Question 1

Ranchers can raise either cattle or sheep on their land.Which of the following would cause the supply of sheep to increase?
A)an increase in the price of sheep
B)a decrease in the price of cattle
C)an increase in the demand for cattle
D)an increase in the price of sheep feed

Accepted Answer

If the price of cattle decreases, it becomes less profitable for ranchers to raise cattle and they may switch to raising sheep instead, increasing the supply of sheep. None of the other choices directly affect the supply of sheep.

Question 2

Figure 3-2
 
-Refer to Figure 3-2.A decrease in the expected future price of the product would be represented by a movement from
A)A to B.
B)B to A.
C)S₁ to S₂.
D)S₂ to S₁.

Accepted Answer

The answer of Figure 3-2
 
-Refer to Figure 3-2.A decrease...

Question 3

Figure 3-2
 
-Refer to Figure 3-2.A decrease in the price of substitutes in production would be represented by a movement from
A)A to B.
B)B to A.
C)S₁ to S₂.
D)S₂ to S₁.

Accepted Answer

The answer of Figure 3-2
 
-Refer to Figure 3-2.A decrease...

Question 4

Figure 3-2
 
-Refer to Figure 3-2.A decrease in the number of firms in the market would be represented by a movement from
A)A to B.
B)B to A.
C)S₁ to S₂.
D)S₂ to S₁.

Accepted Answer

A decrease in the number of firms in the market would lead to a decrease in supply, shifting the supply curve to the left from S₂ to S₁. Therefore, the correct answer is option D. Moving from A to B would represent a decrease in demand, not a decrease in the number of firms. S₁ and S₂ represent different levels of supply at the same number of firms, so they are not applicable in this question.

Question 5

If a firm has an incentive to increase supply now and decrease supply in the future,the firm expects that the
A)price of its product will be lower in the future than it is today.
B)price of its product will be higher in the future than it is today.
C)price of inputs will be lower in the future than they are today.
D)demand for the product will be lower in the future than it is today.

Accepted Answer

The answer of If a firm has an incentive to...

Question 6

Harvey Rabbitt pays for monthly cable TV service.Last week the cable company informed Harvey that his monthly cable price would go down because the city council has granted approval for three new cable companies to service his area.How is the market for cable TV services affected by this?
A)There is an increase in the supply of cable TV service.
B)There is a decrease in the demand for cable TV service.
C)There is a decrease in the quantity of cable TV service supplied.
D)There is a decrease in the supply of cable TV service.

Accepted Answer

The approval for three new cable companies to service the area increases the number of firms supplying cable TV services, thereby increasing the supply of cable TV service in the market. This increase in supply may lead to a decrease in price and an increase in the quantity of cable TV service demanded by consumers.

Question 7

Figure 3-2
 
-Refer to Figure 3-2.An increase in the expected future price of the product would be represented by a movement from
A)A to B.
B)B to A.
C)S₁ to S₂.
D)S₂ to S₁.

Accepted Answer

The answer of Figure 3-2
 
-Refer to Figure 3-2.An increase...

Question 8

Vineyards can grow either red wine grapes or white wine grapes on their land.Which of the following would cause the supply of red wine grapes to decrease?
A)an increase in the price of white wine grapes
B)a decrease in the price of white wine grapes
C)an increase in the demand for red wine grapes
D)an increase in the price of red wine

Accepted Answer

An increase in the price of white wine grapes would incentivize vineyards to allocate more land to growing white wine grapes, which would decrease the supply of red wine grapes.

Question 9

Figure 3-2
 
-Refer to Figure 3-2.A technological advancement would be represented by a movement from
A)A to B.
B)B to A.
C)S₁ to S₂.
D)S₂ to S₁.

Accepted Answer

A technological advancement would shift the supply curve to the right (from S₁ to S₂), indicating an increase in the quantity supplied at any given price. The movement from A to B and B to A would represent changes in quantity demanded due to a shift in consumer preferences or income, but not necessarily a technological advancement.

