Question 1

Suppose a method was discovered to cheaply convert corn into a fuel for automobiles that got better gas mileage than gasoline and caused less damage to the internal combustion engine. As a result, we would expect that

Accepted Answer

The discovery of a method to cheaply convert corn into a superior automobile fuel would increase the demand for corn, leading to both higher prices and quantities as suppliers respond to the increased demand.

Question 2

A shift in the supply curve for gasoline in the United States would result if

Accepted Answer

A 50-cent tax on gasoline would increase the cost of producing gasoline, leading to a decrease in supply and a leftward shift of the supply curve. Allowing oil to be drilled in previously restricted areas or discovering new methods for recovering oil would increase the supply of gasoline and shift the supply curve to the right. Therefore, all of the choices are true and would result in a shift in the supply curve for gasoline in the United States.

Question 3

Suppose state governments, in an attempt to help save the family farm, issued licenses that allowed them to grow a heretofore-illegal substance. As a result,

Accepted Answer

If state governments issue licenses allowing the growth of a previously illegal substance, this indicates an increase in supply of the substance. With an increase in supply, the equilibrium price will fall and the equilibrium quantity will rise, as consumers will be able to purchase more of the substance at a lower price. Therefore, the correct answer is D.

Question 4

Statement I: The market for gasoline is very local because the money you would save by driving to the next market would be more than offset by the money it would cost you to go there. Statement II: The market for automobiles is regional rather than local.

Accepted Answer

Statement I is true because the cost of gasoline and the relatively small differences in price between nearby locations mean that it's not economical to travel far for cheaper gasoline. Statement II is true because the market for automobiles is broader, with people often willing to travel to different cities or regions to find a better deal or a specific vehicle model, making it a regional market.

Question 5

Statement I: When the price of a good is increased, there is an implicit assumption that there is no change in any other factors that would affect quantity demanded. Statement II: There are many other factors that influence demand other than price.

Accepted Answer

Both statements are true. Statement I refers to the ceteris paribus assumption in economics, which holds other factors constant when analyzing the effect of price on quantity demanded. Statement II acknowledges the complexity of demand, recognizing that factors such as consumer preferences, income, and prices of related goods also influence demand.

Question 6

If quantity supplied decreased by 10 units at each price, you would conclude that

Accepted Answer

A decrease in the quantity supplied at each price indicates that suppliers are not willing or able to produce as much as before. This suggests that the supply curve has shifted to the left, indicating a decrease in supply. Therefore, the correct answer is D. It cannot be B because if demand decreased, both quantity supplied and price would have decreased as well. It cannot be A or C because they both suggest an increase in supply and demand, respectively, which is not supported by the given information.

Question 7

What happens to equilibrium quantity when simultaneously the demand curve shifts left and the supply curve shifts right?

Accepted Answer

When both the demand curve shifts left (indicating a decrease in demand) and the supply curve shifts right (indicating an increase in supply), the effect on equilibrium quantity depends on the relative magnitudes of these shifts. If the increase in supply is greater than the decrease in demand, the equilibrium quantity could increase. Conversely, if the decrease in demand is greater than the increase in supply, the equilibrium quantity could decrease. If the shifts are of equal magnitude, the equilibrium quantity could remain the same. Therefore, without specific information on the magnitudes of the shifts, the outcome is indeterminate.

Question 8

An increase in the price of coffee is likely to

Accepted Answer

An increase in the price of coffee will likely lead to a decrease in the demand for coffee creamer. This is because coffee creamer is a complementary good, meaning that its demand is closely tied to the demand for coffee. As the price of coffee increases, consumers may choose to cut back on their consumption of coffee, which would then lead to a decrease in their demand for coffee creamer.

Question 9

If quantity demanded increased by 5 units at each price, you would conclude that

Accepted Answer

An increase in quantity demanded means that consumers are willing to buy more of a product at every given price. This indicates a rise in demand for the product.

Question 10

Equilibrium price is _______ and equilibrium quantity is ______.

Accepted Answer

In an equilibrium, the supply and demand curves intersect at a point where the quantity demanded equals the quantity supplied, and the price at that point is the equilibrium price. Looking at the graph, we can see that the point at which the demand and supply curves intersect is at a price of $30 and a quantity of 100 units. Therefore, the correct answer is C, with an equilibrium price of $30 and an equilibrium quantity of 100.

Question 11

When quantity demanded is greater than quantity supplied,

Accepted Answer

The answer of When quantity demanded is greater than quantity...

Question 12

If butter and margarine are substitutes and the price for margarine increases, all of the following will result except

Accepted Answer

When the price of margarine increases, it does not directly cause the demand for margarine to fall; instead, it leads to a decrease in the quantity demanded. Demand refers to the willingness and ability of consumers to purchase goods at different prices, while quantity demanded refers to the specific amount of goods consumers are willing to buy at a particular price. Changes in price affect the quantity demanded, not the demand itself.

