Question 1

Figure 3-7 
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for almonds.Which panel best describes what happens in this market when there is an increase in the productivity of almond harvesters?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)

Accepted Answer

The answer of Figure 3-7 
-Refer to Figure 3-7.Assume that...

Question 2

Figure 3-7 
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for women's clothing.Which panel best describes what happens in this market when the wages of seamstresses rise?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)

Accepted Answer

When the wages of seamstresses rise, the cost of producing women's clothing increases. This causes a decrease in the supply of women's clothing, as shown by the leftward shift of the supply curve in panel (b). As a result, the equilibrium price of women's clothing increases, as shown by the upward movement along the demand curve from point A to point B in panel (b). The equilibrium quantity of women's clothing decreases, as shown by the decrease in the horizontal axis value from Q1 to Q2. Panels (a), (c), and (d) do not accurately depict the effects of an increase in seamstresses' wages on the market for women's clothing.

Question 3

Draw a supply and demand graph showing an equilibrium price of $50 and an equilibrium quantity of 200 units.Explain what would happen if the selling price was $75,and illustrate this on the graph.Explain what would happen if the selling price was $25,and illustrate this on the graph.Be sure to label each axis and curve on the graph.

Accepted Answer

The answer of Draw a supply and demand graph showing...

Question 4

Let D = demand,S = supply,P = equilibrium price,Q = equilibrium quantity.What happens in the market for tropical hardwood trees if the government restricts the amount of forest lands that can be logged?
A) D decreases, S no change, P and Q decrease
B) S decreases, D no change, P increases, Q decreases
C) D and S decrease, P and Q increase
D) D no change, S decreases, P increases, Q increases

Accepted Answer

If the government restricts the amount of forest lands that can be logged, the supply of tropical hardwood trees decreases, causing a shift to the left in the supply curve. This results in a higher equilibrium price (P) and a lower equilibrium quantity (Q). The demand for tropical hardwood trees is unlikely to be affected by the regulation, so there is no shift in the demand curve. Therefore, the best choice is B, which describes a decrease in supply (S), increase in price (P), and decrease in quantity (Q) without any change in demand (D).

Question 5

Assume that the hourly price for the services of tarot card readers has risen and sales of these services have also risen.One can conclude that
A) the law of demand has been violated.
B) the number of tarot card readers has increased.
C) the demand for tarot card readers has increased.
D) tarot card readers are deliberately charging high prices because they provide services for superstitious clients.

Accepted Answer

If the price for tarot card readers has risen and sales have also risen, it indicates that there has been an increase in demand for their services despite the higher price. This is in accordance with the law of demand, which states that as the price of a good or service increases, the quantity demanded will decrease. Therefore, option C is the best choice. Option A can be eliminated as the law of demand has not been violated. Option B is not necessarily true and there may not be an increase in the number of tarot card readers. Option D is speculative and cannot be confirmed based on the given information.

Question 6

Which of the following would cause both the equilibrium price and equilibrium quantity of cotton (assume that cotton is a normal good)to increase?
A) An increase in consumer income.
B) A drought that sharply reduces cotton output.
C) A decrease in consumer income.
D) Unusually good weather that results in a bumper crop of cotton.

Accepted Answer

An increase in consumer income, assuming cotton is a normal good, would lead to an increase in demand. This increased demand shifts the demand curve to the right, resulting in a higher equilibrium price and quantity.

Question 7

Orange juice drinkers want to consume more orange juice at a lower price.Which of the following events would have this effect?
A) A decrease in the price of orange juice processing.
B) An increase in the cost of fertiliser used for orange groves.
C) A decrease in income, assuming orange juice is a normal good.
D) A decrease in the population.

Accepted Answer

A decrease in the price of orange juice processing would lead to a lower cost of production for orange juice. This may result in a decrease in the price of orange juice, which would encourage orange juice drinkers to consume more orange juice at a lower price. Option B is unlikely to have a direct impact on the price of orange juice as it increases the cost of production. Option C suggests a decrease in demand due to a decrease in income, which is not what the question asks for. Option D is irrelevant as it does not affect the price of orange juice.

Question 8

Let D = demand,S = supply,P = equilibrium price,Q = equilibrium quantity.What happens in the market for walnuts if the Centre for Disease Control and Prevention announces that consuming half a cup of walnuts each week helps to lower bad levels of cholesterol?
A) D increases, S no change, P and Q increase
B) S increases, D no change, P decreases, Q increases
C) D and S increase, P and Q decrease
D) D no change, S increases, P decreases, Q decreases

Accepted Answer

The announcement by the Centre for Disease Control and Prevention will likely lead to an increase in demand for walnuts as consumers are made aware of the potential health benefits. This will result in an increase in demand (D), but there will be no change in supply (S). The increase in demand will cause the equilibrium price (P) and quantity (Q) to increase as well. Therefore, the correct answer is A.

