Question 1

Figure 3-7
 
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for almonds.Which panel best describes what happens in this market when there is an increase in the productivity of almond harvesters?
A)Panel (a)
B)Panel (b)
C)Panel (c)
D)Panel (d)

Accepted Answer

The answer of Figure 3-7
 
-Refer to Figure 3-7.Assume that...

Question 2

Figure 3-7
 
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for potatoes and that steak and potatoes are complements.What panel describes what happens in this market when the price of steak rises?
A)Panel (a)
B)Panel (b)
C)Panel (c)
D)Panel (d)

Accepted Answer

The answer of Figure 3-7
 
-Refer to Figure 3-7.Assume that...

Question 3

Figure 3-7
 
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for Fruitopia, a soft drink.Which panel describes what happens in the market for Fruitopia when the price of Snapple, a substitute product, decreases?
A)Panel (a)
B)Panel (b)
C)Panel (c)
D)Panel (d)

Accepted Answer

The answer of Figure 3-7
 
-Refer to Figure 3-7.Assume that...

Question 4

Assume that both the demand curve and the supply curve for MP3 players shift to the right but the supply curve shifts more than the demand curve.As a result
A)both the equilibrium price and quantity of MP3 players will decrease.
B)the equilibrium price of MP3 players will decrease; the equilibrium quantity will increase.
C)the equilibrium price of MP3 players may increase or decrease; the equilibrium quantity will decrease.
D)the equilibrium price of MP3 players will increase; the equilibrium quantity will decrease.

Accepted Answer

When the supply curve shifts more than the demand curve, it indicates that the market is experiencing increased production at a lower cost. This leads to a larger increase in the quantity supplied than the increase in quantity demanded, resulting in a surplus of MP3 players. To clear the surplus, suppliers reduce the price of MP3 players, leading to a lower equilibrium price. However, the increase in quantity supplied leads to a higher equilibrium quantity. Therefore, the equilibrium price of MP3 players will decrease, and the equilibrium quantity will increase.

Question 5

Assume that the demand curve for MP3 players shifts to the right and the supply curve for MP3 players shift to the left, but the supply curve shifts more than the demand curve.As a result
A)both the equilibrium price and quantity of MP3 players will decrease.
B)the equilibrium price of MP3 players will decrease; the equilibrium quantity will increase.
C)the equilibrium price of MP3 players may increase or decrease; the equilibrium quantity will decrease.
D)the equilibrium price of MP3 players will increase; the equilibrium quantity will decrease.

Accepted Answer

When the supply curve shifts more than the demand curve, it means that the supply has decreased more than the demand has increased. This results in a decrease in the equilibrium quantity but an increase in the equilibrium price. Therefore, the correct answer is D.

Question 6

An increase in input costs in the production of electric automobiles caused the price of electric automobiles to rise.Holding everything else constant, how would this affect the market for gasoline-powered automobiles (a substitute for electric automobiles)?
A)The supply of gasoline-powered automobiles would increase and the equilibrium price of gasoline-powered automobiles would decrease.
B)The demand for gasoline-powered automobiles would increase and the equilibrium price of gasoline-powered automobiles would increase.
C)The demand for gasoline-powered automobiles would decrease because consumers could afford to buy fewer gasoline-powered automobiles.
D)The demand for gasoline-powered automobiles would increase and the equilibrium price of gasoline-powered automobiles would decrease.

Accepted Answer

An increase in the price of electric automobiles would make gasoline-powered automobiles relatively more attractive, leading to an increase in demand for gasoline-powered automobiles as they are substitutes for electric automobiles. This increased demand would shift the demand curve for gasoline-powered automobiles to the right, causing an increase in the equilibrium price of gasoline-powered automobiles.

Question 7

Figure 3-8
 
-Refer to Figure 3-8.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 B.
B)The equilibrium point will move from A to C.
C)There will be no change in the equilibrium point.
D)The equilibrium point will move from A to E.

Accepted Answer

The answer of Figure 3-8
 
-Refer to Figure 3-8.The graph...

Question 8

Figure 3-7
 
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for women's clothing.Which panel best describes what happens in this market when the wages of seamstresses rise?
A)Panel (a)
B)Panel (b)
C)Panel (c)
D)Panel (d)

Accepted Answer

Panel (b) shows a decrease in the quantity supplied and an increase in the equilibrium price, which is what would happen in a market for women's clothing if the wages of seamstresses (who produce the garments) were to rise. This would lead to a higher cost of production, resulting in a decrease in supply and a higher price to maintain equilibrium.

