demand for airline tickets, shifting the demand curve to the left. However, the decrease in demand may not be as large as the decrease in supply caused by the increase in jet fuel prices, resulting in a net shift of the supply curve to the left as well. As a result, the falling prices of airline tickets can be explained by a leftward shift of both the demand and supply curves, with the demand curve shifting more to the left than the supply curve.

Question 7

Electric car manufacturers want to sell more electric cars at a higher price.Which of the following events would have this effect?
A)technological advancement in the production of electric car batteries.
B)an increase in the number of manufacturers of electric cars.
C)a decrease in the price of lithium,which is used in the electric car batteries.
D)an increase in the price of gasoline.

Accepted Answer

An increase in the price of gasoline would make owning and operating gasoline-powered cars more expensive, making electric cars a more attractive option. This would increase demand for electric cars, allowing manufacturers to sell them at higher prices. A technological advancement in battery production or a decrease in the price of lithium may lower the cost of making electric cars, but it does not necessarily mean that manufacturers will sell them at a higher price. An increase in the number of manufacturers of electric cars may increase competition and drive prices down, rather than up.

Question 8

Which of the following would cause the equilibrium price of ketchup to increase and the equilibrium quantity of ketchup to decrease?
A)a decrease in the price of tomatoes
B)an increase in the price of tomatoes
C)an increase in the price of mustard,a substitute for ketchup
D)an increase in the price of french fries,a complement for ketchup

Accepted Answer

Ketchup is made from tomatoes, so an increase in the price of tomatoes (a key ingredient in the production of ketchup) would cause the production of ketchup to become more expensive. Producers would then supply less ketchup, causing a decrease in the equilibrium quantity. Meanwhile, consumers would be willing to pay more for ketchup due to the increased cost of production, leading to an increase in the equilibrium price. An increase in the price of mustard, a substitute for ketchup, would cause consumers to switch to ketchup and increase the demand for ketchup. This would lead to an increase in both the equilibrium price and quantity. An increase in the price of French fries, a complement for ketchup, would cause consumers to buy fewer French fries, leading to a decrease in the demand for ketchup. This would lead to a decrease in the equilibrium quantity of ketchup, but the effect on the equilibrium price would be ambiguous (it could increase, decrease, or remain unchanged).

Question 9

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
A)increase demand and increase supply,resulting in an increase in the equilibrium quantity and a decrease in the equilibrium price of red wine.
B)increase demand and decrease supply resulting in a decrease in both the equilibrium quantity and the equilibrium price of red wine.
C)increase demand and decrease supply,resulting in an increase in the equilibrium price and an uncertain effect on the equilibrium quantity of red wine.
D)increase demand and decrease supply,resulting in an increase in both the equilibrium price and the equilibrium quantity of red wine.

Accepted Answer

The demand for red wine will increase because of the perceived health benefits of drinking one glass per day. However, the supply will decrease due to the reduced grape harvest. This will lead to an increase in the equilibrium price of red wine, but the effect on the equilibrium quantity is uncertain as it will depend on the magnitude of the increase in demand and the decrease in supply.

Question 10

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?
A)The supply curve has shifted to the right and the demand curve has shifted to the left.As a result there has been a decrease in the equilibrium quantity and an uncertain effect on the equilibrium price.
B)Both the supply and demand curves have shifted to the right.As a result,there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price.
C)Both the supply and demand curves have shifted to the right.As a result,there has been an increase in both the equilibrium price and the equilibrium quantity.
D)The supply curve has shifted to the left and the demand curve has shifted to the right.As a result,there has been an increase in the equilibrium price and an uncertain effect on the equilibrium quantity.

Accepted Answer

The decrease in production costs due to technological improvements has led to a shift in the supply curve to the right, increasing the quantity supplied at any given price. The increase in preference for microbrew beer over wine has led to a shift in the demand curve to the right, increasing the quantity demanded at any given price. Therefore, both the supply and demand curves have shifted to the right, resulting in an increase in the equilibrium quantity. However, the effect on equilibrium price is uncertain as it depends on the magnitude of the shifts in both supply and demand curves.

Question 11

Which of the following would cause both the equilibrium price and equilibrium quantity of barley (assume that barley is an inferior good)to increase?
A)an increase in consumer income
B)a drought that sharply reduces barley output
C)a decrease in consumer income
D)unusually good weather that results in a bumper crop of barley

Accepted Answer

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

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?
A)The supply curve has shifted to the left and the demand curve has shifted to the right.As a result there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price.
B)Both the supply and demand curves have shifted to the right.As a result,there has been an increase in the equilibrium price and an uncertain effect on the equilibrium quantity.
C)Both the supply and demand curves have shifted to the right.As a result,there has been an increase in both the equilibrium price and the equilibrium quantity.
D)The supply curve has shifted to the left and the demand curve has shifted to the right.As a result,there has been an increase in the equilibrium price and an uncertain effect on the equilibrium quantity.

Accepted Answer

The increase in cost of vineyards has reduced the supply of wine, shifting the supply curve to the left. Meanwhile, the increasing preference for wine over beer has increased demand, shifting the demand curve to the right. This results in an increase in equilibrium price, but the effect on the equilibrium quantity is uncertain depending on the magnitude of the two shifts.

