Question 1

Discuss the correct and incorrect economic analysis in the following statement.
"The United Auto Workers Union has successfully negotiated a 9 percent increase in wages for its workers. This increase in the wage rate causes an increase in demand for automobiles, since many consumers now have greater incomes, and also a decrease in the supply of automobiles because the cost of production has increased. These effects cancel each other out resulting in no change in equilibrium price and quantity in the automobile market."

Accepted Answer

The answer of Discuss the correct and incorrect economic analysis...

Question 2

In 1984, the National Minimum Drinking Age Act was passed, raising the legal age to consume alcoholic beverages in the United States to 21. In much of Europe, the legal age to consume alcohol is 18. If the legal drinking age in the United States was changed back to 18, how would this affect the market for alcoholic beverages? What would happen to the equilibrium price and quantity of alcoholic beverages?

Accepted Answer

The answer of In 1984, the National Minimum Drinking Age...

Question 3

Shrimp is an increasingly popular part of the American diet. Louisiana shrimpers who represent the bulk of the U.S. industry were almost all put out of business by Hurricane Katrina. How did the hurricane affect the equilibrium price and quantity of shrimp?

Accepted Answer

The answer of Shrimp is an increasingly popular part of...

Question 4

In each of the following situations, list what will happen to the equilibrium price and the equilibrium quantity for a particular product, which is an inferior good.
a. The population increases and productivity increases.
b. Income increases and the price of inputs decrease.
c. The number of firms in the market decreases and income increases.
d. Consumer preference increases and the price of a complement decreases.
e. The price of a substitute in consumption decreases and the price of a substitute in production decreases.

Accepted Answer

The answer of In each of the following situations, list...

Question 5

If the demand for a product decreases and the supply of the product does not change, equilibrium price and equilibrium quantity will both increase.

Accepted Answer

If the demand for a product decreases, there will be a surplus of the product at the original equilibrium price, leading to a decrease in price. This decrease in price will continue until a new equilibrium is reached where the quantity demanded and supplied match again, but at a lower price and quantity.

Question 6

If pilots and flight attendants agree to wage and benefit reductions in the wake of the financial difficulties in the airline industry, what impact would this have on the supply and demand in the market for airline service, assuming no other changes take place in this market?

Accepted Answer

The answer of If pilots and flight attendants agree to...

Question 7

Discuss the correct and incorrect economic analysis in the following statements.
"If a disease kills a large number of turkeys, the supply of turkeys will decrease. This will result in a price increase, which will then cause the supply of turkeys to increase."

Accepted Answer

The answer of Discuss the correct and incorrect economic analysis...

Question 8

If a union successfully negotiates for higher wages and benefits for steel workers, what impact would this have on supply and demand in the market for steel, assuming no other changes take place in this market?

Accepted Answer

The answer of If a union successfully negotiates for higher...

Question 9

Discuss the correct and incorrect economic analysis in the following statement.
"If good weather in Hawaii creates a bumper crop of pineapples, the supply of pineapples will increase. This will result in a price decrease, which will then cause the supply of pineapples to decrease."

Accepted Answer

The answer of Discuss the correct and incorrect economic analysis...

Question 10

In each of the following situations, list what will happen to the equilibrium price and the equilibrium quantity for a particular product, which is an inferior good.
a. The population decreases and productivity increases
b. Income increases and the price of inputs increase
c. The number of firms in the market decreases and income decreases
d. Consumer preference decreases and the price of a complement increases
e. The price of a substitute in consumption increases and the price of a substitute in production increases

Accepted Answer

The answer of In each of the following situations, list...

Question 11

Explain how it would be possible for the equilibrium price and equilibrium quantity to both increase in the market for motorcycles if consumer preference for motorcycles increases and the number of motorcycle manufacturers decreases.

Accepted Answer

The answer of Explain how it would be possible for...

Question 12

According to the Australian Wool Innovation, severe drought conditions in Australia contributed to the lowest level of wool production in 50 years. This record low production has driven up prices sharply in Australian wool markets. Meanwhile, the price of raw cotton increased significantly for the first time in many years.
a. Illustrate this observation with one demand and supply graph for the market for Australian wool and another demand and supply graph for raw cotton.
b. Make sure that your graphs clearly show (1) the initial equilibrium before the decrease in the supply of Australian wool and (2) the final equilibrium.
c. Use arrows to indicate any shifts in the demand and supply curves for each market.
d. Label your graphs fully and write an explanation of your work.

Accepted Answer

The answer of According to the Australian Wool Innovation, severe...

Question 13

In each of the following situations, list what will happen to the equilibrium price and the equilibrium quantity for a particular product, which is a normal good.
a. The population increases and the price of inputs increase.
b. The price of a complement increases and technology advances.
c. The number of firms in the market increases and income increases.
d. Price is expected to increase in the future.
e. Consumer preference increases and the price of a substitute in production decreases.

Accepted Answer

The answer of In each of the following situations, list...

Question 14

A growing number of cigar manufacturers in the Caribbean and Central America have begun producing and exporting cigars to the U.S. market. How has this affected the equilibrium price and quantity of cigars?

Accepted Answer

The answer of A growing number of cigar manufacturers in...

Question 15

In most countries in South America, the legal driving age is 18. If the legal driving age in the United States was raised from 16 to 18, how would this affect the market for new and used automobiles? What would happen to the equilibrium price and quantity of new and used automobiles?

Accepted Answer

The answer of In most countries in South America, the...

Question 16

If the demand curve for a product shifts to the right and the supply curve for the product shifts to the left, equilibrium price and equilibrium quantity will both increase.

Accepted Answer

If the demand curve shifts to the right and the supply curve shifts to the left, the equilibrium quantity will decrease, but the effect on equilibrium price cannot be determined without more information about the magnitude of the shifts.

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

Shrimp is an increasingly popular part of the American diet. Louisiana shrimpers who represent the bulk of the U.S. industry were almost all put out of business by Hurricane Katrina. How did the hurricane affect the equilibrium price and quantity of shrimp?

If the demand for a product decreases and the supply of the product does not change, equilibrium price and equilibrium quantity will both increase.

If pilots and flight attendants agree to wage and benefit reductions in the wake of the financial difficulties in the airline industry, what impact would this have on the supply and demand in the market for airline service, assuming no other changes take place in this market?

Discuss the correct and incorrect economic analysis in the following statements. "If a disease kills a large number of turkeys, the supply of turkeys will decrease. This will result in a price increase, which will then cause the supply of turkeys to increase."

If a union successfully negotiates for higher wages and benefits for steel workers, what impact would this have on supply and demand in the market for steel, assuming no other changes take place in this market?

Discuss the correct and incorrect economic analysis in the following statement. "If good weather in Hawaii creates a bumper crop of pineapples, the supply of pineapples will increase. This will result in a price decrease, which will then cause the supply of pineapples to decrease."

Explain how it would be possible for the equilibrium price and equilibrium quantity to both increase in the market for motorcycles if consumer preference for motorcycles increases and the number of motorcycle manufacturers decreases.

A growing number of cigar manufacturers in the Caribbean and Central America have begun producing and exporting cigars to the U.S. market. How has this affected the equilibrium price and quantity of cigars?

In most countries in South America, the legal driving age is 18. If the legal driving age in the United States was raised from 16 to 18, how would this affect the market for new and used automobiles? What would happen to the equilibrium price and quantity of new and used automobiles?

If the demand curve for a product shifts to the right and the supply curve for the product shifts to the left, equilibrium price and equilibrium quantity will both increase.