Question 1

Which of the following would cause a shift to the right of the supply curve for gasoline?
I. A large increase in the price of public transportation.
II. A large decrease in the price of automobiles.
III. A large reduction in the costs of producing gasoline.
A) I only
B) II only
C) III only
D) II and III only

Accepted Answer

A large reduction in the costs of producing gasoline would lead to an increase in the supply of gasoline, causing a shift to the right of the supply curve. A large increase in the price of public transportation or a large decrease in the price of automobiles would not directly affect the supply of gasoline, and thus would not cause a shift of the supply curve for gasoline.

Question 2

When an industry's raw material costs increase, other things remaining the same,
A) the supply curve shifts to the left.
B) the supply curve shifts to the right.
C) output increases regardless of the market price and the supply curve shifts upward.
D) output decreases and the market price also decreases.

Accepted Answer

An increase in raw material costs raises the cost of production, making it more expensive for firms to produce the same quantity of goods. As a result, firms are willing to supply less at each price point, leading to a leftward shift in the supply curve.

Question 3

Sugar can be refined from sugar beets. When the price of those beets falls,
A) the demand curve for sugar would shift right.
B) the demand curve for sugar would shift left.
C) the supply curve for sugar would shift right.
D) the supply curve for sugar would shift left.

Accepted Answer

When the price of sugar beets falls, it becomes cheaper to produce sugar, leading to an increase in the supply of sugar. This is represented by a rightward shift in the supply curve for sugar.

Question 4

To protect the cod fishery off the northeast coast of the U.S., the federal government may limit the amount of fish that each boat can catch in the fishery. The result of this public policy is to:
A) shift the cod demand curve to the left.
B) shift the cod demand curve to the right.
C) shift the cod supply curve to the right.
D) shift the cod supply curve to the left.

Accepted Answer

By limiting the amount of fish that each boat can catch in the fishery, the supply of cod will decrease, leading to a leftward shift in the cod supply curve. This will result in higher prices for cod, which will reduce the quantity demanded, shifting the demand curve to the left as well.

Question 5

Which of the following will NOT cause a rightward shift in the demand curve for beer?
A) A change in the price of beer
B) A health study indicating positive health benefits of moderate beer consumption
C) An increase in the price of French wine (a substitute)
D) A decrease in the price of potato chips (a complement)
E) none of the above

Accepted Answer

A change in the price of beer will cause a movement along the demand curve, not a shift.

Question 6

Which of the following will cause the demand curve for Beatles' compact discs to shift to the right?
A) An increase in the price of the discs
B) A decrease in consumers' incomes
C) An increase in the price of Phil Collins' latest compact disc (a substitute)
D) all of the above
E) none of the above

Accepted Answer

An increase in the price of a substitute, in this case Phil Collins' latest compact disc, will cause consumers to shift their demand to the Beatles' compact discs, therefore increasing demand for them. A decrease in consumers' incomes and an increase in the price of the discs will likely have the opposite effect of decreasing demand.

Question 7

Coffee and cream:
A) are both luxury goods.
B) are complements.
C) are both more inelastic in demand in the long run than in the short run.
D) have a positive cross price elasticity of demand.

Accepted Answer

Coffee and cream are complements because they are often consumed together. An increase in the price of one will decrease the demand for the other. The other choices are not accurate as coffee and cream are not necessarily luxury goods, their elasticity of demand may vary depending on the market and time frame, and their cross price elasticity of demand is negative, not positive.

Question 8

Due to the recent increase in the price of natural gas, the quantity of coal demanded by electric power generation plants has increased. Based on this information, coal and natural gas are:
A) complements.
B) substitutes.
C) independent goods.
D) none of the above

Accepted Answer

Coal and natural gas are substitutes, meaning that an increase in the price of one good (natural gas) leads to an increase in the demand for the other good (coal) since electric power generation plants can switch between the two depending on affordability.

Question 9

Which of the following would shift the demand curve for new textbooks to the right?
A) A fall in the price of paper used in publishing texts
B) A fall in the price of equivalent used textbooks
C) An increase in the number of students attending college
D) A fall in the price of new textbooks.