Question 9

If the price of a product is above equilibrium,what forces it down?

Accepted Answer

The answer of If the price of a product is...

Question 10

Figure 3-7 
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for potatoes and that steak and potatoes are complements.Which panel describes what happens in this market when the price of steak rises?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)

Accepted Answer

The answer of Figure 3-7 
-Refer to Figure 3-7.Assume that...

Question 11

Assume that the price for swimming pool maintenance services has risen and sales of these services have fallen.One can conclude that
A) the law of supply has been violated.
B) the demand for swimming pool maintenance services has increased.
C) the supply of swimming pool maintenance services has decreased.
D) swimming pool maintenance services are becoming more technologically advanced.

Accepted Answer

If the price for swimming pool maintenance services has risen, it implies that the suppliers are charging more for the service, which can result in a decrease in the supply of swimming pool maintenance services, as suppliers may not be able to provide as many services at the new higher price. Additionally, if sales have fallen, it suggests that there are fewer people willing to purchase these services at the new higher price. Therefore, the decrease in demand as well as the decrease in the supply of these services is contributing to the fall in sales. The law of supply is not being violated here, as an increase in price can lead to a decrease in supply. There is no evidence or indication to suggest that swimming pool maintenance services are becoming more technologically advanced, so option D can be ruled out.

Question 12

A decrease in the demand for soft drinks due to changes in consumer tastes,accompanied by an increase in the supply of soft drinks as a result of reductions in input prices,will result in
A) a decrease in the equilibrium quantity of soft drinks and no change in the equilibrium price.
B) a decrease in the equilibrium price of soft drinks and no change in the equilibrium quantity.
C) a decrease in the equilibrium price of soft drinks; the equilibrium quantity may increase or decrease.
D) an increase in the equilibrium quantity of soft drinks; the equilibrium price may increase or decrease.

Accepted Answer

A decrease in demand and an increase in supply will cause a surplus of soft drinks in the market. In order to clear the surplus, suppliers will have to compete by lowering prices, leading to a decrease in the equilibrium price. The equilibrium quantity may increase or decrease, depending on the extent to which the decrease in demand outweighs the increase in supply.

Question 13

Table 3-1
 $$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Price per } \
\text { Bushel (\$) }
\end{array} & \begin{array} { c } 
\text { Quantity } \
\text { Demanded } \
\text { (bushels) }
\end{array} & \begin{array} { c } 
\text { Quantity Supplied } \
\text { (bushels) }
\end{array} \
\hline 3 & 30000 & 0 \
\hline 6 & 26000 & 4000 \
\hline 9 & 22000 & 9000 \
\hline 12 & 18000 & 12000 \
\hline 15 & 15000 & 15000 \
\hline 18 & 12000 & 22000 \
\hline 21 & 8000 & 28000 \
\hline 24 & 4000 & 36000 \
\hline
\end{array}$$
-Refer to Table 3-1.The table contains information about the corn market.Use the table to answer the following questions.
a.What are the equilibrium price and quantity of corn?
b.Suppose the prevailing price is $9 per bushel.Is there a shortage or a surplus in the market?
c.What is the quantity of the shortage or surplus?
d.How many bushels will be sold if the market price is $9 per bushel?
e.If the market price is $9 per bushel,what must happen to restore equilibrium in the market?
f.At what price will suppliers be able to sell 22 000 bushels of corn?
g.Suppose the market price is $21 per bushel.Is there a shortage or a surplus in the market?
h.What is the quantity of the shortage or surplus?
i.How many bushels will be sold if the market price is $21 per bushel?
j.If the market price is $21 per bushel,what must happen to restore equilibrium in the market?

Accepted Answer

The answer of Table 3-1
 \[\begin{array} { | c |...

Question 14

Which of the following would cause the equilibrium price of white bread to decrease and the equilibrium quantity of white bread to increase?
A) A decrease in the price of flour.
B) An increase in the price of flour.
C) An increase in the price of rye bread, a substitute for white bread.
D) An increase in the price of butter, a complement for white bread.

