Question 1

Figure 3-8 
-Which of the following statements is true?
A) An increase in supply causes a change in equilibrium price; the change in price does not cause a further change in demand or supply.
B) A decrease in supply causes equilibrium price to rise; the increase in price then results in a decrease in demand.
C) If both demand and supply increase, there must be an increase in equilibrium price; equilibrium quantity may either increase or decrease.
D) If demand decreases and supply increases, one cannot determine if equilibrium price will increase or decrease without knowing which change is greater.

Accepted Answer

According to the graph, when there is an increase in supply, the equilibrium price decreases while the equilibrium quantity increases. The change in price does not cause a further change in demand or supply, as stated in statement A. Statement B is incorrect because a decrease in supply causes equilibrium price to rise, not the other way around. Statement C is incorrect because an increase in both demand and supply does not necessarily mean an increase in equilibrium price; it depends on the magnitude of the changes in demand and supply. Statement D is incorrect because, according to the graph, if demand decreases and supply increases, the equilibrium price will always decrease.

Question 2

Figure 3-8 
-Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D1 and S2 (point
A) A positive change in the technology used to produce apples and decrease in the price of oranges, a substitute for apples.
B) An increase in the wages of apple workers and an increase in the price of oranges, a substitute for apples.
B). Which of the following changes would cause the equilibrium to change to point C?
C) An increase in the number of apple producers and a decrease in the number of apple trees as a result of disease.
D) A decrease in the wages of apple workers and an increase in the price of oranges, a substitute for apples.

Accepted Answer

A positive change in the technology used to produce apples and decrease in the price of oranges, a substitute for apples.

Question 3

Figure 3-8 
-Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D1 and S1 (point
A) The equilibrium point will move from A to E.
A). If the price of oranges, a substitute for apples, decreases and the wages of apple workers increase, how will the equilibrium point change?
B) The equilibrium point will move from A to B.
C) The equilibrium point will move from A to C.
D) The equilibrium will first move from A to B, then return to A.

Accepted Answer

The answer of Figure 3-8 
-Refer to Figure 3-8. The...

Question 4

Assume that the demand curve for MP3 players shifts to the right and the supply curve for MP3 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 MP3 players will decrease.
B) the equilibrium price of MP3 players will decrease; the equilibrium quantity will increase.
C) the equilibrium price of MP3 players may increase or decrease; the equilibrium quantity will decrease.
D) the equilibrium price of MP3 players will increase; the equilibrium quantity will decrease.

Accepted Answer

When the demand curve shifts right, it indicates an increase in demand for MP3 players. When the supply curve shifts left, it indicates a decrease in supply of MP3 players. However, if the supply curve shifts more than the demand curve, it means that the decrease in supply is greater than the increase in demand. As a result, the equilibrium price will increase as the market tries to ration the limited supply among the higher demand. At the same time, the equilibrium quantity will decrease due to the decreased supply. Therefore, Option D is the correct choice.

Question 5

Figure 3-8 
-Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D1 and S1 (point
A) A
A). If there is an increase in the wages of motorcycle workers and an increase in the price of motorcycle insurance, a complement to motorcycles, the equilibrium could move to which point?
B) B
C) C
D) E

Accepted Answer

The answer of Figure 3-8 
-Refer to Figure 3-8. The...

Question 6

Figure 3-8 
-Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D1 and S2 (point
A) A
B) B
B). f there is an increase in number of companies producing motorcycles and a decrease in income (assume motorcycles are a normal good), the equilibrium could move to which point?
C) C
D) E

Accepted Answer

An increase in the number of companies producing motorcycles would shift the supply curve to the right (from S2 to S3), while a decrease in income would shift the demand curve to the left (from D1 to D2). The new equilibrium would occur at the intersection of D2 and S3, which is at point C.

Question 7

Figure 3-8 
-Which of the following statements is true?
A) An increase in demand causes a change in equilibrium price; the change in price does not cause a further change in demand or supply.
B) A decrease in supply causes equilibrium price to rise; the increase in price then results in a decrease in demand.
C) If both demand and supply increase, there must be an increase in equilibrium price; equilibrium quantity may either increase or decrease.
D) If demand decreases and supply increases, one cannot determine if equilibrium price will increase or decrease without knowing which change is greater.

