Question 1

Although it is a popular product, Apple makes little profit from each song downloaded through iTunes. Why does Apple charge only US$0.99 to download a song?
A) The low price makes it more likely that consumers will buy iPods, which are relatively expensive.
B) Apple cannot raise the price above US$0.99 per song because consumers can download songs at even lower prices from Apple's competitors.
C) Although Apple makes a small amount of profit per song, total profit is large because the quantity sold is large.
D) Apple plans to increase the price of downloading songs after it sells a large enough number of iPods.

Accepted Answer

The low price of songs on iTunes encourages consumers to buy iPods, which are more profitable for Apple.

Question 2

To compete with the iPod from Apple, Microsoft began marketing its own digital music player, called Zune. The textbook mentioned one strategy Microsoft could use to overcome the advantages Apple has from selling the most popular brand of music player. What was this strategy?
A) Microsoft could spend some of its large advertising budget to run television and magazine ads for Zune.
B) Microsoft is considering suing Apple for copyright infringement; Microsoft was the first company to develop the technology used to produce digital music players.
C) Microsoft could advertise Zune by sending emails to the many consumers who use the company's software.
D) Microsoft could try to sell Zune or downloaded songs at prices lower than those charged by Apple.

Accepted Answer

Microsoft could try to sell Zune or downloaded songs at prices lower than those charged by Apple.

Question 3

Supermarkets should not necessarily remove goods from their shelves even if they are not selling well. Which of the following explains this reasoning?
A) If a slow -selling product is a complement of another product, removing the slow -seller would reduce sales of both products.
B) Removing slow -selling products will force consumers to buy these products at other stores.
C) If a slow -selling product is a new product it may become a best -seller in the future.
D) A profit can be made from a slow -selling good if it sells at a high price.

Accepted Answer

If a slow-selling product is a complement of another product, removing the slow-seller would reduce sales of both products.

Question 4

Research suggests that supermarkets should consider which of the following when deciding whether to remove slow -selling goods from their shelves?
A) whether the goods removed are popular with affluent consumers
B) whether the goods removed have high profit margins
C) whether the goods removed are likely to be subject to shortages in the future
D) whether the goods removed are substitutes or complements with the remaining goods

Accepted Answer

The correct answer is D because the removal of slow-selling goods can affect the sales of other goods that are substitutes or complements to them.

Question 5

Google launched Ahlan Online
A) in response to the growing Arab world demand for internet navigation.
B) to meet the needs of the Arab culture.
C) to facilitate on -line shopping.
D) to attract more Arab youth to use Google.

Accepted Answer

Google launched Ahlan Online in response to the growing demand for internet navigation in the Arab world, aiming to make the internet more accessible and useful for Arabic speakers.

Question 6

In 2002, Apple decided not to develop and sell a "tablet PC" N a laptop with a special screen that can convert handwriting into text. Which of the following is a reason why Apple chose not to develop a tablet PC?
A) Microsoft had a patent on the technology used to make tablet PCs and was not willing to sell the rights to this technology to Apple.
B) The price of the tablet PC would have been too high to sell many units.
C) Apple would not be able to produce enough tablet PC units to meet the demand for them.
D) The technology was considered too complex for the average computer user.

Accepted Answer

The answer of In 2002, Apple decided not to develop...

Question 7

In 2002, Apple decided not to develop and sell a "tablet PC" N a laptop with a special screen that can convert handwriting into text. According to one Apple executive, the tablet PC project was not consistent with Apple's theory for success. What is this theory?
A) Apple markets products that it can sell for high prices. The tablet PC would have sold for a low price.
B) Apple believes its success will come from selling many inexpensive items rather than relatively few expensive items.
C) Apple only sells items that it can build a successful advertising campaign around.
D) Apple markets only products that it has patented. This prevents other companies from competing with Apple.

Accepted Answer

The answer of In 2002, Apple decided not to develop...

Question 8

What is the difference between an "increase in supply" and an "increase in quantity supplied"?
A) An "increase in supply" means the supply curve has shifted to the right while an "increase in quantity supplied" means at any given price supply has increased.
B) There is no difference between the two terms; they both refer to a shift of the supply curve.
C) An "increase in supply" means the supply curve has shifted to the right while an "increase in quantity supplied" refers to a movement along a given supply curve in response to an increase in price.
D) There is no difference between the two terms; they both refer to a movement along a given supply curve.