Question 9

Figure 3-8
 
-Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for sugar at the intersection of D₁ and S₂ (point B). If there is a decrease in the price of fertilizer used on sugar cane and there is a decrease in tastes for sugar-sweetened soft drinks, how will the equilibrium point change?
A)The equilibrium point will move from B to A.
B)The equilibrium point will move from B to C.
C)There will be no change in the equilibrium point.
D)The equilibrium point will move from B to E.

Accepted Answer

A decrease in the price of fertilizer used on sugar cane will lead to an increase in the supply of sugar (shift of S₂ to S₃). A decrease in tastes for sugar-sweetened soft drinks will lead to a decrease in the demand for sugar (shift of D₁ to D₂). These two changes will cause a decrease in the equilibrium price and quantity. The new equilibrium point will be at C, where S₃ and D₂ intersect.

Question 10

Figure 3-7
 
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for used clothing, an inferior good.Which panel describes what happens in this market as a result of a decrease in income?
A)Panel (a)
B)Panel (b)
C)Panel (c)
D)Panel (d)

Accepted Answer

A decrease in income increases the demand for an inferior good like used clothing, shifting the demand curve to the right, as shown in Panel (c).

Question 11

Figure 3-7
 
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for bicycle helmets.Which panel best describes what happens in this market if there is a substantial increase in the price of bicycles?
A)Panel (a)
B)Panel (b)
C)Panel (c)
D)Panel (d)

Accepted Answer

The answer of Figure 3-7
 
-Refer to Figure 3-7.Assume that...

Question 12

Positive technological change in the production of LCD televisions caused the price of LCD televisions to fall.Holding everything else constant, how would this affect the market for Blu-ray players (a complement to LCD televisions)?
A)The supply of Blu-ray players would increase and the equilibrium price of Blu-ray players would decrease.
B)The demand for Blu-ray players would increase and the equilibrium price of Blu-ray players would increase.
C)The demand for Blu-ray players would decrease because consumers could afford to buy fewer LCD televisions and Blu-ray players.
D)The demand for Blu-ray players would increase and the equilibrium price of Blu-ray players would decrease.

Accepted Answer

When the price of LCD televisions falls due to positive technological change, more consumers are likely to buy them. Since Blu-ray players are complements to LCD televisions, the demand for Blu-ray players will increase, leading to an increase in their equilibrium price.

Question 13

Figure 3-7
 
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for rice.What happens in this market if buyers expect the price of rice to fall?
A)Panel (a)
B)Panel (b)
C)Panel (c)
D)Panel (d)

Accepted Answer

The answer of Figure 3-7
 
-Refer to Figure 3-7.Assume that...

Question 14

Figure 3-8
 
-Refer to Figure 3-8.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 the price of oranges, a substitute for apples, decreases and the wages of apple workers increase, 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)The equilibrium will first move from A to B, then return to A.

Accepted Answer

The decrease in the price of oranges will decrease the demand for apples (shift from D₁ to D₂), and the increase in wages will decrease the supply of apples (shift from S₁ to S₂). The new equilibrium will be at the intersection of D₂ and S₂, which is point E.

Question 15

Assume that the demand curve for MP3 players shifts to the right and the supply curve for MP3 players shift to the left, but the supply curve shifts less than the demand curve.As a result
A)both the equilibrium price and quantity of MP3 players will decrease.
B)both the equilibrium price and quantity of MP3 players will increase.
C)the equilibrium price of MP3 players may increase or decrease; the equilibrium quantity will decrease.
D)the equilibrium price of MP3 players will increase; the equilibrium quantity will decrease.

Accepted Answer

The answer of Assume that the demand curve for MP3...

Question 16

Assume that both the demand curve and the supply curve for MP3 players shift to the right but the demand curve shifts more than the supply curve.As a result
A)both the equilibrium price and quantity of MP3 players will increase.
B)the equilibrium price of MP3 players will increase; the equilibrium quantity may increase or decrease.
C)the equilibrium price of MP3 players may increase or decrease; the equilibrium quantity will increase.
D)the equilibrium price of MP3 players will decrease; the equilibrium quantity may increase or decrease.

