Question 1

Suppose in the market for iPhones, the following two changes take place: (1) the cost of making iPhones falls, and (2) the price of smartphone data plans falls. What happens to the equilibrium price and the equilibrium quantity?

Accepted Answer

The cost of making iPhones falling leads to a supply increase (shifting the supply curve to the right), which would normally lower the price and increase the quantity. The fall in the price of smartphone data plans increases demand for iPhones (shifting the demand curve to the right), which would normally increase both the price and quantity. The combined effect is indeterminate on price because one effect pushes price down while the other pushes it up, but both effects clearly increase the equilibrium quantity.

Question 2

Suppose it is discovered that consuming Greek yogurt leads to decreased risk of heart disease. This information would MOST likely lead to a(n)

Accepted Answer

The discovery that consuming Greek yogurt decreases the risk of heart disease would likely create a positive publicity for Greek yogurt, leading to an increase in demand for it. People who are health-conscious or those who fear heart diseases will start including it in their diet leading to an increase in demand for Greek yogurt.

Question 3

At any price below the equilibrium price

Accepted Answer

At any price below the equilibrium price, there is a shortage because the quantity demanded exceeds the quantity supplied.

Question 4

If sellers expect the price of their product to rise in the future, they are likely to increase their supply in the near future.

Accepted Answer

Sellers expecting higher future prices may actually decrease their current supply to save it for selling at those higher future prices, thus not increasing supply in the near future.

Question 5

The supply of coffee has increased twice as much as the demand for coffee has increased. As a result, we can predict a(n)

Accepted Answer

When the supply of a good increases more than the demand for it, the equilibrium price typically decreases because there is more of the good available than people want to buy at the previous price. However, because there is still an increase in demand, albeit smaller than the increase in supply, the equilibrium quantity—the amount of the good that is bought and sold—increases. This is because the lower price encourages more consumption, even though the demand increase is smaller than the supply increase.

Question 6

(Table) Using the data in the table for the market for lattes, at a price of $8, there is a _____ and the price will _____.

Accepted Answer

The answer of (Table) Using the data in the table...

Question 7

Which scenario is the MOST likely effect of a decrease in the price of milk on the market for cereal?

Accepted Answer

When the price of milk decreases, milk becomes cheaper, leading to an increase in the demand for cereal (a complementary good), which in turn increases both the equilibrium price and quantity of cereal.

Question 8

If consumers believe that an item will not be available in the future, then demand will shift _____ and the equilibrium quantity will _____.

Accepted Answer

When consumers believe an item will not be available in the future, demand increases because people want to buy it before it's gone, shifting the demand curve to the right. This increase in demand typically leads to a higher equilibrium quantity as the market adjusts to the increased desire for the product.

Question 9

If the price of gasoline increases from $4 to $4.50, ceteris paribus

Accepted Answer

When the price of gasoline increases, people will be less likely to buy the same amount of gasoline or more, as they will be incentivized to look for alternatives, such as public transportation or more fuel-efficient cars. Therefore, the demand for gasoline is likely to decrease, resulting in people buying less gasoline.

Question 10

Ceteris paribus, an improvement in production technology

Accepted Answer

An improvement in production technology increases the efficiency of production, which in turn reduces the cost of production per unit. This translates to a lower marginal cost of production, which leads to a rightward shift of the supply curve. The equilibrium price will decrease and equilibrium output will increase as a result. Therefore, choice (B) is the correct answer.

Question 11

If both the supply of and the demand for a good increase simultaneously, the equilibrium quantity will

Accepted Answer

When both supply and demand increase simultaneously, the equilibrium quantity will increase. This is because both suppliers and consumers are willing and able to produce and consume more of the good at the existing price, resulting in an increase in the quantity traded in the market.

Question 12

An increase in supply causes the equilibrium price to _____ and the equilibrium quantity to _____.

Accepted Answer

An increase in supply will result in a shift of the supply curve to the right, leading to a surplus of goods at the initial equilibrium price. In order to clear the surplus, sellers will have to lower their prices, causing the equilibrium price to fall. As there are now more goods available at a lower price, the equilibrium quantity will rise.

Question 13

A decrease in demand causes the equilibrium price to _____ and the equilibrium quantity to _____.

Accepted Answer

A decrease in demand means that there is less interest in the product, which leads to sellers having excess supply. To get rid of the surplus, sellers must lower the price, which ultimately causes the equilibrium price to fall. As demand decreases, so does the equilibrium quantity, as there will be less demand to match the sellers' new lower supply.

Question 14

Selling a used textbook online does not involve markets because the book has already been sold once before.

Accepted Answer

Selling a used textbook online still involves markets because buyers and sellers are engaging in a transaction, even though the book has been sold once before. The market for used textbooks may have different prices and demand compared to the market for new textbooks.

Question 15

A surplus exists when the price is below the equilibrium price.

Accepted Answer

A surplus exists when the price is above the equilibrium price, leading to a situation where the quantity supplied exceeds the quantity demanded.

Question 16

Which factor would shift the demand curve for gasoline to the right?

Accepted Answer

An increase in national income would likely lead to an increase in demand for gasoline as consumers can afford to drive more or purchase larger, less fuel-efficient vehicles.

Question 17

A shift in the supply curve occurs when one or more of the determinants of supply changes.

Accepted Answer

When one or more determinants of supply such as production costs, technology, taxes, subsidies, and availability of inputs change, the supply curve shifts either to the right or the left.

Question 18

Which graph concerning electric vehicles (EVs) indicates the impact of more states installing EV charging stations and allowing free EV parking in metered stalls?

Accepted Answer

The answer of Which graph concerning electric vehicles (EVs) indicates...

Question 19

(Figure: Interpreting Demand Curves) In the demand curve shown, an increase in price from $1 to $2 will

Accepted Answer

According to the demand curve shown, an increase in price from $1 to $2 will result in a decrease in quantity demanded from 30 to 20 units. This is because as the price increases, the quantity demanded generally decreases, creating a negative slope on the demand curve. Thus, choice B is the correct answer. Choices A, C, and D are incorrect.

Question 20

When quantity supplied exceeds quantity demanded, a _____ occurs, putting _____ pressure on the price.

Accepted Answer

When quantity supplied exceeds quantity demanded, a surplus occurs, leading to downward pressure on the price as sellers attempt to clear excess inventory.

Quiz 3: Supply and Demand