Accepted Answer

An "increase in supply" refers to a situation where suppliers are willing and able to sell more of their goods at each price, leading to a rightward shift of the supply curve. An "increase in quantity supplied" occurs when there is a movement along the supply curve due to a higher price, indicating that suppliers are willing to sell more of the good at the higher price, but the overall supply curve does not shift.

Question 9

Mazin subscribes to a monthly pest control service for his home. Last week the owner of the service informed Mazin that he will have to raise his monthly service fee because of increases in the price of gasoline used by his workers on their service trips. How is the market for pest control services affected by this?
A) There is a decrease in the quantity supplied of pest control services.
B) There is a decrease in the supply of pest control services.
C) There is an increase in the supply of pest control services.
D) There is a decrease in the demand for pest control services.

Accepted Answer

An increase in the price of gasoline, a necessary input for providing pest control services, raises the cost of providing these services. This leads to a decrease in the supply of pest control services, as it becomes more expensive for providers to offer the same amount of services at previous prices.

Question 10

-Refer to Figure 3 -1. The figure above shows the supply and demand curves for two markets: the market for original Picasso paintings, and the market for designer jeans. Which graph most likely represents which market?
A) Graph B represents the market for original Picasso paintings and Graph A represents the market for designer jeans.
B) Graph B represents both the market for original Picasso paintings and designer jeans.
C) Graph A represents the market for original Picasso paintings and Graph B represents the market for designer jeans.
D) Graph A represents both the market for original Picasso paintings and designer jeans.

Accepted Answer

Graph B, with a steep demand curve, likely represents the market for original Picasso paintings, indicating that changes in price have little effect on quantity demanded due to their uniqueness and high value. Graph A, with a more elastic demand curve, likely represents the market for designer jeans, where changes in price can significantly affect the quantity demanded.

Question 11

Assume there is a shortage in the market for digital music players. Which of the following statements correctly describes this situation?
A) the shortage will cause an increase in the equilibrium price of digital music players.
B) The price of digital music players will rise in response to the shortage; as the price rises the quantity demanded will increase and the quantity supplied will decrease.
C) Some consumers will be unable to obtain digital music players at the market price and will have an incentive to offer to buy the product at a higher price.
D) The demand for digital music players is greater than the supply of digital music players.

Accepted Answer

The answer of Assume there is a shortage in the...

Question 12

-Refer to Figure 3 -4. The figure above represents the market for canvas tote bags. Assume that the market price is US$35. Which of the following statement is true?
A) There is a surplus that will cause the price to decrease; quantity supplied will then increase and quantity demanded will decrease until the price equals US$25.
B) There is a surplus that will cause the price to decrease; quantity demanded will then increase and quantity supplied will decrease until the price equals US$25.
C) There is a surplus that will cause the price to increase; quantity demanded will then decrease and quantity supplied will increase until the price equals US$25.
D) There will be a surplus that will cause the price to decrease; demand will then increase and supply will decrease until the price equals US$25.

Accepted Answer

In a market, when the price is above the equilibrium, a surplus occurs because the quantity supplied exceeds the quantity demanded. This surplus puts downward pressure on the price. As the price decreases, the quantity demanded will increase (because consumers are more willing to buy cheaper goods) and the quantity supplied will decrease (because producers are less willing to supply goods at lower prices), moving the market towards equilibrium.

Question 13

-Refer to Figure 3 -4. The figure above represents the market for canvas bags. Assume that the price o bags is US$15. At this price
A) the quantity demanded exceeds the quantity supplied of bags by 75. The price will eventually rise to US$25 where quantity demanded will equal quantity supplied.
B) the demand exceeds the supply of bags by 55. Some consumers will have an incentive to offer to buy tote bags at a higher price.
C) there is a shortage, equal to 55 bags, that will be eliminated when the price rises to US$25.
D) there is a shortage, equal to 55 bags; the price of tote bags will rise until demand is equal to supply.

Accepted Answer

The answer of 
-Refer to Figure 3 -4. The figure...