Accepted Answer

When both the demand curve and the supply curve shift to the right, the equilibrium price and quantity will both increase. This is because the increase in demand will lead to a higher equilibrium price, and the increase in supply will lead to a higher equilibrium quantity.

Question 17

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

Accepted Answer

A decrease in the price of incandescent light bulbs would typically increase demand, not decrease it, according to the law of demand.

Question 18

An increase in the demand for lobster due to changes in consumer tastes, accompanied by a decrease in the supply of lobster as a result bad weather reducing the number of fishermen trapping lobster, will result in
A)a decrease in the equilibrium quantity of lobster and no change in the equilibrium price.
B)an increase in the equilibrium price of lobster and no change in the equilibrium quantity.
C)an increase in the equilibrium price of lobster; the equilibrium quantity may increase or decrease.
D)a decrease in the equilibrium quantity of lobster; the equilibrium price may increase or decrease.

Accepted Answer

An increase in demand raises the price and quantity, while a decrease in supply raises the price but lowers the quantity. The equilibrium price will increase, but the change in equilibrium quantity is uncertain as it depends on the relative magnitudes of the shifts in demand and supply.

Question 19

Figure 3-8
 
-Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for sugar at the intersection of D₁ and S₁ (point A). If there is an increase in the price of fertilizer used on sugar cane and there is a decrease in tastes for sugar-sweetened soft drinks, how will the equilibrium point change?
A)The equilibrium point will move from A to B.
B)The equilibrium point will move from A to C.
C)There will be no change in the equilibrium point.
D)The equilibrium point will move from A to E.

Accepted Answer

The answer of Figure 3-8
 
-Refer to Figure 3-8.The graph...

Question 20

A decrease in the demand for soft drinks due to changes in consumer tastes, accompanied by an increase in the supply of soft drinks as a result of reductions in input prices, will result in
A)a decrease in the equilibrium quantity of soft drinks and no change in the equilibrium price.
B)a decrease in the equilibrium price of soft drinks and no change in the equilibrium quantity.
C)a decrease in the equilibrium price of soft drinks; the equilibrium quantity may increase or decrease.
D)an increase in the equilibrium quantity of soft drinks; the equilibrium price may increase or decrease.

Accepted Answer

A decrease in demand will decrease the equilibrium quantity, while an increase in supply will decrease the equilibrium price. Therefore, it can be concluded that the equilibrium price of soft drinks will decrease, but the change in equilibrium quantity is uncertain, as it depends on the extent of the decrease in demand and the increase in supply.

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

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for almonds.Which panel best describes what happens in this market when there is an increase in the productivity of almond harvesters?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for potatoes and that steak and potatoes are complements.What panel describes what happens in this market when the price of steak rises?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for Fruitopia, a soft drink.Which panel describes what happens in the market for Fruitopia when the price of Snapple, a substitute product, decreases?

Assume that both the demand curve and the supply curve for MP3 players shift to the right but the supply curve shifts more than the demand curve.As a result

Assume that the demand curve for MP3 players shifts to the right and the supply curve for MP3 players shift to the left, but the supply curve shifts more than the demand curve.As a result

An increase in input costs in the production of electric automobiles caused the price of electric automobiles to rise.Holding everything else constant, how would this affect the market for gasoline-powered automobiles (a substitute for electric automobiles) ?

Figure 3-8 -Refer to Figure 3-8.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?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for women's clothing.Which panel best describes what happens in this market when the wages of seamstresses rise?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for used clothing, an inferior good.Which panel describes what happens in this market as a result of a decrease in income?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for bicycle helmets.Which panel best describes what happens in this market if there is a substantial increase in the price of bicycles?

Positive technological change in the production of LCD televisions caused the price of LCD televisions to fall.Holding everything else constant, how would this affect the market for Blu-ray players (a complement to LCD televisions) ?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for rice.What happens in this market if buyers expect the price of rice to fall?

Assume that the demand curve for MP3 players shifts to the right and the supply curve for MP3 players shift to the left, but the supply curve shifts less than the demand curve.As a result

Assume that both the demand curve and the supply curve for MP3 players shift to the right but the demand curve shifts more than the supply curve.As a result

An increase in the demand for lobster due to changes in consumer tastes, accompanied by a decrease in the supply of lobster as a result bad weather reducing the number of fishermen trapping lobster, will result in

A decrease in the demand for soft drinks due to changes in consumer tastes, accompanied by an increase in the supply of soft drinks as a result of reductions in input prices, will result in