Accepted Answer

An increase in the number of students attending college would increase the demand for new textbooks as there would be more students needing textbooks. The other options would not necessarily increase demand. A fall in the price of paper used in publishing texts could lower the cost of producing textbooks, but it would not necessarily increase the demand for them. A fall in the price of equivalent used textbooks and a fall in the price of new textbooks could decrease the demand for new textbooks as students may opt to purchase cheaper used textbooks or wait for further price reductions on new textbooks.

Question 10

Assume that steak and potatoes are complements. When the price of steak goes up, the demand curve for potatoes:
A) shifts to the left.
B) shifts to the right.
C) remains constant.
D) shifts to the right initially and then returns to its original position.

Accepted Answer

When the price of steak goes up, the demand for steak decreases. This leads to a decrease in demand for its complement, potatoes. As a result, the demand curve for potatoes shifts to the left.

Question 11

You are analyzing the demand for good X. Which of the following will result in a shift to the right of the demand curve for X?
A) A decrease in the price of X
B) An increase in the price of a good that is a complement to good X
C) An increase in the price of a good that is a substitute for X
D) all of the above

Accepted Answer

An increase in the price of a substitute good makes the original good more attractive to consumers, leading to an increase in demand for the original good, thus shifting its demand curve to the right. Decreases in the price of the good itself or increases in the price of a complement do not shift the demand curve; they move along it or affect demand for the complement, respectively.

Question 12

Which of the following is NOT an application of supply and demand analysis?
A) Understanding changing world economic conditions and their effects on prices
B) Evaluating the effects of government price controls on the agricultural industry
C) Determining how taxes affect aggregate consumption spending patterns
D) all of the above
E) none of the above

Accepted Answer

Supply and demand analysis can be applied to all the scenarios mentioned: understanding economic conditions, evaluating price controls, and determining tax effects on consumption.

Question 13

The discussion of Figure 2.2 in the text indicates that quantity demanded for most goods tends to increase as income rises. However, the quantity of bananas demanded in the U.S. tends to decrease as income rises. Under this condition, we expect that an increase in consumer income shifts the demand curve for bananas:
A) rightward
B) no shift.
C) leftward.
D) upward.

Accepted Answer

The fact that the quantity of bananas demanded in the U.S. tends to decrease as income rises implies that bananas are an inferior good for U.S. consumers. Therefore, an increase in consumer income would lead to a decrease in demand for bananas, causing the demand curve to shift leftward.

Question 14

Suppose biochemists discover an enzyme that can double the amount of ethanol that may be derived from a given amount of biomass. Based on this technological development, we expect the:
A) supply curve for ethanol to shift leftward.
B) supply curve for ethanol to shift rightward.
C) demand curve for ethanol to shift leftward.
D) demand curve for ethanol to shift rightward.

Accepted Answer

The discovery of an enzyme that can double the amount of ethanol produced from a given amount of biomass would increase the supply of ethanol, as producers would be able to produce more ethanol from the same amount of biomass. This would shift the supply curve for ethanol to the right. Therefore, the correct answer is choice B, supply curve for ethanol to shift rightward.

Question 15

The price of good A goes up. As a result, the demand for good B shifts to the left. From this we can infer that:
A) good A is used to produce good B.
B) good B is used to produce good A.
C) goods A and B are substitutes.
D) goods A and B are complements.
E) none of the above

Accepted Answer

This is an example of complementary goods, as an increase in the price of good A leads to a decrease in demand for good B. This suggests that the two goods are used together, or that the consumption of one good is related to the consumption of the other good.

Question 16

Which of the following would cause a rightward shift in the demand curve for gasoline?
I. A large increase in the price of public transportation.
II. A large decrease in the price of automobiles.
III. A large reduction in the costs of producing gasoline.
A) I only
B) II only
C) I and II only
D) II and III only
E) I, II, and III

Accepted Answer

I. A large increase in the price of public transportation: This would cause consumers to switch from public transportation to driving their own car, increasing the demand for gasoline, resulting in a rightward shift in the demand curve.
II. A large decrease in the price of automobiles: This would make it cheaper for consumers to purchase cars, increasing the number of cars on the road, hence the demand for gasoline would increase, resulting in a rightward shift in the demand curve.
III. A large reduction in the costs of producing gasoline: This would cause the suppliers to produce more gasoline and sell it at a lower price than before. The increase in supply would certainly lead to an increase in demand as well, resulting in a rightward shift in the demand curve.

