Question 1

Suppose the equilibrium price of a gallon of gasoline drops from $3.00 to $2.85 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

The decrease in price and increase in quantity suggest that there has been an increase in supply, as suppliers are willing and able to provide more gas at a lower price. This is the only option that fits the given information.

Question 2

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 3

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

Accepted Answer

A new fee that used car dealers must pay to the government on all sales of used cars would increase the cost of selling used cars, leading dealers to raise prices to maintain their profit margins. This higher price would decrease the quantity of used cars demanded, thus increasing the equilibrium price and decreasing the equilibrium quantity. Choices A and B would likely decrease both the equilibrium price and quantity, and D is incorrect because not all options are consistent with increasing the equilibrium price while decreasing the equilibrium quantity.

Question 4

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 cold weather causing an increase in the price of home heating oil would not directly affect the supply of gasoline or the demand for gasoline. However, since crude oil can be refined into both home heating oil and gasoline, an increase in the demand for home heating oil could lead to a decrease in the supply of crude oil available for refining into gasoline. This could cause the equilibrium price of gasoline to rise as the supply decreases relative to the demand.

Question 5

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, which will cause an increase in the supply of wheat. This will shift the supply curve to the right, leading to a decrease in the equilibrium price of wheat. At the same time, the increase in supply will lead to an increase in the equilibrium quantity of wheat.

Question 6

In 2014, 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

The increase in the price of peanuts, a key input for peanut butter, would decrease the supply of peanut butter. This decrease in supply would lead to an increase in the price of peanut butter and a decrease in the quantity of peanut butter sold.

Question 7

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 8

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 9

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 enable producers to make digital cameras more efficiently, lowering their production costs and potentially leading to a decrease in the equilibrium price. This, in turn, would result in an increase in the equilibrium quantity demanded, as more consumers would be able and willing to buy digital cameras at the lower price. The other choices are unlikely to directly affect the equilibrium price and quantity of digital cameras.

Question 10

Many Southern farmers face a choice between planting peanuts or cotton. In 2014, farmers anticipated higher prices for cotton. In the market for peanuts in 2014, 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, there would be a decrease in the supply of peanuts (since fewer farmers would be planting them), which would lead to an increase in the price of peanuts (since the demand for them would remain the same), and a decrease in the quantity of peanuts (since fewer are being produced).

Question 11

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, which is an important input into the production of wooden desks, will increase the cost of production for the sellers, leading to a decrease in the supply of wooden desks. This decrease in supply would shift the supply curve to the left, leading to a higher equilibrium price and a lower equilibrium quantity of wooden desks sold. Therefore, the correct choice is D, where the equilibrium quantity decreases and the equilibrium price rises.

Question 12

An increase in the price of jet fuel will ________ airline travel and the equilibrium quantity of airline travel will ________.

Accepted Answer

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

Question 13

"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 caused their price to increase, leading consumers to turn to substitute California oranges. This increase in demand for California oranges caused their price to rise. This is an example of the law of demand, where increase in price of one product leads to an increase in demand for its substitute.

Question 14

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

Accepted Answer

If workers who make DVDs get a pay raise, the cost of production for DVDs increases, resulting in a decrease in supply (shift of the supply curve to the left). As a result, the equilibrium price of DVDs will rise, and the equilibrium quantity of DVDs will decrease.

Question 15

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 16

In 2014, 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 answer of In 2014, the price of peanuts was...

Question 17

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 tablet prices and increase in sales each year suggests that the supply curve of tablets shifted rightward, meaning that manufacturers were able to produce and sell more tablets at a lower cost. This could be due to technological advancements, economies of scale, or other factors that increased production efficiency. The law of supply does apply to companies in the high-tech sector of the economy, and the law of demand does apply to customers in this sector as well. The demand curve for tablets may have also shifted, but this is not clear from the information given.

Question 18

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

Accepted Answer

An increase in the price of a key input (aluminum) will lead to a decrease in the supply of bicycles, shifting the supply curve to the left. This will lead to an increase in the equilibrium price of bicycles. Therefore, the correct choice is D, which represents a leftward shift of the supply curve of bicycles.

Question 19

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 20

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 falling price and increasing quantity sold suggest that there was an increase in the supply of computers, represented by a rightward shift of the supply curve. As supply increased, the price fell and quantity sold increased according to the law of supply. The law of demand may not have been contradicted, as there may have been an increase in demand as well as a shift in the supply curve. However, the information provided suggests a stronger case for a supply shift.

Quiz 3: Demand and Supply

Suppose the equilibrium price of a gallon of gasoline drops from $3.00 to $2.85 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

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

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

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

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

In 2014, 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.

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

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?

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?

Many Southern farmers face a choice between planting peanuts or cotton. In 2014, farmers anticipated higher prices for cotton. In the market for peanuts in 2014, there would be in the supply of peanuts, which leads to in the price of peanuts and in the quantity of peanuts.

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

An increase in the price of jet fuel will airline travel and the equilibrium quantity of airline travel will .

"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?

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

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

In 2014, 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.

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

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

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