Question 1

How would a decrease in consumer income affect the market for new automobiles?
A)Demand would decrease, leading to an increase in price and a reduction in quantity sold.
B)Demand would decrease, leading to a reduction in price and a reduction in quantity sold.
C)Demand would increase, leading to an increase in price and an increase in quantity sold.
D)Demand would increase, leading to a reduction in price and an increase in quantity sold.

Accepted Answer

When consumer income decreases, they are less likely to purchase big-ticket items such as new automobiles, resulting in a decrease in demand for new automobiles. As a result, there will be a reduction in price and a reduction in quantity sold as car companies try to entice consumers to buy by lowering prices.

Question 2

If Congress decides to reduce the tax per pack paid by sellers of cigarettes, other things being equal, the equilibrium price of cigarettes will fall. This fall in the equilibrium price can be attributed to a(n):
A)upward movement along the supply curve for cigarettes.
B)rightward shift of the supply curve for cigarettes.
C)upward movement along the demand curve for cigarettes.
D)leftward shift of the supply curve for cigarettes.

Accepted Answer

A reduction in tax per pack paid by sellers of cigarettes will decrease the cost of production, leading to a rightward shift in the supply curve. This will increase the quantity supplied at each price level, leading to a decrease in the equilibrium price. Therefore, the correct answer is a rightward shift of the supply curve for cigarettes.

Question 3

If you were a government official that wanted to raise the equilibrium price of milk, which of the following actions would you take?
A)Take milk from government storage and sell it.
B)Encourage farmers to produce more milk.
C)Subsidize purchases of dairy equipment.
D)Encourage farmers to produce less milk.

Accepted Answer

To raise the equilibrium price of milk, the government official should encourage farmers to produce less milk. This will decrease the supply of milk and shift the supply curve to the left. With the demand curve remaining constant, the equilibrium price of milk will increase. The other options would either increase the supply of milk or have no direct impact on the supply of milk, therefore they would not effectively raise the equilibrium price.

Question 4

A decrease in demand leads to a (an):
A)increased equilibrium price and an increased equilibrium quantity.
B)decreased equilibrium price and a decreased equilibrium quantity.
C)decreased equilibrium price and an increased equilibrium quantity.
D)increased equilibrium price and a decreased equilibrium quantity.

Accepted Answer

A decrease in demand shifts the demand curve to the left, resulting in a new equilibrium point where both price and quantity decrease. Therefore, the correct option is B - decreased equilibrium price and a decreased equilibrium quantity.

Question 5

If Congress decides to increase the tax per pack paid by sellers of cigarettes, other things being equal, the price of cigarettes will rise. This rise in prices can be attributed to a(n):
A)upward movement along the supply curve for cigarettes.
B)rightward shift of the supply curve for cigarettes.
C)upward movement along the demand curve for cigarettes.
D)leftward shift of the supply curve for cigarettes.

Accepted Answer

The answer of If Congress decides to increase the tax...

Question 6

If we observe a decrease in the price of a good and a decrease in the amount of the good bought and sold, this could be explained by a(an):
A)increase in the supply of the good.
B)increase in the demand for the good.
C)decrease in the demand for the good.
D)decrease in the supply of the good.

Accepted Answer

If the price of a good decreases but the amount bought and sold also decreases, it means that the demand for the good has decreased. This could be due to a change in consumer preferences, a decrease in disposable income or a decrease in the perceived value of the good. Therefore, the best choice is a decrease in the demand for the good (C).

Question 7

If you were a government official and wanted to raise the price of wheat, which of the following actions would you take?
A)Take wheat from government storage and sell it.
B)Encourage farmers to use more fertilizer.
C)Lower the price of rye.
D)Subsidize purchases of farm equipment.
E)Encourage farmers to grow less wheat.

Accepted Answer

By encouraging farmers to grow less wheat, the supply of wheat will decrease which will increase the price of wheat.

Question 8

If the demand for a good decreased, what would be the effect on the equilibrium price and quantity?
A)Price would increase, and quantity would decrease.
B)Price would decrease, and quantity would decrease.
C)Price would increase, and quantity would increase.
D)Price would decrease, and quantity would increase.