Accepted Answer

According to the graph, an increase in demand causes a shift to the right of the demand curve, resulting in an increase in equilibrium price and quantity. However, the change in price does not cause a further change in demand or supply. This is because the increase in price already accounted for the initial increase in demand.

Question 8

Figure 3-8 
-Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D2 and S2 (point
A) The equilibrium point will move from E to A.
B) The equilibrium point will move from E to B.
C) The equilibrium point will move from E to C.
D) The equilibrium point will remain at E.
E). If the technology to produce motorcycles improves and the number of buyers increases, how will the equilibrium point change?

Accepted Answer

The answer of Figure 3-8 
-Refer to Figure 3-8. The...

Question 9

Figure 3-8 
-Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D2 and S1 (point
A) The equilibrium point will move from C to E.
B) The equilibrium point will move from C to B.
C) The equilibrium point will move from C to A.
C). If the price of motorcycle side cars (a complement to motorcycles) decreases, and the wages of motorcycle workers increase, how will the equilibrium point change?
D) The equilibrium will first move from C to A, then return to C.

Accepted Answer

The answer of Figure 3-8 
-Refer to Figure 3-8. The...

Question 10

Figure 3-8 
-Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for sugar at the intersection of D1 and S2 (point
A) The equilibrium point will move from B to A.
B) The equilibrium point will move from B to C.
B). If there is a decrease in the price of fertilizer used on sugar cane and there is a decrease in tastes for sugar-sweetened soft drinks, how will the equilibrium point change?
C) There will be no change in the equilibrium point.
D) The equilibrium point will move from B to E.

Accepted Answer

A decrease in the price of fertilizer will increase the supply of sugar (shift the supply curve right), and a decrease in tastes for sugar-sweetened soft drinks will decrease the demand for sugar (shift the demand curve left). The new equilibrium will be at the intersection of the new supply and demand curves, which is point C.

Question 11

Figure 3-8 
-Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D1 and S1 (point
A) The equilibrium point will move from A to B.
A). If there is a surplus of motorcycles how will the equilibrium point change?
B) The equilibrium point will move from A to C.
C) There will be no change in the equilibrium point.
D) The equilibrium point will move from A to E.

Accepted Answer

The answer of Figure 3-8 
-Refer to Figure 3-8. The...

Question 12

Figure 3-8 
-Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D1 and S1 (point
A) none of the points shown
A). If there is an increase in the wages of apple workers and an increase in the price of oranges, a substitute for apples, the equilibrium could move to which point?
B) B
C) C
D) E

Accepted Answer

The answer of Figure 3-8 
-Refer to Figure 3-8. The...

Question 13

Figure 3-8 
-Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D2 and S1 (point
A) A positive change in the technology used to produce motorcycles and decrease in the price of motorcycle insurance, a complement to motorcycles.
B) An increase in the wages of motorcycle workers and a decrease in the price of motorcycle insurance, a complement to motorcycles.
C) An increase in the number of motorcycle producers and an increase in the number of consumers who prefer riding motorcycles.
C). Which of the following changes would cause the equilibrium to change to point B?
D) An increase in the wages of motorcycle workers and an increase in the price of motorcycle insurance, a complement to motorcycles.

Accepted Answer

Point B represents a new competitive equilibrium point with a higher quantity and lower price compared to point C. This can be caused by a decrease in production costs, such as an increase in worker productivity (which can be achieved through higher wages) or a decrease in input prices. Additionally, a decrease in the price of a complement to motorcycles, such as insurance, would also increase demand for motorcycles and shift the demand curve to the right (from D2 to D1), leading to a higher quantity and lower price. Options A and D include a decrease and an increase in the price of motorcycle insurance, respectively, which would have opposing effects on demand and might cancel each other out. Option C represents an increase in both supply and demand, which might lead to an increase in quantity but not necessarily a lower price (depending on the magnitude of the shifts).

Question 14

Figure 3-8 
-Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D2 and S1 (point
A) A positive change in the technology used to produce apples and decrease in the price of oranges, a substitute for apples.
B) An increase in the wages of apple workers and an increase in the price of oranges, a substitute for apples.
C) An increase in the number of apple producers and a decrease in the number of apple trees as a result of disease.
C). Which of the following changes would cause the equilibrium to change to point B?
D) A decrease in the wages of apple workers and an increase in the price of oranges, a substitute for apples.

