Question 1

Which of the following is evidence of a shortage of walnuts?
A)Firms lower the price of walnuts.
B)The price of cashews is lowered in order to make up for the walnut shortage.
C)The equilibrium price of walnuts falls due to a decrease in demand.
D)The quantity of walnuts demanded is greater than the quantity supplied.

Accepted Answer

If the quantity of walnuts demanded is greater than the quantity supplied, this is evidence of a shortage of walnuts. A shortage occurs when demand exceeds supply, so in this case, consumers are wanting to purchase more walnuts than are available for sale.

Question 2

A shortage is defined as the situation that exists when the quantity of a good supplied is greater than the quantity demanded.

Accepted Answer

The definition given is incorrect. A shortage exists when the quantity demanded is greater than the quantity supplied.

Question 3

Figure 3-5
 
-Refer to Figure 3-5.At a price of $5, the quantity sold
A)is 2 units.
B)is 4 units.
C)is 6 units.
D)cannot be determined.

Accepted Answer

The answer of Figure 3-5
 
-Refer to Figure 3-5.At a...

Question 4

Assume there is a shortage in the market for digital music players.Which of the following statements correctly describes this situation?
A)The demand for digital music players is greater than the supply of digital music players.
B)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.
C)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.
D)The shortage will cause a decrease in the equilibrium price of digital music players.

Accepted Answer

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

Question 5

Figure 3-6
 
-Refer to Figure 3-6.The figure above represents the market for canvas tote bags.Compare the conditions in the market when the price is $50 and when the price is $35.Which of the following describes how the market differs at these prices?
A)At each price there is a surplus; the surplus is greater at $35 than at $50.
B)The difference between quantity supplied and quantity demanded is greater at $50 than at $35.
C)At each price there is a surplus; firms will lower the equilibrium price in order to eliminate the surplus.
D)At each price the supply of tote bags exceeds that demand for tote bags.

Accepted Answer

When the price is $50, the quantity supplied is greater than the quantity demanded, indicating a surplus in the market. However, the magnitude of the surplus is smaller compared to the surplus at the price of $35 where the difference between quantity supplied and quantity demanded is even greater. Therefore, the market differs in terms of the magnitude of the surplus, which is larger at $35 than at $50.

Question 6

Auctions in recent years have resulted in higher prices paid for letters written by John Wilkes Booth than those written by Abraham Lincoln.Which of the following events would cause the price differences in these letters to get smaller?
A)The demand for Booth letters increases.
B)The supply of Lincoln letters increases.
C)The demand for Lincoln letters increases and the supply of Booth letters increases.
D)The demand for Lincoln letters decreases and the demand for Booth letters increases.

Accepted Answer

If the demand for Lincoln letters increases and the supply of Booth letters increases, the increased supply of Lincoln letters would reduce their price, and the increased demand for Booth letters would raise their price. This would result in a smaller price difference between the two types of letters.

Question 7

In a perfectly competitive market, there are ________ buyers and ________ sellers.
A)many; few
B)few; many
C)many; many
D)few; few

Accepted Answer

A perfectly competitive market is a theoretical market where there are many buyers and many sellers, no barriers to entry or exit, homogenous products, perfect information, and firms are price takers, meaning they have no control over the market price. Therefore, choice C is the correct answer.

Question 8

In response to a surplus the market price of a good will fall; as the price falls, the quantity demanded will increase and quantity supplied will decrease until equilibrium is reached.

Accepted Answer

This is the basic law of supply and demand. As there is a surplus, the quantity supplied exceeds the quantity demanded which eventually leads to a decrease in market price to clear the market. This ultimately balances the market at an equilibrium point where the quantity supplied is equal to the quantity demanded.

Question 9

Market equilibrium occurs where supply equals demand.

Accepted Answer

The answer of Market equilibrium occurs where supply equals demand....

Question 10

A shortage occurs when the market price is lower than the equilibrium price.

Accepted Answer

The answer of A shortage occurs when the market price...

Question 11

Figure 3-5
 
-Refer to Figure 3-5.In a free market such as that depicted above, a surplus is eliminated by
A)a price increase, increasing the supply and decreasing the demand.
B)a price decrease, decreasing the supply and increasing the demand.
C)a price decrease, decreasing the quantity supplied and increasing the quantity demanded.
D)a price increase, increasing the quantity supplied and decreasing the quantity demanded.

Accepted Answer

The answer of Figure 3-5
 
-Refer to Figure 3-5.In a...

Question 12

Figure 3-6
 
-Refer to Figure 3-6.The figure above represents the market for canvas tote bags.Assume that the price of tote bags is $15.At this price
A)the quantity demanded exceeds the quantity supplied by 75. The price will eventually rise to $25 where quantity demanded will equal quantity supplied.
B)the demand exceeds the supply of tote 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 tote bags, that will be eliminated when the price rises to $25.
D)there is a shortage equal to 55 tote bags; the price of tote bags will rise until demand is equal to supply.

Accepted Answer

At a price of $15, the quantity demanded exceeds the quantity supplied by 55. This results in a shortage of 55 tote bags. The market is not in equilibrium and the shortage will persist until the price rises. As price increases, quantity demanded falls and quantity supplied rises, eventually reaching a point where demand and supply are equal. At a price of $25, the quantity demanded will equal the quantity supplied, eliminating the shortage. Therefore, choice C is correct.

