Question 1

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

Accepted Answer

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

Question 2

Select the phrase that correctly completes the following statement."A decrease in the expected future price caused an increase in the supply of smartphones.As a result
A) the price of smartphones decreased and the demand for smartphones increased."
B) the equilibrium quantity of smartphones decreased."
C) the price of smartphones decreased and the quantity of smartphones demanded increased."
D) the price of smartphones decreased. The lower price caused the supply of smartphones to decrease."

Accepted Answer

According to the law of supply, a decrease in expected future prices leads to an increase in supply. As a result, the supply curve for smartphones would shift to the right. This would cause a decrease in the price of smartphones and an increase in the quantity demanded of smartphones. Therefore, option C is the correct choice. Option A is incorrect because if the price of smartphones decreased, it would lead to an increase in demand, not the other way around. Option B is incorrect because a decrease in the expected future price causes an increase in supply, which would cause the equilibrium quantity to increase, not decrease. Option D is incorrect because a lower price would cause an increase in demand, not a decrease in supply.

Question 3

Which of the following statements is true?
A) A decrease in demand causes a decrease in the equilibrium price; the decrease in price causes supply to decrease.
B) A decrease in demand causes the equilibrium price to fall; the decrease in price then results in a decrease in quantity supplied.
C) If both demand and supply increase, there must be an increase in the equilibrium price; equilibrium quantity may either increase or decrease.
D) If demand decreases and supply increases one cannot determine if the equilibrium price will increase or decrease without knowing which change is greater.

Accepted Answer

When demand decreases, the equilibrium price will fall. This then results in a decrease in quantity supplied. This is because at a lower price, producers will be less willing to supply as much. Choice A is incorrect because it states that the decrease in price causes supply to decrease, which is not true. Choice C is incorrect because while an increase in both demand and supply could result in an increase in equilibrium price, it is not necessarily always the case that equilibrium quantity will increase. Choice D is incorrect because when demand decreases and supply increases, it is always true that the equilibrium price will decrease (due to the decrease in demand) but the direction of the change in equilibrium quantity depends on which change is greater.

Question 4

What would happen in the market for knee replacement surgery if insurance companies started to cover a smaller portion of the cost of the surgery?
A) Demand will decrease, but this will not shift the supply curve.
B) Supply will decrease, but this will not shift the demand curve.
C) Demand and supply will both decrease.
D) Demand will decrease and supply will increase.

Accepted Answer

If insurance companies cover a smaller portion of the cost of knee replacement surgery, patients will have to pay more out-of-pocket. This makes the surgery less affordable for some, leading to a decrease in demand. The supply curve, which represents the willingness and ability of producers to offer goods at different prices, would not be directly affected by this change in insurance coverage.

Question 5

Assume that both the demand curve and the supply curve for DVD 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 DVD players will decrease.
B) the equilibrium price of DVD players will decrease; the equilibrium quantity may increase or decrease.
C) the equilibrium price of DVD players may increase or decrease; the equilibrium quantity will increase.
D) the equilibrium price of DVD players will increase; the equilibrium quantity will decrease.

Accepted Answer

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

Question 6

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

Accepted Answer

When the demand curve shifts to the left, it indicates a decrease in demand, and when the supply curve shifts to the right more significantly, it indicates an increase in supply. The larger shift in supply compared to demand will lead to a decrease in the equilibrium price due to excess supply. The equilibrium quantity will increase because the increase in supply outweighs the decrease in demand.

Question 7

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

Accepted Answer

The statement is false because the demand for non-digital cameras would not decrease as the price of non-digital cameras fell. As the price of digital cameras fell, the demand for non-digital cameras would decrease. However, a decrease in the price of non-digital cameras would not cause a further decrease in the demand for non-digital cameras.

Question 8

An increase in the equilibrium quantity of a product will result
A) when the quantity of the product supplied exceeds the quantity demanded.
B) when there is an increase in supply and an increase in demand for the product.
C) when there is an increase in supply and a decrease in demand for the product.
D) when there is an decrease in demand and a decrease in the cost of inputs used to make the product.

Accepted Answer

An increase in the equilibrium quantity of a product occurs when there is an increase in both supply and demand for the product. This causes the price to stay the same or decrease, while the quantity sold increases. Option A is incorrect because an excess supply of a product leads to a decrease in price rather than an increase in quantity. Option C is incorrect as an increase in supply and a decrease in demand would decrease the price and may or may not result in an increase in quantity. Option D may decrease the cost of production, but a decrease in demand would lower the price and reduce the equilibrium quantity, therefore this option is incorrect.