Question 14

Even when the demand for one good is high, the price of the good is also affected by supply. The textbook illustrates this by comparing the price of two items that are both used in the jewellery industry. Which of the following describes the prices of the two materials?
A) Platinum is sold for a higher price than diamonds.
B) Platinum is sold for a higher price than gold.
C) Gold is sold for a higher price than platinum.
D) Gold is sold for a higher price than diamonds.

Accepted Answer

The price of a good in the market is determined by both its demand and supply. In the case of platinum and gold, even if both are highly demanded in the jewelry industry, platinum often has a higher price than gold due to factors like rarity, cost of extraction, and market demand-supply dynamics.

Question 15

Consider the collectors' market for first editions of two popular children's books, Harry Potter and the Order of the Phoenix by J. K. Rowling and Ruby in the Smoke by Philip Pullman. Sales of the Harry Potter novel are much greater than sales of Ruby in the Smoke yet the price of the Harry Potter novel is much lower than the price of Pullman's novel.
a. On one large diagram, draw a demand and supply graph for first editions of Harry Potter and the Order of the Phoenix and another demand and supply graph for first editions of Ruby in the Smoke.
b. Show how it is possible for the price of the Harry Potter novel to be much lower than the price of Pullman's novel, even though the demand for the Harry Potter novel is much greater than the demand for Ruby in the Smoke.
c. Provide a written explanation to accompany your graphical illustration.

Accepted Answer

The answer of Consider the collectors' market for first editions...

Question 16

Wheat is an important part of the Arab diet. Wheat farmers in Saudi Arabia industry have almost been put out of business by water shortages. How will this affect the equilibrium price and quantity of wheat?

Accepted Answer

The answer of Wheat is an important part of the...

Question 17

-Refer to Table 3 -2. The table contains information about the wheat market. Use the table to answer the following questions.
a. What are the equilibrium price and quantity of wheat?
b. Suppose the prevailing price is US$6 per bushel. Is there a shortage or a surplus in the market?
c. What is the quantity of the shortage or surplus?
d. How many bushels will be sold if the market price is US$6 per bushel?
e. If the market price is US$6 per bushel, what must happen to restore equilibrium in the market?
f. At what price will suppliers be able to sell 36,000 bushels of wheat?
g. Suppose the market price is US$14 per bushel. Is there a shortage or a surplus in the market?
h. What is the quantity of the shortage or surplus?
i. How many bushels will be sold if the market price is US$14 per bushel?
j. If the market price is US$14 per bushel, what must happen to restore equilibrium in the market?

Accepted Answer

The answer of 
-Refer to Table 3 -2. The table...

Question 18

"The price of digital cameras fell because of improvements in production technology. As a result, the demand for non-digital cameras decreased. This caused the price of non-digital cameras to fall; as the price of non-digital cameras fell the demand for non-digital cameras decreased even further." Evaluate this statement.
A) The statement is false because the demand for non -digital cameras would increase as the price of digital cameras fell.
B) The statement is false. A decrease in the price of digital cameras would decrease the demand for non -digital cameras, but a decrease in the price of non -digital cameras would not cause the demand for non -digital cameras to decrease.
C) The statement is false because it confuses the law of demand with the law of supply.
D) The statement is false because digital camera producers would not reduce their prices as a result of improvements in technology; doing so would reduce their profits.

Accepted Answer

The statement incorrectly suggests that a decrease in the price of non-digital cameras would lead to a decrease in demand for them. According to the law of demand, a decrease in price typically leads to an increase in demand, not a decrease.

Question 19

-Refer to Figure 3-6. The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D₁ and S₁ (point A). If there is a shortage of apples how will the equilibrium point change? A) the equilibrium point will move from A to E B) the equilibrium point will move from A to B C) the equilibrium point will move from A to C D) there will be no change in the equilibrium point

Accepted Answer

The answer of 
-Refer to Figure 3-6. The graph in...

Question 20

-Refer to Figure 3-6. The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D₁ and S₁ (point A). If there is an increase in the wages of apple workers and an increase in the price of oranges, a substitute for apples, the equilibrium could move to which point? A) E B) B C) None of the points shown. D) C

Accepted Answer

The answer of 
-Refer to Figure 3-6. The graph in...