Accepted Answer

If the demand for a good decreases, the equilibrium price and quantity will both decrease. This happens because there is less demand for the good, so producers will need to lower the price in order to sell the same quantity. As a result, the quantity of the good produced and sold will also decrease.

Question 9

If the supply of a good decreased, what would be the effect on the equilibrium price and quantity?
A)Price would increase, and quantity would decrease.
B)Price would decrease, and quantity would decrease.
C)Price would increase, and quantity would increase.
D)Price would decrease, and quantity would increase.

Accepted Answer

If the supply of a good decreases, the shift in the supply curve will cause the equilibrium price to increase and the equilibrium quantity to decrease. This is because the decrease in supply means that there is less of the good available to consumers, and the market will adjust by raising the price to ration the limited supply. As a result, fewer buyers will be willing and able to purchase the good at the higher price, leading to a decrease in quantity demanded.

Question 10

How would a decrease in the price of the feed grains used to feed cattle affect the market for beef?
A)The demand for beef would increase, increasing beef prices.
B)The demand for beef would decrease, decreasing beef prices.
C)The supply of beef would increase, decreasing beef prices.
D)The supply of beef would decrease, increasing beef prices.

Accepted Answer

A decrease in the price of feed grains would lower the cost of production for cattle farmers, leading to an increase in the supply of beef in the market. This increase in supply would put downward pressure on beef prices. Therefore, the correct choice is C.

Question 11

Suppose a new law requires all piercing studios to pass tougher licensing tests and to begin using more costly sterilization methods. Other things constant, this law would cause:
A)an increase in the supply of piercings and a lower price for piercings.
B)an increase in the supply of piercings and a higher price for piercings.
C)a decrease in the supply of piercings and a higher price for piercings.
D)a decrease in the supply of piercings and a lower price for piercings.

Accepted Answer

The tougher licensing tests and more costly sterilization methods will likely increase the costs for piercing studios, resulting in a decrease in the supply of piercings. This decrease in supply will lead to higher prices for piercings.

Question 12

Each year around Valentine's Day, we would expect:
A)the demand for roses to increase.
B)the price of roses to increase.
C)the quantity of roses sold to increase.
D)all of these.

Accepted Answer

Valentine's Day is associated with giving roses as gifts, so there is an increase in demand for roses. The increase in demand usually results in an increase in price, but it can also result in an increase in quantity sold if suppliers are able to meet the increased demand. Therefore, all of these choices are expected around Valentine's Day.

Question 13

If we observe a decrease in the price of a good and an increase in the amount of the good bought and sold, this could be explained by a(n):
A)increase in the supply of the good.
B)increase in the demand for the good.
C)decrease in the demand for the good.
D)decrease in the supply of the good.

Accepted Answer

An increase in the supply of a good means that more of the good is available at every price. This leads to a decrease in the price of the good, as sellers are willing to accept less to sell their product, and an increase in the quantity bought and sold, as buyers are able to purchase more at lower prices.

Question 14

After a hurricane in Florida knocked out the regional water supply for several days, the demand for bottled water increased sharply. In a market economy, how will this increase in demand affect the equilibrium price and quantity of bottled water?
A)Price will increase, and quantity will decrease.
B)Price will decrease, and quantity will decrease.
C)Price will decrease, and quantity will increase.
D)Price will increase, and quantity will increase.

Accepted Answer

In a market economy, an increase in demand for a good will lead to an increase in the equilibrium price and quantity. This is due to the fact that suppliers will respond to the increased demand by raising prices and increasing production in order to earn more profits. As a result, the quantity supplied will increase to meet the higher demand, and the price will also rise to reflect the increased scarcity of the good. Therefore, the choice that best fits this scenario is D, where the price and quantity of bottled water will both increase due to the increase in demand following the hurricane.

Question 15

An increase in the demand for tattoos will lead to a:
A)higher price and a larger quantity sold.
B)lower price and a larger quantity sold.
C)higher price and a smaller quantity sold.
D)lower price and a smaller quantity sold

Accepted Answer

According to the law of supply and demand, an increase in demand leads to a higher price and a larger quantity sold. As the number of people wanting tattoos increases, there will be more demand for tattoo artists, leading to higher prices for their services. Additionally, more people will be willing to get tattoos, leading to a larger quantity of tattoos being sold overall.