Question 17

Plastic and steel are substitutes in the production of body panels for certain automobiles. If the price of plastic increases, with other things remaining the same, we would expect:
A) the price of steel to fall.
B) the demand curve for steel to shift to the right.
C) the demand curve for plastic to shift to the left.
D) nothing to happen to steel because it is only a substitute for plastic.
E) the demand curve for steel to shift to the left.

Accepted Answer

When the price of plastic increases, manufacturers may switch to using more steel as a substitute, increasing the demand for steel. This is represented by a rightward shift in the demand curve for steel.

Question 18

A supply curve reveals:
A) the quantity of output consumers are willing to purchase at each possible market price.
B) the difference between quantity demanded and quantity supplied at each price.
C) the maximum level of output an industry can produce, regardless of price.
D) the quantity of output that producers are willing to produce and sell at each possible market price.

Accepted Answer

A supply curve shows the quantity of output that producers are willing to produce and sell at each possible market price.

Question 19

Which of the following events will cause a leftward shift in the supply curve of gasoline?
A) A decrease in the price of gasoline
B) An increase in the wage rate of refinery workers
C) Decrease in the price of crude oil
D) An improvement in oil refining technology
E) all of the above

Accepted Answer

An increase in the wage rate of refinery workers would increase the cost of production for gasoline, leading to a decrease in supply and a leftward shift in the supply curve. A decrease in the price of gasoline (A) or crude oil (C) would increase the quantity supplied, leading to a rightward shift in the supply curve, while an improvement in oil refining technology (D) would increase the efficiency of production, also leading to a rightward shift in the supply curve. Therefore, the correct answer is B only.

Question 20

Which of the following will NOT cause a shift in the supply of gasoline?
A) An increase in the wage rate of refinery workers
B) A decrease in the price of gasoline
C) An improvement in oil refining technology
D) A decrease in the price of crude oil

Accepted Answer

A decrease in the price of gasoline would be a movement along the supply curve, rather than a shift in the supply curve itself. The other options all involve factors that would lead to a shift in the supply curve, either causing an increase or decrease in the quantity supplied at each price level.

Quiz 2: The Basics of Supply and Demand

Which of the following would cause a shift to the right of the supply curve for gasoline? I. A large increase in the price of public transportation. II. A large decrease in the price of automobiles. III. A large reduction in the costs of producing gasoline.

When an industry's raw material costs increase, other things remaining the same,

Sugar can be refined from sugar beets. When the price of those beets falls,

To protect the cod fishery off the northeast coast of the U.S., the federal government may limit the amount of fish that each boat can catch in the fishery. The result of this public policy is to:

Which of the following will NOT cause a rightward shift in the demand curve for beer?

Which of the following will cause the demand curve for Beatles' compact discs to shift to the right?

Coffee and cream:

Due to the recent increase in the price of natural gas, the quantity of coal demanded by electric power generation plants has increased. Based on this information, coal and natural gas are:

Which of the following would shift the demand curve for new textbooks to the right?

Assume that steak and potatoes are complements. When the price of steak goes up, the demand curve for potatoes:

You are analyzing the demand for good X. Which of the following will result in a shift to the right of the demand curve for X?

Which of the following is NOT an application of supply and demand analysis?

Suppose biochemists discover an enzyme that can double the amount of ethanol that may be derived from a given amount of biomass. Based on this technological development, we expect the:

The price of good A goes up. As a result, the demand for good B shifts to the left. From this we can infer that:

Which of the following would cause a rightward shift in the demand curve for gasoline? I. A large increase in the price of public transportation. II. A large decrease in the price of automobiles. III. A large reduction in the costs of producing gasoline.

Plastic and steel are substitutes in the production of body panels for certain automobiles. If the price of plastic increases, with other things remaining the same, we would expect:

A supply curve reveals:

Which of the following events will cause a leftward shift in the supply curve of gasoline?

Which of the following will NOT cause a shift in the supply of gasoline?