Question 1

"The recent hurricanes in Florida are bringing financial gain to California citrus growers. Due to extensive damage to the Florida citrus crop, California citrus products are commanding their highest prices ever." Which of the following statements best explains the economics of this quotation?

Accepted Answer

The decrease in supply of Florida oranges has caused their price to increase, which in turn has increased the demand for substitute California oranges. This increase in demand for California oranges has allowed California citrus growers to command their highest prices ever.

Question 2

We observe that the equilibrium price of digital cameras has fallen and the equilibrium quantity of digital cameras has increased. Which of the following events could be responsible for this?

Accepted Answer

Technological advances in digital camera production would lead to an increase in the supply of digital cameras, causing the equilibrium price to fall and the equilibrium quantity to increase. Consumers' preferences changing in favor of digital cameras may also have an effect, but it would not necessarily lead to a decrease in price unless there was also an increase in supply. The price of film cameras rising would have no impact on the equilibrium of digital cameras. A pay raise for workers who make digital cameras would lead to an increase in production costs, resulting in a decrease in supply and an increase in price, which is opposite of the observed scenario.

Question 3

If a technological advance takes place in the computer industry, then the equilibrium price of a computer will ________ and the equilibrium quantity will ________.

Accepted Answer

A technological advance in the computer industry typically leads to a decrease in production costs, which can increase supply. As supply increases, the equilibrium price tends to fall, and the equilibrium quantity tends to increase, as more consumers can afford to buy computers at lower prices.

Question 4

Suppose the equilibrium price of a gallon of gasoline drops from $4.00 to $3.85 and the equilibrium quantity increases from 365 millions of gallons per week to 372 millions of gallons per week. These changes can be the result of

Accepted Answer

A drop in price and an increase in quantity indicate an increase in supply, which would shift the supply curve to the right, causing a new equilibrium point at a lower price and higher quantity. This eliminates choices B and D, which would indicate an increase in demand. Choice C would indicate a decrease in supply, which would cause a higher equilibrium price, not a lower one. Therefore, the best choice is A.

Question 5

In 2011, the price of peanuts increased. In the market for peanut butter, this change lead to ________ and which therefore ________ the price of peanut butter and ________ the quantity of peanut butter.

Accepted Answer

An increase in the price of peanuts will lead to a decrease in the supply of peanuts, which is a key ingredient in peanut butter. This decrease in supply will cause an increase in the price of peanut butter and a decrease in the quantity of peanut butter. Therefore, choice A is the best answer.

Question 6

If both demand and supply increase, what will be the effect on the equilibrium price and quantity?

Accepted Answer

When both demand and supply increase, the quantity will definitely increase because more is being produced and more is wanted. However, the effect on price is uncertain without knowing the relative magnitudes of the shifts in demand and supply. If demand increases more than supply, price could rise. If supply increases more than demand, price could fall. If they increase by the same amount, price might stay the same.

Question 7

A fall in the price of wheat fertilizer ________ the equilibrium price of wheat and ________ the equilibrium quantity of wheat.

Accepted Answer

A fall in the price of wheat fertilizer will lower the cost of production for wheat farmers, resulting in a decrease in the supply curve for wheat. This will shift the supply curve to the right, leading to a lower equilibrium price (lower) and an increase in the equilibrium quantity (increase).

Question 8

There is a technological advance in the production of ice cream. As a result, the supply curve of ice cream shifts ________ and ________.

Accepted Answer

A technological advance in the production of ice cream would make production more efficient, leading to an increase in supply. This shift in the supply curve to the right would cause the equilibrium price to fall (due to increased supply) and the equilibrium quantity to increase (as more ice cream is available at lower prices).

Question 9

Which of the following increases the equilibrium price of a used car and decreases the equilibrium quantity?

Accepted Answer

The answer of Which of the following increases the equilibrium...

Question 10

In the market for bananas, the price is $2.00 a bunch. An increase in the supply of bananas decreases the price of bananas and ________.

Accepted Answer

An increase in the supply of bananas leads to a decrease in price, which in turn increases the quantity of bananas demanded according to the law of demand. This is because consumers are more willing to buy more bananas at the lower price.

Question 11

Many Southern farmers face a choice between planting peanuts or cotton. In 2011, farmers anticipated higher prices for cotton. In the market for peanuts in 2011, there would be ________ in the supply of peanuts, which leads to ________ in the price of peanuts and ________ in the quantity of peanuts.

Accepted Answer

If farmers choose to plant more cotton due to higher anticipated prices in 2011, this means there will be a decrease in the supply of peanuts. When supply decreases, this leads to an increase in price and a decrease in quantity demanded. Therefore, the price of peanuts will increase and the quantity of peanuts demanded will decrease.

Question 12

During the last decade, the price of a computer fell every year and the quantity sold increased every year. This experience suggests that the

Accepted Answer

The fall in price and increase in quantity sold suggest that the supply curve shifted rightward, meaning that suppliers were able and willing to supply more computers at each price level.

Question 13

There is a technological advance in the production of a good and simultaneously also an increase in the expected future price. Which of the following will happen?

Accepted Answer

Technological improvements typically make production more efficient, leading to a rightward shift in the supply curve, indicating an increase in supply. On the other hand, an increase in the expected future price can lead producers to reduce current supply in anticipation of higher future profits, shifting the supply curve leftward. The net effect on the equilibrium price and quantity depends on the relative magnitudes of these shifts, which cannot be determined without additional information.

