Question 1

Which of the following could cause the supply curve for the market for oranges to shift to the left?

Accepted Answer

A severe hurricane in Florida could destroy orange crops and reduce the supply of oranges in the market, leading to a leftward shift in the supply curve. The other options would not directly affect the supply of oranges.

Question 2

James specializes in college-level economics tutoring.He knows that,during the two weeks before finals,he can charge more for an hour of private tutoring.Expecting this price increase,James will:

Accepted Answer

James anticipates higher demand for his tutoring services as finals approach, leading him to withhold some of his current tutoring capacity to take advantage of higher future prices. This action effectively reduces the current supply of his tutoring services, shifting the supply curve to the left.

Question 3

Refer to the table below.If the price of this good is $2.00,there would be a _________ of _________ units.

Accepted Answer

At a price of $2.00, the quantity demanded is 70 units, but the quantity supplied is only 40 units. Therefore, there would be a shortage of 30 units.

Question 4

If a new french fry-cutting machine works twice as fast as the old machine,McDonald's would:

Accepted Answer

If the new machine works twice as fast as the old one, McDonald's will be able to produce and sell more french fries at every price without increasing its production costs significantly. As a result, they might be willing to increase their output and profits, while keeping the same price levels. This could also allow them to meet demand more efficiently and potentially attract more customers.

Question 5

Which following change in the coffee market would shift the supply curve to the right?

Accepted Answer

If the wage for employees in the coffee business decreases, the cost of producing coffee would decrease. This would incentivize firms to produce more coffee at each price level, which would shift the supply curve to the right.

Question 6

Refer to the table below.The equilibrium price and quantity in this market is:

Accepted Answer

The answer of Refer to the table below.The equilibrium price...

Question 7

When the government places a tax on a good and all else is held constant,which of the following would most likely happen?

Accepted Answer

When the government places a tax on a good, the price that the buyer pays for the good increases, leading to a decrease in quantity demanded. This, in turn, causes the overall consumption of the good to decrease, assuming the good does not have a vertical demand curve.

Question 8

In 1993,the government increased the tax on gasoline producers from 14.1 cents per gallon to 18.4 cents per gallon.Our model of supply and demand predicts that:

Accepted Answer

According to the law of supply, as the cost of production increases, the quantity supplied decreases. Thus, when the tax on gasoline producers increased, the cost of production increased, resulting in a decrease in the supply of gasoline. Therefore, the correct answer is D.

Question 9

Which of the quantity (Q) and price (P) combinations in the accompanying figure represents the market at competitive equilibrium?

Accepted Answer

The competitive equilibrium occurs at the intersection of the supply and demand curves. In this case, that intersection occurs at point C, which represents a quantity of 22 units being sold at a price of $8. At this point, the quantity supplied equals the quantity demanded, and there is no excess supply or demand in the market. Therefore, (C) is the correct choice.

Question 10

When the government places a tax on the producer of a good or service:

Accepted Answer

When the government places a tax on the producer of a good or service, the cost of producing the good or service increases. This results in a decrease in the profitability of producing the good or service, which causes a decrease in the quantity supplied at every price level. Therefore, the supply curve for the good or service shifts to the left. This does not directly affect the demand for the good or service, so the demand curve remains unaffected.

Question 11

Firm A notices that Firm B is making a profit by producing footballs.There is nothing stopping Firm A from entering the football market,so it does.Holding all else constant,the number of firms in the market will:

Accepted Answer

Firm A's entry into the football market increases the number of firms in the market, which leads to an increase in the supply of footballs. This increase in supply causes the supply curve to shift to the right, resulting in a lower equilibrium price and a higher equilibrium quantity of footballs. Therefore, the best choice is E, which states that the number of firms in the market will increase, causing the supply to increase.

Question 12

Old Navy stocks more Bermuda shorts during the summer months than in the winter months.The resulting shift in supply explains:

Accepted Answer

Price expectations influence how much of a product a company like Old Navy might stock at different times of the year. Expecting higher demand and potentially higher prices in the summer for Bermuda shorts, Old Navy increases its stock to meet this anticipated demand.

Question 13

A subsidy:

Accepted Answer

A subsidy is a payment made by the government to encourage consumption or production of a good or service. It is a form of financial aid or support extended to an economic sector or individual business. The aim is to make the goods or services more affordable or to stimulate the production of a particular product that is beneficial to society.

Question 14

Refer to the accompanying graph.If a tax is placed on a good and all else is held constant,we would assume that the supply curve would:

Accepted Answer

When a tax is imposed on a good, the cost of production increases for the supplier, thus reducing the profitability of producing the good. As a result, the supply curve shifts to the left. In this graph, the supply curve shifts from S₁ to S₂, indicating a decrease in the quantity of the good supplied at any given price level. Therefore, the correct choice is C.

Question 15

Which of the following situations would cause the demand curve to shift to the right?

Accepted Answer

The answer of Which of the following situations would cause...

Question 16

If the price of Gatorade increases,the

Accepted Answer

If the price of Gatorade increases, consumers may switch to Powerade, a substitute, increasing its demand and thus raising its equilibrium price.

Question 17

When the number of firms in a market decreases,

Accepted Answer

When the number of firms in a market decreases, the supply curve shifts to the left. This is because there are fewer firms producing the same quantity of output, which leads to a reduction in overall supply. As a result, the equilibrium price in the market increases. The demand curve is not affected by the decrease in the number of firms, as it represents the willingness of consumers to buy a given quantity of output at different prices.

Question 18

An improvement in technology:

Accepted Answer

An improvement in technology allows a producer to increase output with the same amount of input. This means that the same amount of resources can be used to produce more goods, leading to an increase in supply and potentially lower prices for consumers.

Question 19

When the price of ground beef increases and all else is held constant,we would expect the supply of hamburgers to _________,causing the price to _________.

Accepted Answer

When the price of ground beef (an input cost) increases, the supply of hamburgers (made from ground beef) would decrease because it becomes more expensive to produce hamburgers. This decrease in supply, with demand remaining constant, would lead to an increase in the price of hamburgers.

Question 20

On January 30,2012,Starbucks India announced plans to open 50 cafés.What would you expect to happen to the market for coffee in India,assuming all other factors are held constant?

Accepted Answer

The opening of 50 new Starbucks cafés in India would increase the availability of coffee to consumers, thus increasing the supply of coffee in the market. This does not directly affect the demand for coffee, which is determined by consumers' desire and ability to purchase coffee at various prices.

Quiz 3: The Market at Work: Supply and Demand