Question 9

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

Accepted Answer

When the demand curve shifts to the left, it indicates a decrease in demand, and when the supply curve shifts to the right, it indicates an increase in supply. However, since the demand curve shifts more than the supply curve, the dominant effect is a decrease in both the equilibrium price and quantity of DVD players.

Question 10

A decrease in input costs in the production of LCD televisions caused the price of LCD televisions to decrease.Holding everything else constant,how would this affect the market for video game consoles (a complement to LCD televisions)?
A) The supply of video game consoles would increase and the equilibrium price of video game consoles would decrease.
B) The demand for video game consoles would decrease and the equilibrium price of video game consoles would decrease.
C) The demand for video game consoles would decrease because consumers could afford to buy fewer LCD televisions and video game consoles.
D) The demand for video game consoles would increase and the equilibrium price of video game consoles would increase.

Accepted Answer

A decrease in input costs for LCD televisions would lead to a decrease in the price of LCD televisions. This would increase the quantity demanded for LCD televisions, which in turn would increase the demand for video game consoles (a complement to LCD televisions). As a result, the demand for video game consoles would increase, leading to an increase in the equilibrium price of video game consoles.

Question 11

"Because Coke and Pepsi are substitutes,a decrease in the price of Pepsi will cause the demand for Coke to decrease.This initial shift in demand for Coke results in a lower price for Coke; this lower price will cause the demand curve for Coke to shift to the left." Which of the following correctly comments on this statement?
A) The statement will be true if consumer tastes for Coke and Pepsi do not change.
B) The statement is false because a change in the price of Coke would not change the demand for Coke.
C) The statement is false because Pepsi is an inferior good; Coke is a normal good.
D) The statement is false because one cannot assume that Coke and Pepsi are substitutes for all consumers.

Accepted Answer

The statement is false because a change in the price of Coke would not change the demand for Coke; it would change the quantity demanded. The demand curve itself shifts due to factors other than the good's own price, such as changes in consumer income, tastes, or prices of related goods. Changes in the good's own price move the quantity demanded along the demand curve, not the position of the demand curve.

Question 12

Select the phrase that correctly completes the following statement."A decrease in the number of manufacturers caused a decrease in the supply of sailboats.As a result
A) the price of sailboats increased and the demand for sailboats decreased."
B) the equilibrium quantity of sailboats increased."
C) the price of sailboats increased and the quantity of sailboats demanded decreased."
D) the price of sailboats increased. The higher price caused the supply of sailboats to increase."

Accepted Answer

According to the law of supply and demand, a decrease in the number of manufacturers would cause a decrease in the supply of sailboats, leading to an increase in the price of sailboats. This would lead to a decrease in the quantity of sailboats demanded, resulting in a new equilibrium point at a higher price and lower quantity. Therefore, choice C is the correct answer.

Question 13

Suppose consumer preference for organic corn starts to rise while the cost of growing organic corn continues to rise.In the market for organic corn,this would be represented by the equilibrium price ________ and the equilibrium quantity ________.
A) increasing; increasing or decreasing
B) decreasing; increasing or decreasing
C) increasing or decreasing; increasing
D) increasing or decreasing; decreasing

Accepted Answer

The increase in consumer preference for organic corn would shift the demand curve to the right, leading to a higher equilibrium price. The rise in the cost of growing organic corn would shift the supply curve to the left, also contributing to a higher equilibrium price. The effect on equilibrium quantity is uncertain without knowing the relative magnitudes of the shifts in supply and demand; hence, the equilibrium quantity could increase or decrease.

Question 14

Which of the following would cause a decrease in the equilibrium price and decrease in the equilibrium quantity of papayas?
A) a decrease in supply and an increase in demand
B) a decrease in demand
C) an increase in supply and an increase in demand greater than the increase in supply
D) a decrease in supply and a decrease in demand

Accepted Answer

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

Question 15

An increase in the equilibrium price for a product will result
A) when the quantity of the product demanded exceeds the quantity supplied.
B) when there is a decrease in supply and an increase in demand for the product.
C) when there is a decrease in supply and a decrease in demand for the product.
D) when there is an increase in demand and an increase in the number of firms producing the product.

Accepted Answer

An increase in equilibrium price can result due to a decrease in supply and an increase in demand for the product. This is because the decrease in supply means that there is less of the product available to meet the demand, and the increase in demand means that consumers are willing to pay more for the limited supply, resulting in a higher equilibrium price.