Accepted Answer

A decrease in the price of flour would decrease the production cost of white bread, leading to a decrease in its equilibrium price. As a result, the suppliers will produce more white bread and the equilibrium quantity of white bread will increase. None of the other options would cause a decrease in the equilibrium price of white bread and an increase in its equilibrium quantity.

Question 15

Figure 3-7 
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for bicycle helmets.Which panel best describes what happens in this market if there is a substantial increase in the price of bicycles?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)

Accepted Answer

The answer of Figure 3-7 
-Refer to Figure 3-7.Assume that...

Question 16

Figure 3-7 
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for rice.What happens in this market if buyers expect the price of rice to fall?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)

Accepted Answer

The answer of Figure 3-7 
-Refer to Figure 3-7.Assume that...

Question 17

Which of the following would cause both the equilibrium price and equilibrium quantity of potatoes (assume that potatoes are an inferior good)to decrease?
A) An increase in consumer income.
B) A freeze that sharply reduces potato output.
C) A decrease in consumer income.
D) A technological advancement that results in a bumper crop of potatoes.

Accepted Answer

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

Question 18

An increase in the demand for lobster due to changes in consumer tastes,accompanied by a decrease in the supply of lobster as a result of bad weather reducing the number of fishermen trapping lobster,will result in
A) a decrease in the equilibrium quantity of lobster and no change in the equilibrium price.
B) an increase in the equilibrium price of lobster and no change in the equilibrium quantity.
C) an increase in the equilibrium price of lobster; the equilibrium quantity may increase or decrease.
D) a decrease in the equilibrium quantity of lobster; the equilibrium price may increase or decrease.

Accepted Answer

An increase in demand raises the equilibrium price and quantity, while a decrease in supply raises the price but lowers the quantity. The net effect is an increase in price, but the change in quantity depends on the relative magnitudes of the shifts in demand and supply.

Question 19

Olive oil producers want to sell more olive oil at a higher price.Which of the following events would have this effect?
A) An increase in the price of olive oil presses.
B) A decrease in the cost of transporting olive oil to markets.
C) An increase in the price of land used to plant olives.
D) Research finds that consumption of olive oil reduces the risk of heart disease.

Accepted Answer

Research finding that consumption of olive oil reduces the risk of heart disease would increase the demand for olive oil causing producers to sell more olive oil at a higher price.

Question 20

Figure 3-7 
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for used clothing,an inferior good.Which panel describes what happens in this market as a result of a decrease in income?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)

Accepted Answer

The answer of Figure 3-7 
-Refer to Figure 3-7.Assume that...

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

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for almonds.Which panel best describes what happens in this market when there is an increase in the productivity of almond harvesters?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for women's clothing.Which panel best describes what happens in this market when the wages of seamstresses rise?

Let D = demand,S = supply,P = equilibrium price,Q = equilibrium quantity.What happens in the market for tropical hardwood trees if the government restricts the amount of forest lands that can be logged?

Assume that the hourly price for the services of tarot card readers has risen and sales of these services have also risen.One can conclude that

Which of the following would cause both the equilibrium price and equilibrium quantity of cotton (assume that cotton is a normal good) to increase?

Orange juice drinkers want to consume more orange juice at a lower price.Which of the following events would have this effect?

Let D = demand,S = supply,P = equilibrium price,Q = equilibrium quantity.What happens in the market for walnuts if the Centre for Disease Control and Prevention announces that consuming half a cup of walnuts each week helps to lower bad levels of cholesterol?

If the price of a product is above equilibrium,what forces it down?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for potatoes and that steak and potatoes are complements.Which panel describes what happens in this market when the price of steak rises?

Assume that the price for swimming pool maintenance services has risen and sales of these services have fallen.One can conclude that

A decrease in the demand for soft drinks due to changes in consumer tastes,accompanied by an increase in the supply of soft drinks as a result of reductions in input prices,will result in

Which of the following would cause the equilibrium price of white bread to decrease and the equilibrium quantity of white bread to increase?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for bicycle helmets.Which panel best describes what happens in this market if there is a substantial increase in the price of bicycles?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for rice.What happens in this market if buyers expect the price of rice to fall?

Which of the following would cause both the equilibrium price and equilibrium quantity of potatoes (assume that potatoes are an inferior good) to decrease?

An increase in the demand for lobster due to changes in consumer tastes,accompanied by a decrease in the supply of lobster as a result of bad weather reducing the number of fishermen trapping lobster,will result in

Olive oil producers want to sell more olive oil at a higher price.Which of the following events would have this effect?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for used clothing,an inferior good.Which panel describes what happens in this market as a result of a decrease in income?