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

Although it is a popular product, Apple makes little profit from each song downloaded through iTunes. Why does Apple charge only US$0.99 to download a song?

To compete with the iPod from Apple, Microsoft began marketing its own digital music player, called Zune. The textbook mentioned one strategy Microsoft could use to overcome the advantages Apple has from selling the most popular brand of music player. What was this strategy?

Supermarkets should not necessarily remove goods from their shelves even if they are not selling well. Which of the following explains this reasoning?

Research suggests that supermarkets should consider which of the following when deciding whether to remove slow -selling goods from their shelves?

Google launched Ahlan Online

In 2002, Apple decided not to develop and sell a "tablet PC" N a laptop with a special screen that can convert handwriting into text. Which of the following is a reason why Apple chose not to develop a tablet PC?

In 2002, Apple decided not to develop and sell a "tablet PC" N a laptop with a special screen that can convert handwriting into text. According to one Apple executive, the tablet PC project was not consistent with Apple's theory for success. What is this theory?

What is the difference between an "increase in supply" and an "increase in quantity supplied"?

-Refer to Figure 3 -1. The figure above shows the supply and demand curves for two markets: the market for original Picasso paintings, and the market for designer jeans. Which graph most likely represents which market?

Assume there is a shortage in the market for digital music players. Which of the following statements correctly describes this situation?

-Refer to Figure 3 -4. The figure above represents the market for canvas tote bags. Assume that the market price is US$35. Which of the following statement is true?

-Refer to Figure 3 -4. The figure above represents the market for canvas bags. Assume that the price o bags is US$15. At this price

Even when the demand for one good is high, the price of the good is also affected by supply. The textbook illustrates this by comparing the price of two items that are both used in the jewellery industry. Which of the following describes the prices of the two materials?

Wheat is an important part of the Arab diet. Wheat farmers in Saudi Arabia industry have almost been put out of business by water shortages. How will this affect the equilibrium price and quantity of wheat?

-Refer to Figure 3-6. The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D₁ and S₁ (point A) . If there is a shortage of apples how will the equilibrium point change?

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

Although it is a popular product, Apple makes little profit from each song downloaded through iTunes. Why does Apple charge only US$0.99 to download a song?

To compete with the iPod from Apple, Microsoft began marketing its own digital music player, called Zune. The textbook mentioned one strategy Microsoft could use to overcome the advantages Apple has from selling the most popular brand of music player. What was this strategy?

Supermarkets should not necessarily remove goods from their shelves even if they are not selling well. Which of the following explains this reasoning?

Research suggests that supermarkets should consider which of the following when deciding whether to remove slow -selling goods from their shelves?

Google launched Ahlan Online

In 2002, Apple decided not to develop and sell a "tablet PC" N a laptop with a special screen that can convert handwriting into text. Which of the following is a reason why Apple chose not to develop a tablet PC?

In 2002, Apple decided not to develop and sell a "tablet PC" N a laptop with a special screen that can convert handwriting into text. According to one Apple executive, the tablet PC project was not consistent with Apple's theory for success. What is this theory?

What is the difference between an "increase in supply" and an "increase in quantity supplied"?

-Refer to Figure 3 -1. The figure above shows the supply and demand curves for two markets: the market for original Picasso paintings, and the market for designer jeans. Which graph most likely represents which market?

Assume there is a shortage in the market for digital music players. Which of the following statements correctly describes this situation?

-Refer to Figure 3 -4. The figure above represents the market for canvas tote bags. Assume that the market price is US$35. Which of the following statement is true?

-Refer to Figure 3 -4. The figure above represents the market for canvas bags. Assume that the price o bags is US$15. At this price

Even when the demand for one good is high, the price of the good is also affected by supply. The textbook illustrates this by comparing the price of two items that are both used in the jewellery industry. Which of the following describes the prices of the two materials?

Wheat is an important part of the Arab diet. Wheat farmers in Saudi Arabia industry have almost been put out of business by water shortages. How will this affect the equilibrium price and quantity of wheat?

-Refer to Figure 3-6. The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D1 and S1 (point A) . If there is a shortage of apples how will the equilibrium point change?

-Refer to Figure 3-6. The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D₁ and S₁ (point A) . If there is a shortage of apples how will the equilibrium point change?