Question 14

Crude oil can be refined into home heating oil or gasoline. If very cold weather caused the price of home heating oil to increase, then the

Accepted Answer

The increase in price of home heating oil would likely result in a shift in demand from home heating oil to alternative sources of energy, such as gasoline for heating purposes. This increase in demand for gasoline would lead to an increase in the equilibrium price of gasoline. It is unlikely that there would be an increase in supply of gasoline as a result of the increase in demand for home heating oil.

Question 15

What is the effect on the price and quantity of wooden desks of a rise in the price of wood?

Accepted Answer

A rise in the price of wood would increase the cost of production for wooden desks, leading to a decrease in the supply of wooden desks. With a lower supply, the equilibrium quantity of wooden desks would decrease. At the same time, consumers may switch away from wooden desks to other alternatives, such as metal or plastic desks, leading to a decrease in demand. With a lower demand as well, the equilibrium price of wooden desks would rise. Therefore, the correct answer is D) The equilibrium quantity of wooden desks decreases and the equilibrium price rises.

Question 16

After 2009, the price of tablets fell each year and manufacturers of tablets produced and sold more tablets each year. This result is because the

Accepted Answer

The decrease in price and increase in quantity sold of tablets suggests a rightward shift in the supply curve for tablets.

Question 17

If the price of aluminum used to make bicycles increases, the price of a bicycle rises because of a

Accepted Answer

The increase in the price of aluminum, a key input in bicycle production, makes it more costly to produce bicycles. This results in a decrease in the supply of bicycles, represented by a leftward shift of the supply curve. It does not directly affect the demand for bicycles, nor does it cause the supply curve to shift rightward.

Question 18

If workers who make DVDs get a pay raise, the equilibrium price of a DVD ________ and the equilibrium quantity of DVDs ________.

Accepted Answer

When workers who make DVDs get a pay raise, the cost of producing DVDs increases. This typically leads to a decrease in supply, as it becomes more expensive to produce the same quantity of DVDs. With a decrease in supply and assuming demand remains constant, the equilibrium price of DVDs rises (as the supply curve shifts to the left), and the equilibrium quantity of DVDs decreases (as the new equilibrium point is at a lower quantity on the demand curve).

Question 19

An increase in the price of jet fuel will ________ air flights and the equilibrium quantity of air flights will ________.

Accepted Answer

The answer of An increase in the price of jet...

Question 20

In 2011, the price of peanuts was rising, which lead peanut butter sellers to expect the price of peanut butter would rise in the future. Consequently, in the current market for peanut butter there was ________ which resulted in ________ in the price of peanut butter and ________ in the quantity of peanut butter.

Accepted Answer

The expectation of a rise in the price of peanuts (an input in the production of peanut butter) leads to an increase in the cost of producing peanut butter. As a result, peanut butter sellers increase their supply to maximize profits before the price of peanuts actually rises. This leads to an increase in the supply of peanut butter. However, the increase in supply is not enough to offset the expected increase in price, so the price of peanut butter still rises. The increase in price leads to a decrease in the quantity of peanut butter demanded, but the increase in supply partially offsets this decrease, resulting in a net increase in the quantity of peanut butter. Therefore, the correct answer is B: an increase in supply of peanut butter; a decrease in price of peanut butter; an increase in quantity of peanut butter.

Quiz 3: Demand and Supply

"The recent hurricanes in Florida are bringing financial gain to California citrus growers. Due to extensive damage to the Florida citrus crop, California citrus products are commanding their highest prices ever." Which of the following statements best explains the economics of this quotation?

We observe that the equilibrium price of digital cameras has fallen and the equilibrium quantity of digital cameras has increased. Which of the following events could be responsible for this?

If a technological advance takes place in the computer industry, then the equilibrium price of a computer will and the equilibrium quantity will .

Suppose the equilibrium price of a gallon of gasoline drops from $4.00 to $3.85 and the equilibrium quantity increases from 365 millions of gallons per week to 372 millions of gallons per week. These changes can be the result of

In 2011, the price of peanuts increased. In the market for peanut butter, this change lead to and which therefore the price of peanut butter and the quantity of peanut butter.

If both demand and supply increase, what will be the effect on the equilibrium price and quantity?

A fall in the price of wheat fertilizer the equilibrium price of wheat and the equilibrium quantity of wheat.

There is a technological advance in the production of ice cream. As a result, the supply curve of ice cream shifts and .

Which of the following increases the equilibrium price of a used car and decreases the equilibrium quantity?

In the market for bananas, the price is $2.00 a bunch. An increase in the supply of bananas decreases the price of bananas and ________.

Many Southern farmers face a choice between planting peanuts or cotton. In 2011, farmers anticipated higher prices for cotton. In the market for peanuts in 2011, there would be in the supply of peanuts, which leads to in the price of peanuts and in the quantity of peanuts.

During the last decade, the price of a computer fell every year and the quantity sold increased every year. This experience suggests that the

There is a technological advance in the production of a good and simultaneously also an increase in the expected future price. Which of the following will happen?

Crude oil can be refined into home heating oil or gasoline. If very cold weather caused the price of home heating oil to increase, then the

What is the effect on the price and quantity of wooden desks of a rise in the price of wood?

After 2009, the price of tablets fell each year and manufacturers of tablets produced and sold more tablets each year. This result is because the

If the price of aluminum used to make bicycles increases, the price of a bicycle rises because of a

If workers who make DVDs get a pay raise, the equilibrium price of a DVD and the equilibrium quantity of DVDs .

An increase in the price of jet fuel will air flights and the equilibrium quantity of air flights will .

In 2011, the price of peanuts was rising, which lead peanut butter sellers to expect the price of peanut butter would rise in the future. Consequently, in the current market for peanut butter there was which resulted in in the price of peanut butter and in the quantity of peanut butter.