Question 13

If the representatives of the OPEC countries decided to increase the quotas of oil each country are allowed to produce, the result would be that

Accepted Answer

If OPEC countries decide to increase their quotas of oil production, it means that they will be increasing their supply of oil to the global market. Therefore, the world supply of oil would rise.

Question 14

If a federal gasoline tax of $1 per gallon goes into effect, in an attempt to promote conservation of energy, the result would be to

Accepted Answer

A $1 per gallon tax on gasoline would increase the cost of producing gasoline for suppliers, causing a shift in the supply curve to the left. This would result in a higher equilibrium price and a decrease in the equilibrium quantity of gasoline. This tax would also incentivize consumers to conserve gasoline and find alternative modes of transportation, further reducing the equilibrium quantity. Therefore, the correct answer is C, where both the equilibrium price and quantity decrease.

Question 15

Uncertainty over the possibility of war in Iraq in March 2003 caused many corporations to purchase oil in advance in the futures market to protect against unexpected price increases. What effect did their actions have on the market for oil?

Accepted Answer

The corporations' actions of purchasing oil in advance in the futures market would lead to an increase in demand, as they are buying oil to protect themselves against unexpected price increases in the future. This increase in demand could potentially raise the price of oil in the market.

Question 16

A rightward shift of the entire demand curve

Accepted Answer

A rightward shift of the entire demand curve might be due to an increase in population, as more people will be demanding the product or service. A decline in income (choice A) would lead to a leftward shift of the demand curve for a normal good, while an increase in income (choice B) would lead to a rightward shift for a normal good and a leftward shift for an inferior good. A tax increase (choice C) would lead to a leftward shift of the demand curve.

Question 17

A shift in the supply curve for gasoline in the United States would result if

Accepted Answer

A new method for drilling through rock that opens up vast new oil reserves in Wyoming would increase the supply of gasoline in the United States, shifting the supply curve to the right.

Question 18

Which of the following can cause a change in supply?

Accepted Answer

Technological advance can lead to improvements in production processes and lower costs, which can increase supply.

Answer: D
 An increase in the price of a good or service can incentivize suppliers to increase their level of production and supply in order to take advantage of higher profits. Conversely, a decrease in price can lead to a decrease in supply.

Choices A, B, and C are incorrect because they describe factors that affect demand, not supply.

Question 19

Which statement is false?

Accepted Answer

A market can also be online or virtual, and does not necessarily have to be tied to a specific physical location.

Question 20

If the normalization of trade relations between the U.S. and Cuba legalizes the sale of Cuban cigars in our country, it would

Accepted Answer

The legalization of the sale of Cuban cigars in the U.S. would increase the supply of cigars available in the market, shifting the supply curve to the right. This would lead to a decrease in equilibrium price (due to the increase in supply) and an increase in equilibrium quantity (due to the decrease in price). Therefore, option B is the correct choice.

Quiz 5: Demand, Supply, and Equilibrium

Suppose a method was discovered to cheaply convert corn into a fuel for automobiles that got better gas mileage than gasoline and caused less damage to the internal combustion engine. As a result, we would expect that

A shift in the supply curve for gasoline in the United States would result if

Suppose state governments, in an attempt to help save the family farm, issued licenses that allowed them to grow a heretofore-illegal substance. As a result,

Statement I: The market for gasoline is very local because the money you would save by driving to the next market would be more than offset by the money it would cost you to go there. Statement II: The market for automobiles is regional rather than local.

Statement I: When the price of a good is increased, there is an implicit assumption that there is no change in any other factors that would affect quantity demanded. Statement II: There are many other factors that influence demand other than price.

If quantity supplied decreased by 10 units at each price, you would conclude that

What happens to equilibrium quantity when simultaneously the demand curve shifts left and the supply curve shifts right?

An increase in the price of coffee is likely to

If quantity demanded increased by 5 units at each price, you would conclude that

Equilibrium price is _ and equilibrium quantity is .

When quantity demanded is greater than quantity supplied,

If butter and margarine are substitutes and the price for margarine increases, all of the following will result except

If the representatives of the OPEC countries decided to increase the quotas of oil each country are allowed to produce, the result would be that

If a federal gasoline tax of $1 per gallon goes into effect, in an attempt to promote conservation of energy, the result would be to

Uncertainty over the possibility of war in Iraq in March 2003 caused many corporations to purchase oil in advance in the futures market to protect against unexpected price increases. What effect did their actions have on the market for oil?

A rightward shift of the entire demand curve

A shift in the supply curve for gasoline in the United States would result if

Which of the following can cause a change in supply?

Which statement is false?

If the normalization of trade relations between the U.S. and Cuba legalizes the sale of Cuban cigars in our country, it would