Question 10

Which of the following would shift the supply curve for MP3 players to the left?
A)an increase in the price of an input used to produce MP3 players
B)a decrease in consumer tastes for MP3 players
C)an increase in the number of firms that produce MP3 players
D)an increase in the productivity of the workers who produce MP3 players

Accepted Answer

An increase in the price of an input used to produce MP3 players would increase the cost of producing MP3 players, which would cause producers to reduce the quantity supplied at any given price, shifting the supply curve to the left.

Question 11

The supply curve for watches
A)shows the supply of watches consumers are willing and able to buy at any given price.
B)is downward sloping.
C)shows the relationship between the quantity of watches firms are willing and able to supply and the quantity of watches consumers are willing and able to purchase.
D)shows the relationship between the price of watches and the quantity of watches supplied.

Accepted Answer

The supply curve for watches shows the relationship between the price of watches and the quantity of watches supplied by firms. It is upward sloping, indicating that as the price of watches increases, the quantity supplied by firms also increases.

Question 12

Which of the following would shift the supply curve for MP3 players to the right?
A)an increase in the price of a substitute in production
B)an increase in consumer income (assuming that all MP3 players are normal goods)
C)a decrease in the number of firms that produce MP3 players
D)a decrease in the price of an input used to produce MP3 players

Accepted Answer

A decrease in the price of an input used to produce MP3 players would lower the cost of production for MP3 players, motivating producers to produce MP3 players at a lower cost. This would shift the supply curve for MP3 players to the right. An increase in the price of a substitute in production would make producing MP3 players relatively more expensive and, all else equal, result in a leftward shift in the supply curve, so A is not the best choice. An increase in consumer income would likely result in a higher demand for MP3 players, which all else equal, would lead to a rightward shift in the demand curve for MP3 players, but would not directly affect the supply curve, so B is not the best choice. A decrease in the number of firms that produce MP3 players would decrease the supply of MP3 players and shift the supply curve to the left, so C is not the best choice.

Question 13

Figure 3-2
 
-Refer to Figure 3-2.An increase in the price of the product would be represented by a movement from
A)A to B.
B)B to A.
C)S₁ to S₂.
D)S₂ to S₁.

Accepted Answer

An increase in the price of the product would cause a movement along the supply curve, not a shift of the supply curve. Thus, the correct answer is A, which illustrates the movement from point A to point B along the same supply curve.

Question 14

In October 2005,the U.S.Fish and Wildlife Service banned the importation of beluga caviar,the most prized of caviars,from the Caspian Sea.What happened in the market for caviar in the U.S.?
A)The supply curve shifted to the left.
B)The supply curve shifted to the right.
C)The demand curve shifted to the right.
D)The demand curve shifted to the left.

Accepted Answer

The ban on importation of beluga caviar from the Caspian Sea would decrease the supply of this particular type of caviar available in the U.S. market. As a result, the supply curve would shift to the left, indicating a decrease in the quantity supplied at any given price. This would lead to an increase in the price of beluga caviar, assuming the demand for it remained constant.

Question 15

Danielle Ocean pays for monthly pool maintenance for her home swimming pool.Last week the owner of the pool service informed Danielle that he will have to raise his monthly service fee because of increases in the price of pool chemicals.How is the market for pool maintenance services affected by this?
A)There is an increase in the supply of pool maintenance services.
B)There is a decrease in the demand for pool maintenance services.
C)There is a decrease in the quantity of pool maintenance services supplied.
D)There is a decrease in the supply of pool maintenance services.

Accepted Answer

The increase in the price of pool chemicals likely affects the cost of providing pool maintenance services, which in turn decreases the supply of pool maintenance services. As a result, the owner of the pool service is raising his price, indicating a decrease in supply of pool maintenance services.

