Question 1

Suppose that today the market for lima beans is in equilibrium.Tomorrow both the supply and demand curves for lima beans will shift to the left.As a result,the equilibrium price __________ and the equilibrium quantity will __________.

Accepted Answer

When both supply and demand decrease, the equilibrium quantity will definitely fall, but the effect on equilibrium price is indeterminate without knowing the relative magnitudes of the shifts.

Question 2

An increase in equilibrium price and a decrease in equilibrium quantity could be caused by a(n)

Accepted Answer

An increase in resource prices would lead to a decrease in supply, causing the equilibrium price to rise and the equilibrium quantity to fall.

Question 3

Assume the most typical shapes for the demand and supply in a competitive market.Suppose that demand falls and supply increases.Which of the following statements is correct?

Accepted Answer

In a typical competitive market, a fall in demand and an increase in supply will result in a surplus of goods. This will put downward pressure on the price and may increase or decrease the equilibrium quantity depending on the magnitude of the shifts in demand and supply. Therefore, the correct statement is that the equilibrium price will fall while the equilibrium quantity may rise or fall. Option A is the only one that correctly reflects this outcome.

Question 4

-In Figure 3-11,suppose that initially the market is in equilibrium as defined by the demand and supply curves D₁ and S₁.Which price/quantity combination could result from a decrease in the wages paid to workers?

Accepted Answer

A decrease in wages reduces production costs, shifting the supply curve to the right, leading to a lower price and higher quantity.

Question 5

Assume the typical shapes of the demand and supply curves.If both demand and supply increase in a competitive market,the equilibrium price will

Accepted Answer

If both demand and supply increase, the equilibrium quantity will definitely increase. However, the direction of the price change will depend on the relative magnitude of the shifts. If the increase in demand is greater than the increase in supply, the demand curve will shift further to the right, which will cause the equilibrium price to rise. If the increase in supply is greater than the increase in demand, the supply curve will shift further to the right, which will cause the equilibrium price to fall. Therefore, choice C is the best answer because it accounts for the possibility of both demand and supply increasing and the direction of the price change being dependent on the relative sizes of the shifts.

Question 6

Consider the competitive market for oil.Which of the following would result from the discovery of new oil fields that can be profitably accessed at the current price?

Accepted Answer

The discovery of new oil fields that can be profitably accessed at the current price would likely result in an excess supply of oil if the price of oil fails to drop sufficiently. This is because the increased supply would push the market towards excess supply, leading to a surplus of oil.

Question 7

Assuming the most typical shapes of the demand and supply curves,which of the following could lead to an increase in the current equilibrium price for personal computers?

Accepted Answer

Expectations of a higher future price can lead to an increase in current demand, as consumers may want to purchase before prices rise, thus increasing the current equilibrium price.

Question 8

-Consider the market for ground beef represented by Figure 3-12,which is initially in equilibrium at point J.Assume that ground beef is an inferior good.Which of the following could explain a movement to a new equilibrium at point M?

Accepted Answer

A decrease in buyers' incomes would increase the demand for an inferior good like ground beef, while a decrease in the number of acres owned by cattle ranches would reduce the supply, leading to a new equilibrium at point M.

Question 9

If the supply curve does not shift,an increase in demand results in a(n)

Accepted Answer

If the supply curve does not shift, an increase in demand will lead to a higher equilibrium price and a larger equilibrium quantity. This is because, as demand increases, buyers are willing to pay more for the good or service, leading to a higher price. As producers see the higher price, they are incentivized to produce more, leading to a larger quantity being supplied. Therefore, the equilibrium price and quantity both increase. Choice C is the only option that represents this outcome.

Question 10

An increase in both equilibrium price and quantity could be produced by a(n)

Accepted Answer

An increase in demand while supply is constant will lead to an increase in both equilibrium price and quantity. This is because when demand increases, buyers will be willing to pay a higher price, leading to an increase in price. At the same time, sellers will respond to the higher price by producing and selling more, leading to an increase in quantity.

Question 11

-Consider the market for ground beef represented by Figure 3-12,which is initially in equilibrium at point J.Which of the following is correct if equilibrium shifts to point K?

Accepted Answer

The answer of 
-Consider the market for ground beef represented...

Question 12

A decrease in supply results in a(n)

Accepted Answer

A decrease in supply typically leads to a higher equilibrium price and a lower equilibrium quantity, as there is less of the good available, causing prices to rise and quantity to fall.

Question 13

A decrease in equilibrium price and an increase in equilibrium quantity could be brought about by a(n)

Accepted Answer

An improvement in production technology typically increases supply, leading to a decrease in equilibrium price and an increase in equilibrium quantity.

Question 14

A decrease in both equilibrium price and quantity could be produced by a(n)

Accepted Answer

A decrease in both equilibrium price and quantity can only happen when there is a decrease in demand, keeping supply constant. This would lead to excess supply, causing producers to lower the price and reduce the quantity supplied in the market. A decrease in supply, an increase in supply, an improvement in technology would either increase the price or increase the quantity supplied, leading to an increase in equilibrium price and quantity. An increase in demand would increase both equilibrium price and quantity.

Question 15

If there is an increase in the demand for automobiles,and at the same time auto workers receive a substantial raise,what will happen to equilibrium price and quantity in the automobile market?

Accepted Answer

An increase in demand raises both price and quantity, while an increase in production costs (due to higher wages) reduces supply, raising price but reducing quantity. The net effect is a definite increase in price, but the change in quantity is uncertain.

Question 16

-In Figure 3-11,suppose that initially the market is in equilibrium as defined by the demand and supply curves D₁ and S₁.Which price/quantity combination could result from an increase in consumers' incomes coupled with an improvement in technology?

Accepted Answer

The answer of 
-In Figure 3-11,suppose that initially the market...

Question 17

Oil and Natural Gas can each be used as a source of energy and are,for many purposes interchangeable.Which of the following best explains the increase in the price of natural gas that accompanied the increase in the price of oil during the 1990-1991 Persian Gulf War?

Accepted Answer

When the price of oil increased, consumers turned to natural gas as a substitute, increasing its demand and thus its price.

Question 18

A decrease in demand,with supply constant,results in a(n)

Accepted Answer

When demand decreases while supply remains constant, the market moves towards a surplus, leading to a decrease in equilibrium price and quantity.

Question 19

An increase in supply results in a(n)

Accepted Answer

An increase in supply will cause a surplus as there is an excess supply of goods. This means that the market will be flooded with products that are not being sold at the current price. To get rid of the surplus, producers will lower their prices until the excess supply clears. This leads to a decrease in the equilibrium price and an increase in the equilibrium quantity. Therefore, D is the correct answer.

Question 20

Economists view shifts of supply and demand as

Accepted Answer

Economists view shifts of supply and demand as normal and frequent events. These shifts can occur due to changes in market conditions, technological advancements, natural disasters, and many other factors. The market mechanism adjusts the prices to reach a new equilibrium point after the shifts in supply and demand. These adjustments ensure that the market clears, i.e., the quantity demanded is equal to the quantity supplied.

Quiz 3: Supply and Demand

Suppose that today the market for lima beans is in equilibrium.Tomorrow both the supply and demand curves for lima beans will shift to the left.As a result,the equilibrium price and the equilibrium quantity will .