Question 1

Spam is considered an inferior good.What would happen to the equilibrium price and quantity of Spam if income decreased and more firms started producing Spam?

Accepted Answer

When income decreases, demand for an inferior good like Spam increases, pushing both price and quantity up. However, if more firms start producing Spam, the supply increases, which tends to lower the price but increase the quantity. The overall effect on price is indeterminate because one factor pushes it up (increased demand) and the other pushes it down (increased supply), but the quantity will definitely go up due to both increased demand and increased supply.

Question 2

If the price and quantity for a normal good,Good X,is $8 and 6 units at the original equilibrium,what is one possibility for the new equilibrium of Good X if we see income increase and all other factors stay constant?

Accepted Answer

An increase in income will shift the demand curve for a normal good like Good X to the right, indicating that consumers are willing and able to buy more of the good at each price level. This will result in a new equilibrium with a higher price and quantity. Option B has a higher price ($10) and a higher quantity (8 units), which is consistent with the effect of an increase in income on a normal good.

Question 3

The government offers numerous educational subsidies through grants and low-cost equipment to schools.They also provide a lot of incentives to go to school.Because of this,we expect that the equilibrium price of education will ________ and the equilibrium quantity of students will ________.

Accepted Answer

Subsidies and incentives lower the cost of education for students and increase demand, leading to a higher quantity of students. However, the effect on price is indeterminate without knowing how supply responds.

Question 4

What would you expect to happen to the price and quantity of Pepsi if the price of Coke increases and Pepsi develops a new technology that makes its production process more efficient?

Accepted Answer

The increase in Coke's price will increase demand for Pepsi, raising quantity and price. The new technology will increase supply, raising quantity but lowering price. Thus, quantity increases, but price effect is indeterminate.

Question 5

When both supply and demand shift to the right,equilibrium:

Accepted Answer

When both supply and demand increase (shift to the right), the equilibrium quantity always rises because there is more being supplied and more being demanded. The effect on price is indeterminate without knowing the relative magnitudes of the shifts in supply and demand.

Question 6

In the first few months of 2012,the price of gasoline increased by approximately 15%.Because of this increase,we would expect the ________ curve in the market for hybrid cars to ________.

Accepted Answer

When the price of gasoline increases, consumers are likely to seek alternatives to traditional gasoline-powered cars, such as hybrid cars. This would increase the demand for hybrid cars, causing the demand curve to shift to the right.

Question 7

Assume that the market for baseballs is in equilibrium.There is a sudden decrease in income throughout the economy.If all else is held constant,we would expect that if baseballs are a(n)________ good,then the demand curve will shift to the ________,causing the equilibrium price and quantity to ________.

Accepted Answer

If baseballs are considered a normal good, a decrease in income would lead to a decrease in demand for baseballs. This is represented by a leftward shift of the demand curve. As a result, both the equilibrium price and quantity of baseballs would fall.

Question 8

According to the supply and demand model,when the cotton gin was invented and if all else was held constant,we would expect the equilibrium price of cotton to ________ and the equilibrium quantity of cotton to ________.

Accepted Answer

The invention of the cotton gin increased the efficiency of cotton processing, leading to an increase in supply. With higher supply and constant demand, the equilibrium price decreases while the equilibrium quantity increases.

Question 9

Wine and cheese are complement goods because they are consumed together.What would you expect to happen to the equilibrium quantity of cheese if the price of wine increased and all else is held constant?

Accepted Answer

Wine and cheese are complement goods, meaning an increase in the price of one will decrease the demand for the other. If the price of wine increases, the demand for cheese will decrease, resulting in a decrease in the equilibrium quantity of cheese. This is a shift in demand, so choices A, C, and D can be eliminated.

Question 10

When both curves shift:

Accepted Answer

When both curves shift, we cannot predict with certainty whether equilibrium price or equilibrium quantity will be indeterminate. It will depend on the magnitudes of the shifts and the relative slopes of the demand and supply curves.

Question 11

When both supply and demand decrease,the equilibrium price ________ and equilibrium quantity ________.

Accepted Answer

When both supply and demand decrease, the effect on equilibrium price is indeterminate because the decrease in supply tends to increase price, while the decrease in demand tends to decrease price. However, the equilibrium quantity will definitely decrease because both the decrease in supply and demand lead to a lower quantity being traded.

Question 12

When firms in a market are operating at a loss,you can expect some firms to exit the market,causing the ________ curve to shift to the ________ and making the equilibrium price ________ and the equilibrium quantity ________.