Question 13

If, for a product, the quantity supplied exceeds the quantity demanded, the market price will fall until
A)the quantity demanded exceeds the quantity supplied. The market will then be in equilibrium.
B)quantity demanded equals quantity supplied. The equilibrium price will then be lower than the market price.
C)all consumers will be able to afford the product.
D)quantity demanded equals quantity supplied. The market price will then equal the equilibrium price.

Accepted Answer

When the quantity supplied exceeds the quantity demanded, there will be a surplus of the product. In order to sell off the surplus stock, the market price will fall. As the price falls, the quantity demanded will increase, while the quantity supplied will decrease. Eventually, a point will be reached where the quantity demanded equals the quantity supplied, and the market will be in equilibrium. At this point, the market price will equal the equilibrium price.

Question 14

Figure 3-5
 
-Refer to Figure 3-5.At a price of $20
A)there would be a surplus of 8 units.
B)there would be a shortage of 8 units.
C)there would be a surplus of 0 units.
D)there would be a shortage of 4 units.

Accepted Answer

The answer of Figure 3-5
 
-Refer to Figure 3-5.At a...

Question 15

Figure 3-6
 
-Refer to Figure 3-6.The figure above represents the market for canvas tote bags.Assume that the market price is $35.Which of the following statements is true?
A)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 $25.
B)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 $25.
C)There will be a surplus that will cause the price to decrease; demand will then increase and supply will decrease until the price equals $25.
D)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 $25.

Accepted Answer

The answer of Figure 3-6
 
-Refer to Figure 3-6.The figure...

Question 16

Scarcity is defined as the situation that exists when the quantity demanded for a good is greater than the quantity supplied.

Accepted Answer

The answer of Scarcity is defined as the situation that...

Question 17

Figure 3-5
 
-Refer to Figure 3-5.At a price of $10, the quantity sold
A)is 2 units.
B)is 4 units.
C)is 6 units.
D)is 8 units.

Accepted Answer

The answer of Figure 3-5
 
-Refer to Figure 3-5.At a...

Question 18

Which of the following is evidence of a surplus of bananas?
A)Firms raise the price of bananas.
B)The price of bananas is lowered in order to increase sales.
C)The equilibrium price of bananas rises due to an increase in demand.
D)The quantity of bananas demanded is greater than the quantity supplied.

Accepted Answer

When there is a surplus of a good, such as bananas, the quantity supplied exceeds the quantity demanded, resulting in downward pressure on prices. One way for firms to address this surplus and increase sales is by lowering the price of bananas. Therefore, choice B is the best answer.

Question 19

Auctions in recent years have resulted in higher prices paid for letters written by John Wilkes Booth than those written by Abraham Lincoln.What is a reason for this difference in price?
A)There is a surplus of letters written by Booth and a shortage of letters written by Lincoln.
B)Many people are more fascinated by villains and anti-heroes than by heroic figures.
C)There are more letters available for collectors to buy that were written by Lincoln than there are letters that were written by Booth.
D)Booth was a well-known actor; the demand for his letters rose as wealthy actors attempted to buy them.

Accepted Answer

The answer of Auctions in recent years have resulted in...

Question 20

A surplus occurs when the actual selling price is above the market equilibrium price.

Accepted Answer

A surplus occurs when the quantity supplied exceeds the quantity demanded at the market price, which means that the actual selling price is above the market equilibrium price.

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

Which of the following is evidence of a shortage of walnuts?

A shortage is defined as the situation that exists when the quantity of a good supplied is greater than the quantity demanded.

Figure 3-5 -Refer to Figure 3-5.At a price of $5, the quantity sold

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

Figure 3-6 -Refer to Figure 3-6.The figure above represents the market for canvas tote bags.Compare the conditions in the market when the price is $50 and when the price is $35.Which of the following describes how the market differs at these prices?

Auctions in recent years have resulted in higher prices paid for letters written by John Wilkes Booth than those written by Abraham Lincoln.Which of the following events would cause the price differences in these letters to get smaller?

In a perfectly competitive market, there are buyers and sellers.

In response to a surplus the market price of a good will fall; as the price falls, the quantity demanded will increase and quantity supplied will decrease until equilibrium is reached.

Market equilibrium occurs where supply equals demand.

A shortage occurs when the market price is lower than the equilibrium price.

Figure 3-5 -Refer to Figure 3-5.In a free market such as that depicted above, a surplus is eliminated by

Figure 3-6 -Refer to Figure 3-6.The figure above represents the market for canvas tote bags.Assume that the price of tote bags is $15.At this price

If, for a product, the quantity supplied exceeds the quantity demanded, the market price will fall until

Figure 3-5 -Refer to Figure 3-5.At a price of $20

Figure 3-6 -Refer to Figure 3-6.The figure above represents the market for canvas tote bags.Assume that the market price is $35.Which of the following statements is true?

Scarcity is defined as the situation that exists when the quantity demanded for a good is greater than the quantity supplied.

Figure 3-5 -Refer to Figure 3-5.At a price of $10, the quantity sold

Which of the following is evidence of a surplus of bananas?

Auctions in recent years have resulted in higher prices paid for letters written by John Wilkes Booth than those written by Abraham Lincoln.What is a reason for this difference in price?

A surplus occurs when the actual selling price is above the market equilibrium price.