Question 16

A decrease in the price of GPS systems will result in
A)a smaller quantity of GPS systems supplied.
B)a larger quantity of GPS systems supplied.
C)a decrease in the demand for GPS systems.
D)an increase in the supply of GPS systems.

Accepted Answer

The answer of A decrease in the price of GPS...

Question 17

If a firm expects that the price of its product will be higher in the future than it is today
A)the firm will go out of business.
B)the firm has an incentive to increase supply now and decrease supply in the future.
C)the firm has an incentive to decrease quantity supplied now and increase quantity supplied in the future.
D)the firm has an incentive to decrease supply now and increase supply in the future.

Accepted Answer

If a firm expects that the price of its product will be higher in the future than it is today, it has an incentive to decrease supply now and increase supply in the future. This strategy aligns with the basic economic principle of supply and demand. By reducing supply now, the firm can create artificial scarcity and increase the current price. Then, in the future when the price is expected to be higher, the firm can increase supply to meet the higher demand and capture the higher price.

Question 18

The popularity of digital cameras has enticed large discount stores like Wal-Mart and Costco to offer digital photo printing services.How does this affect the digital photo printing market?
A)The demand curve for digital photo printing services shifts to the right.
B)The demand curve for digital photo printing services shifts to the left.
C)The supply curve for digital photo printing services shifts to the right.
D)The supply curve for digital photo printing services shifts to the left.

Accepted Answer

The answer of The popularity of digital cameras has enticed...

Question 19

An increase in the price of off-road vehicles will result in
A)a smaller quantity of off-road vehicles supplied.
B)a larger quantity of off-road vehicles supplied.
C)an increase in the demand for off-road vehicles.
D)a decrease in the supply of off-road vehicles.

Accepted Answer

The answer of An increase in the price of off-road...

Question 20

Figure 3-2
 
-Refer to Figure 3-2.A decrease in the price of inputs would be represented by a movement from
A)A to B.
B)B to A.
C)S₁ to S₂.
D)S₂ to S₁.

Accepted Answer

The answer of Figure 3-2
 
-Refer to Figure 3-2.A decrease...

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

Ranchers can raise either cattle or sheep on their land.Which of the following would cause the supply of sheep to increase?

Figure 3-2 -Refer to Figure 3-2.A decrease in the expected future price of the product would be represented by a movement from

Figure 3-2 -Refer to Figure 3-2.A decrease in the price of substitutes in production would be represented by a movement from

Figure 3-2 -Refer to Figure 3-2.A decrease in the number of firms in the market would be represented by a movement from

If a firm has an incentive to increase supply now and decrease supply in the future,the firm expects that the

Harvey Rabbitt pays for monthly cable TV service.Last week the cable company informed Harvey that his monthly cable price would go down because the city council has granted approval for three new cable companies to service his area.How is the market for cable TV services affected by this?

Figure 3-2 -Refer to Figure 3-2.An increase in the expected future price of the product would be represented by a movement from

Vineyards can grow either red wine grapes or white wine grapes on their land.Which of the following would cause the supply of red wine grapes to decrease?

Figure 3-2 -Refer to Figure 3-2.A technological advancement would be represented by a movement from

Which of the following would shift the supply curve for MP3 players to the left?

The supply curve for watches

Which of the following would shift the supply curve for MP3 players to the right?

Figure 3-2 -Refer to Figure 3-2.An increase in the price of the product would be represented by a movement from

In October 2005,the U.S.Fish and Wildlife Service banned the importation of beluga caviar,the most prized of caviars,from the Caspian Sea.What happened in the market for caviar in the U.S.?

A decrease in the price of GPS systems will result in

If a firm expects that the price of its product will be higher in the future than it is today

The popularity of digital cameras has enticed large discount stores like Wal-Mart and Costco to offer digital photo printing services.How does this affect the digital photo printing market?

An increase in the price of off-road vehicles will result in

Figure 3-2 -Refer to Figure 3-2.A decrease in the price of inputs would be represented by a movement from