Accepted Answer

When firms are operating at a loss, some firms will exit the market, causing the supply curve to shift to the left. This is because when firms exit the market, the overall supply decreases. As a result, the equilibrium price will increase and the equilibrium quantity will decrease. Therefore, the correct choice is E as it shows a leftward shift in the supply curve causing an increase in equilibrium price and a decrease in equilibrium quantity.

Question 13

When both supply and demand shift to the left,equilibrium:

Accepted Answer

When both supply and demand decrease (shift to the left), the equilibrium quantity will always fall because there is less of the good being supplied and demanded. However, the effect on price is indeterminate without knowing the relative magnitudes of the shifts.

Question 14

In one year,15 bowling alleys opened in California.During that same year,ESPN started broadcasting professional bowling on TV,which sparked more interest in the sport.What would we expect to happen to the price and quantity of a game of bowling in California during that year?

Accepted Answer

The answer of In one year,15 bowling alleys opened in...

Question 15

Leading economic indicators suggest that incomes will be going up next year.In response to these reports,companies are forecasting increased prices for future sales of their goods.As a result of these increases,the supply curve will:

Accepted Answer

When companies forecast increased prices for future sales due to expected higher incomes, they anticipate higher demand. This anticipation might lead them to reduce the quantity supplied at current prices or increase prices, effectively shifting the supply curve to the left. A leftward shift in the supply curve, with demand holding or increasing, typically causes the equilibrium price to increase because the quantity of goods available at previous prices has decreased, leading to higher prices for the available supply.

Question 16

What would you expect to happen to the price of bagels if the price of flour decreased and the price of cream cheese decreased?

Accepted Answer

A decrease in the price of flour (a key input for bagels) would likely increase the supply of bagels, leading to a lower equilibrium price and higher quantity. A decrease in the price of cream cheese (a complement to bagels) would increase the demand for bagels, leading to a higher equilibrium quantity. The combined effect on price is indeterminate as supply increases (lowering price) and demand increases (raising price).

Question 17

When supply shifts left and demand shifts right,the equilibrium:

Accepted Answer

When supply shifts left (decreases) and demand shifts right (increases), the equilibrium price rises and the equilibrium quantity rises.

Question 18

The difference between a tax and a subsidy is that when the government places a tax on a good,it ________ the equilibrium price and ________ the equilibrium quantity,whereas when the government places a subsidy on a good,it ________ the equilibrium price and ________ the equilibrium quantity.

Accepted Answer

A tax increases the equilibrium price and decreases the equilibrium quantity, while a subsidy decreases the equilibrium price and increases the equilibrium quantity.

Question 19

When supply shifts right and demand shifts left,the equilibrium:

Accepted Answer

When supply shifts right, the equilibrium price falls. When demand shifts left, the equilibrium price also falls. Therefore, the equilibrium price always falls when supply shifts right and demand shifts left.

Question 20

If the price and quantity for an inferior good,Good X,is $8 and 6 units at the original equilibrium,what is one possibility for the new equilibrium of Good X if we see income increase and all other factors stay constant?

Accepted Answer

Since Good X is an inferior good, an increase in income will lead to a decrease in demand for Good X. As a result, the new equilibrium will have a lower quantity demanded and a lower price. Option C is the only choice that satisfies this condition.

Quiz 3: The Market at Work: Supply and Demand

Spam is considered an inferior good.What would happen to the equilibrium price and quantity of Spam if income decreased and more firms started producing Spam?

If the price and quantity for a normal good,Good X,is $8 and 6 units at the original equilibrium,what is one possibility for the new equilibrium of Good X if we see income increase and all other factors stay constant?

The government offers numerous educational subsidies through grants and low-cost equipment to schools.They also provide a lot of incentives to go to school.Because of this,we expect that the equilibrium price of education will and the equilibrium quantity of students will .

What would you expect to happen to the price and quantity of Pepsi if the price of Coke increases and Pepsi develops a new technology that makes its production process more efficient?

When both supply and demand shift to the right,equilibrium:

In the first few months of 2012,the price of gasoline increased by approximately 15%.Because of this increase,we would expect the curve in the market for hybrid cars to .

Assume that the market for baseballs is in equilibrium.There is a sudden decrease in income throughout the economy.If all else is held constant,we would expect that if baseballs are a(n) good,then the demand curve will shift to the ,causing the equilibrium price and quantity to .

According to the supply and demand model,when the cotton gin was invented and if all else was held constant,we would expect the equilibrium price of cotton to and the equilibrium quantity of cotton to .