Question 16

An increased equilibrium price and a decreased equilibrium quantity results from a(an):
A)decrease in demand.
B)increase in supply.
C)decrease in supply.
D)increase in demand.

Accepted Answer

When there is a decrease in supply, there is less of the good available at every price level. This leads to an increase in equilibrium price and a decrease in equilibrium quantity.

Question 17

If there is a decrease in demand for lettuce, we would expect:
A)both the price and quantity sold to increase.
B)both the price and quantity sold to decrease.
C)the price to decrease and the quantity sold to increase.
D)the price to increase and the quantity sold to decrease.

Accepted Answer

The answer of If there is a decrease in demand...

Question 18

Over a ten year period, the monthly charge for cellular phone service decreased from $120 per month to $30 per month. At the same time, the number of subscribers increased from less than 10 million to more than 75 million. Which of the following provides the best explanation for these changes?
A)An increase in consumer income over this ten year period
B)A reduction in the price of residential phone service, a substitute for cellular phone service
C)An increase in the wages of workers in the cellular phone industry
D)Technological improvements that reduced the cost of supplying cellular phone service

Accepted Answer

The decrease in the monthly charge for cellular phone service and the increase in the number of subscribers can be attributed to technological improvements that reduced the cost of supplying cellular phone service. This allowed cellular phone companies to offer lower prices to consumers and expand their customer base.

Question 19

Which of the following would decrease the price of packaged hot dogs?
A)An increase in the price of hot dog buns, a complement to packaged hot dogs.
B)A decrease in the price of hamburger meat, a substitute for packaged hot dogs.
C)A technological advance that lowers the cost of producing packaged hot dogs.
D)All of these.

Accepted Answer

The answer of Which of the following would decrease the...

Question 20

Which of the following is the most likely effect of lower apple juice prices on the price and quantity purchased of orange juice, a substitute product?
A)The price of orange juice will increase, and the quantity purchased will fall.
B)The price of orange juice will fall, and the quantity purchased will increase.
C)The price of orange juice will increase, and the quantity purchased will increase.
D)The price of orange juice will fall, and the quantity purchased will fall.

Accepted Answer

The answer of Which of the following is the most...

Quiz 4: Markets in Action

How would a decrease in consumer income affect the market for new automobiles?

If Congress decides to reduce the tax per pack paid by sellers of cigarettes, other things being equal, the equilibrium price of cigarettes will fall. This fall in the equilibrium price can be attributed to a(n) :

If you were a government official that wanted to raise the equilibrium price of milk, which of the following actions would you take?

A decrease in demand leads to a (an) :

If Congress decides to increase the tax per pack paid by sellers of cigarettes, other things being equal, the price of cigarettes will rise. This rise in prices can be attributed to a(n) :

If we observe a decrease in the price of a good and a decrease in the amount of the good bought and sold, this could be explained by a(an) :

If you were a government official and wanted to raise the price of wheat, which of the following actions would you take?

If the demand for a good decreased, what would be the effect on the equilibrium price and quantity?

If the supply of a good decreased, what would be the effect on the equilibrium price and quantity?

How would a decrease in the price of the feed grains used to feed cattle affect the market for beef?

Suppose a new law requires all piercing studios to pass tougher licensing tests and to begin using more costly sterilization methods. Other things constant, this law would cause:

Each year around Valentine's Day, we would expect:

If we observe a decrease in the price of a good and an increase in the amount of the good bought and sold, this could be explained by a(n) :

After a hurricane in Florida knocked out the regional water supply for several days, the demand for bottled water increased sharply. In a market economy, how will this increase in demand affect the equilibrium price and quantity of bottled water?

An increase in the demand for tattoos will lead to a:

An increased equilibrium price and a decreased equilibrium quantity results from a(an) :

If there is a decrease in demand for lettuce, we would expect:

Over a ten year period, the monthly charge for cellular phone service decreased from $120 per month to $30 per month. At the same time, the number of subscribers increased from less than 10 million to more than 75 million. Which of the following provides the best explanation for these changes?

Which of the following would decrease the price of packaged hot dogs?

Which of the following is the most likely effect of lower apple juice prices on the price and quantity purchased of orange juice, a substitute product?