Question 13

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
A)an increase in the equilibrium quantity of peanuts and no change in the equilibrium price.
B)an increase in the equilibrium price of peanuts and no change in the equilibrium quantity.
C)an increase in the equilibrium price of peanuts;the equilibrium quantity may increase or decrease.
D)an increase in the equilibrium quantity of peanuts;the equilibrium price may increase or decrease.

Accepted Answer

An increase in both demand and supply will lead to an increase in the equilibrium quantity of peanuts. However, the change in the equilibrium price is uncertain as it will depend on the magnitude of the increase in demand and supply. If the increase in demand is greater than the increase in supply, then the equilibrium price will increase. On the other hand, if the increase in supply is greater than the increase in demand, then the equilibrium price will decrease. Therefore, the correct answer is D.

Question 14

Hurricane Katrina damaged a large portion of oil refining and pipeline capacity in the Gulf coast states.In the market for gasoline,
A)the supply curve shifted to the left resulting in an increase in the equilibrium price.
B)the supply curve shifted to the right resulting in an increase in the equilibrium price.
C)the demand curve shifted to the left resulting in a decrease in the equilibrium price.
D)the demand curve shifted to the right resulting in an increase in the equilibrium price.

Accepted Answer

Hurricane Katrina damaged oil refining and pipeline capacity, which reduced the supply of gasoline in the market. The decrease in supply caused the supply curve to shift to the left, resulting in an increase in the equilibrium price.

Question 15

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?
A)D increases,S no change,P and Q increase
B)S increases,D no change,P decreases,Q increases
C)D and S increase,P and Q decrease
D)D no change,S increases,P decreases,Q decreases

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 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?
A)The supply curve for smartphones has shifted to the right while the demand curve for smartphones has shifted to the left.
B)The demand curve for smartphones has shifted to the right more than the supply curve has shifted to the right.
C)The demand curve and the supply curve for smartphones have both shifted to the left.
D)The supply curve for smartphones has shifted to the right more than the demand curve has shifted to the right.

Accepted Answer

The falling prices of smartphones can be explained by the supply curve for smartphones shifting to the right more than the demand curve has shifted to the right. This is due to the advancements in technology and improvements in production efficiency, resulting in lower production costs for smartphones. Additionally, as consumer incomes have risen, the demand for smartphones has increased, but not enough to offset the increase in supply, leading to lower prices for consumers.

Question 17

Assume that the price for lawn care has fallen and sales of lawn care services have also fallen.One can conclude that
A)the law of supply has been violated.
B)the number of lawn care service companies has increased.
C)the demand for lawn care service has decreased.
D)lawn care services are deliberately charging low prices because they want to discourage people from maintaining their own lawns.

Accepted Answer

The decrease in sales of lawn care services suggests a decrease in demand, which is consistent with the fall in price. If the demand remained constant while the price fell, the sales would have increased instead of falling. Therefore, option C is the best choice. Options A and D are not relevant to the given information, and there is no evidence to support option B.

Question 18

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?
A)D decreases,S no change,P and Q decrease
B)S decreases,D no change,P increases,Q decreases
C)D and S decrease,P and Q decrease
D)D no change,S increases,P decreases,Q decreases

Accepted Answer

The announcement by the Surgeon General would lead to a decrease in the demand for sushi as people become aware of the health risks associated with consuming raw fish that contains high levels of toxic mercury. However, the supply of sushi would not necessarily be affected as it depends on the availability and cost of raw fish. This would result in a shift in the demand curve to the left, leading to a decrease in both equilibrium price and quantity.

Question 19

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
A)a decrease in the equilibrium quantity of eggs and no change in the equilibrium price.
B)a decrease in the equilibrium price of eggs and no change in the equilibrium quantity.
C)a decrease in the equilibrium price of eggs;the equilibrium quantity may increase or decrease.
D)a decrease in the equilibrium quantity of eggs;the equilibrium price may increase or decrease.

Accepted Answer

The decrease in both demand and supply of eggs will cause a decrease in the equilibrium quantity of eggs. The equilibrium price may either increase or decrease, depending on the relative magnitude of the changes in demand and supply. However, since we know there is a decrease in supply, it is more likely that the equilibrium price of eggs would increase.

Question 20

Electric car enthusiasts want to buy more electric cars at a lower price.All of the following events would have this effect except
A)technological advancement in the production of electric car batteries.
B)an increase in the number of manufacturers of electric cars.
C)a decrease in the price of lithium,which is used in the electric car batteries.
D)an increase in the price of gasoline.

Accepted Answer

An increase in the price of gasoline would make electric cars a more attractive option, potentially increasing demand for them and allowing manufacturers to lower prices without losing profitability. Therefore, this event would not have the opposite effect of increasing the price of electric cars. A, B, and C would all likely lead to a decrease in the price of electric cars, so they do not fit the criteria of the question.

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

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?

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

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

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

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?

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

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

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

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?

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

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?

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

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

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?

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?

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

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?

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

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