Question 16

What would happen in the market for knee replacement surgery if insurance companies started to cover a smaller portion of the cost of the surgery,and fewer doctors decide to enter the field of joint replacement surgery?
A) Demand will decrease, but this will not shift the supply curve.
B) Supply will decrease, but this will not shift the demand curve.
C) Demand and supply will both decrease.
D) Demand will decrease and supply will increase.

Accepted Answer

A decrease in insurance coverage and a decrease in the number of doctors in the field of joint replacement surgery would both lead to a decrease in demand for knee replacement surgery. At the same time, a decrease in the number of doctors in the field would lead to a decrease in the supply of knee replacement surgeries. Therefore, both the demand and supply of knee replacement surgery would decrease.

Question 17

Which of the following statements is true?
A) An increase in demand causes an increase in the equilibrium price; the increase in price causes supply to increase.
B) A decrease in supply causes the equilibrium price to rise; the increase in price then results in a decrease in quantity demanded.
C) If both demand and supply decrease, there must be a decrease in the equilibrium price; equilibrium quantity may either increase or decrease.
D) If demand increases and supply decreases one cannot determine if the equilibrium price will increase or decrease without knowing which change is greater.

Accepted Answer

B) A decrease in supply, with demand holding constant, leads to an increase in the equilibrium price due to the scarcity of the product. This higher price, in turn, results in a decrease in the quantity demanded, aligning with the law of demand.

Question 18

Which of the following would cause an increase in the equilibrium price and decrease in the equilibrium quantity of watermelon?
A) a decrease in demand and an increase in supply
B) a decrease in supply
C) an increase in demand and an increase in supply greater than the increase in demand
D) an increase in demand and an increase in supply

Accepted Answer

A decrease in supply would cause a decrease in the equilibrium quantity, while an increase in the equilibrium price. The other options involve an increase in either supply or demand, which would cause an increase in equilibrium quantity, and therefore cannot be the correct answer.

Question 19

In recent years,the demand for orange juice in the United States has fallen and the supply of orange juice has also fallen,with the decrease in supply being larger than the decrease in demand.In this situation,the equilibrium price of orange juice will have ________ and the equilibrium quantity of orange juice will have ________.
A) decreased; increased
B) decreased; decreased
C) increased; decreased
D) increased; increased

Accepted Answer

When both demand and supply decrease, but the decrease in supply is larger than the decrease in demand, the equilibrium price increases due to the scarcity of supply. The equilibrium quantity decreases because the overall market size has shrunk with the decrease in both demand and supply.

Question 20

When Toyota introduced its 2010 Prius,it announced that the average retail price of the 2010 model would be lower than the average retail price was for the equivalent 2009 model.Which of the following would explain the price differential?
A) The demand for the Prius had increased, and the supply of the Prius remained unchanged.
B) The supply of the Prius had decreased, and the demand for the Prius remained unchanged.
C) The demand for the Prius had decreased, and the supply of the Prius had increased.
D) The demand for the Prius had increased, and the supply of the Prius had decreased.

Accepted Answer

The price of a product typically decreases if the demand for it decreases while its supply increases, as this creates a surplus of the product in the market, leading to lower prices to stimulate sales.

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

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

Select the phrase that correctly completes the following statement."A decrease in the expected future price caused an increase in the supply of smartphones.As a result

Which of the following statements is true?

What would happen in the market for knee replacement surgery if insurance companies started to cover a smaller portion of the cost of the surgery?

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

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

An increase in the equilibrium quantity of a product will result

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

A decrease in input costs in the production of LCD televisions caused the price of LCD televisions to decrease.Holding everything else constant,how would this affect the market for video game consoles (a complement to LCD televisions) ?

Select the phrase that correctly completes the following statement."A decrease in the number of manufacturers caused a decrease in the supply of sailboats.As a result

Suppose consumer preference for organic corn starts to rise while the cost of growing organic corn continues to rise.In the market for organic corn,this would be represented by the equilibrium price and the equilibrium quantity .

Which of the following would cause a decrease in the equilibrium price and decrease in the equilibrium quantity of papayas?

An increase in the equilibrium price for a product will result

What would happen in the market for knee replacement surgery if insurance companies started to cover a smaller portion of the cost of the surgery,and fewer doctors decide to enter the field of joint replacement surgery?

Which of the following statements is true?

Which of the following would cause an increase in the equilibrium price and decrease in the equilibrium quantity of watermelon?

When Toyota introduced its 2010 Prius,it announced that the average retail price of the 2010 model would be lower than the average retail price was for the equivalent 2009 model.Which of the following would explain the price differential?