Accepted Answer

The answer of Figure 3-8 
-Refer to Figure 3-8. The...

Question 15

Figure 3-8 
-Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D2 and S2 (point
A) A positive change in the technology used to produce apples and decrease in the price of oranges, a substitute for apples.
B) An increase in the wages of apple workers and a decrease in the price of oranges, a substitute for apples.
C) An increase in the number of apple producers and a decrease in the number of apple trees as a result of disease.
D) A decrease in the wages of apple workers and an increase in the price of oranges, a substitute for apples.
E). Which of the following changes would cause the equilibrium to change to point A?

Accepted Answer

A decrease in the wages of apple workers would reduce production costs, shifting the supply curve to the right. An increase in the price of oranges, a substitute, would increase the demand for apples, shifting the demand curve to the right. Both changes would move the equilibrium to point A.

Question 16

Assume that the demand curve for MP3 players shifts to the right and the supply curve for MP3 players shift to the left, but the supply curve shifts less than the demand curve. As a result
A) both the equilibrium price and quantity of MP3 players will decrease.
B) both the equilibrium price and quantity of MP3 players will increase.
C) the equilibrium price of MP3 players may increase or decrease; the equilibrium quantity will decrease.
D) the equilibrium price of MP3 players will increase; the equilibrium quantity will decrease.

Accepted Answer

The answer of Assume that the demand curve for MP3...

Question 17

Figure 3-8 
-Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for sugar at the intersection of D1 and S1 (point
A) The equilibrium point will move from A to B.
A). If there is an increase in the price of fertilizer used on sugar cane and there is a decrease in tastes for sugar-sweetened soft drinks, how will the equilibrium point change?
B) The equilibrium point will move from A to C.
C) There will be no change in the equilibrium point.
D) The equilibrium point will move from A to E.

Accepted Answer

The answer of Figure 3-8 
-Refer to Figure 3-8. The...

Question 18

Figure 3-8 
-Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D1 and S1 (point
A) The equilibrium point will move from A to B.
A). If there is a shortage of apples how will the equilibrium point change?
B) The equilibrium point will move from A to C.
C) There will be no change in the equilibrium point.
D) The equilibrium point will move from A to E.

Accepted Answer

The answer of Figure 3-8 
-Refer to Figure 3-8. The...

Question 19

Figure 3-8 
-Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D1 and S1 (point
A) The equilibrium point will move from A to E.
A). If the price of motorcycle engines increases, and the wages of motorcycle workers increase, how will the equilibrium point change?
B) The equilibrium point will move from A to B.
C) The equilibrium point will move from A to C.
D) The equilibrium will first move from A to B, then return to A.

Accepted Answer

The answer of Figure 3-8 
-Refer to Figure 3-8. The...

Question 20

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

Accepted Answer

The answer of "The price of compact fluorescent light bulbs...

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

Figure 3-8 -Which of the following statements is true?

Figure 3-8 -Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D1 and S2 (point

Figure 3-8 -Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D1 and S1 (point A) The equilibrium point will move from A to E.

Assume that the demand curve for MP3 players shifts to the right and the supply curve for MP3 players shift to the left, but the supply curve shifts more than the demand curve. As a result

Figure 3-8 -Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D1 and S1 (point A) A

Figure 3-8 -Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D1 and S2 (point

Figure 3-8 -Which of the following statements is true?

Figure 3-8 -Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D2 and S2 (point

Figure 3-8 -Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D2 and S1 (point

Figure 3-8 -Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for sugar at the intersection of D1 and S2 (point

Figure 3-8 -Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D1 and S1 (point A) The equilibrium point will move from A to B.

Figure 3-8 -Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D1 and S1 (point A) none of the points shown

Figure 3-8 -Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D2 and S1 (point

Figure 3-8 -Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D2 and S1 (point

Figure 3-8 -Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D2 and S2 (point

Assume that the demand curve for MP3 players shifts to the right and the supply curve for MP3 players shift to the left, but the supply curve shifts less than the demand curve. As a result

Figure 3-8 -Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for sugar at the intersection of D1 and S1 (point A) The equilibrium point will move from A to B.

Figure 3-8 -Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D1 and S1 (point A) The equilibrium point will move from A to B.

Figure 3-8 -Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D1 and S1 (point A) The equilibrium point will move from A to E.