Question 1

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

The answer of Positive technological change in the production of...

Question 2

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

The answer of Assume that both the demand curve and...

Question 3

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 4

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 5

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 for soft drinks will result in a leftward shift of the demand curve. An increase in supply of soft drinks as a result of reductions in input prices will result in a rightward shift of the supply curve. The new equilibrium point will be at the intersection of the new demand and supply curves. The equilibrium price will decrease due to the decrease in demand, but the equilibrium quantity may either increase or decrease depending on the magnitude of the shifts in the demand and supply curves. Therefore, choice C is the best answer.

Question 6

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 and decrease in supply will lead to a shortage of lobster, which will result in an increase in the equilibrium price of lobster. The equilibrium quantity may increase or decrease depending on the magnitude of the changes in demand and supply. If the increase in demand is more than the decrease in supply, the equilibrium quantity will increase. However, if the decrease in supply is more than the increase in demand, the equilibrium quantity will decrease. Therefore, option C is the best choice.

Question 7

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 8

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, causing the demand for gasoline-powered automobiles to increase, resulting in an increase in the equilibrium price of gasoline-powered automobiles.

Question 9

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

Question 10

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 11

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 12

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 an 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 for sugar cane will shift the supply curve to the right (S1) and a decrease in tastes for sugar-sweetened soft drinks will shift the demand curve to the left (D2). The new equilibrium point will be where the new supply curve (S1) intersects with the new demand curve (D2), at point C. Thus, the equilibrium point will move from B to C.

Question 13

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

When the wages of seamstresses rise, the cost of producing women's clothing increases, which shifts the supply curve upward and to the left. This leads to a lower quantity of clothing sold at a higher price, as shown in Panel (b). Panels (a) and (c) show a situation where the demand and supply curves shift in opposite directions and therefore have an ambiguous effect on equilibrium quantity and price. Panel (d) shows a situation where there is an increase in demand, which leads to a higher quantity and price, but the wages of seamstresses do not affect the demand curve in this way.

Question 14

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, there will be excess supply in the market at the current equilibrium price. As a result, producers will lower the price to sell their excess supply, leading to a lower equilibrium price. However, with a greater increase in supply, the equilibrium quantity will also increase. Therefore, the correct answer is B.

Question 15

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 16

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, the equilibrium price of MP3 players will increase, and the equilibrium quantity will decrease. This is because the increase in demand is not enough to offset the decrease in supply, leading to a higher price and lower quantity.

Question 17

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 18

"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

The answer of "The price of compact fluorescent light bulbs...

Question 19

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

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

Question 20

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...

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

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) ?

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

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 rice.What happens in this market if buyers expect the price of rice to fall?

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

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

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?

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 3-7 -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?

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?

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

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?

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

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?

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?

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