Question 1

Suppose favorable weather resulted in a bumper crop of oranges in Florida. In the market for oranges,
A) the supply curve shifted to the right, resulting in a decrease in the equilibrium price.
B) the supply curve shifted to the right, resulting in an increase in the equilibrium price.
C) the demand curve shifted to the left, resulting in a decrease in the equilibrium price.
D) the demand curve shifted to the right, resulting in an increase in the equilibrium price.

Accepted Answer

A bumper crop of oranges in Florida would increase the supply of oranges in the market, resulting in a rightward shift of the supply curve. This results in a decrease in the equilibrium price due to the increased availability of oranges in the market.

Question 2

Suppose a negative technological change in the production of disease-resistant wheat caused the price of wheat to rise. Holding everything else constant, how would this affect the market for corn (a substitute for wheat)?
A) The supply of corn would decrease and the equilibrium price of corn would increase.
B) The demand for corn would increase and the equilibrium price of corn would increase.
C) The demand for corn would decrease because consumers could afford to buy less wheat and corn.
D) The demand for corn would increase and the equilibrium price of corn would decrease.

Accepted Answer

Since wheat and corn are substitutes, an increase in the price of wheat would cause consumers to switch to the cheaper alternative, which is corn. This would increase the demand for corn and, assuming no change in supply, would result in an increase in the equilibrium price of corn.

Question 3

Figure 3-8 
-Which of the following would cause a decrease in the equilibrium price and an increase in the equilibrium quantity of salmon?
A) a decrease in demand and an increase in supply
B) an increase in supply
C) an increase in supply and an increase in demand greater than the increase in supply
D) a decrease in demand and a decrease in supply

Accepted Answer

An increase in supply would cause a decrease in the equilibrium price and an increase in the equilibrium quantity of salmon. Option A would cause a decrease in both equilibrium price and equilibrium quantity. Option C would cause an increase in both equilibrium price and equilibrium quantity, but the increase in demand would not be enough to offset the increase in supply. Option D would cause a decrease in both equilibrium price and equilibrium quantity.

Question 4

All else equal, the decrease in consumer preference predicted by Apple for its iPhone 5 would be represented by a
A) shift in the supply curve for iPhones to the right.
B) shift in the supply curve for iPhones to the left.
C) shift in the demand curve for iPhones to the right.
D) shift in the demand curve for iPhones to the left.

Accepted Answer

A decrease in consumer preference for the iPhone 5 would result in a decrease in demand for the product, which is represented by a leftward shift in the demand curve. Therefore, the correct answer is D. A shift in the supply curve would relate to factors such as changes in production costs or technology advancements, and is not related to changes in consumer preferences.

Question 5

Figure 3-8 
-Blu-ray players were introduced to the market in 2006, and new technology has allowed for the cost of manufacturing the players to decline significantly since the initial introduction. How did this change in technology affect the market for Blu-ray players?
A) The new technology caused an increase in the supply of Blu-ray players and a decrease in price of Blu-ray players.
B) The new technology caused an increase in the supply of Blu-ray players and an increase in price of Blu-ray players.
C) The new technology caused a decrease in the demand for Blu-ray players.
D) The new technology caused an increase in the quantity of Blu-ray players supplied.

Accepted Answer

The introduction of new technology is likely to reduce the cost of manufacturing and thereby increase the supply of Blu-ray players. As supply increases, the price of the players is likely to decrease due to more competition among producers. Thus, choice A is the correct answer. Choice B does not make much sense as an increase in supply should lead to a decrease in price, not an increase. Choice C is not supported by the information given, and it is unlikely that new technology would reduce demand for Blu-ray players. Choice D is a partial answer and does not capture the full effect of the technology change on the market.

Question 6

Figure 3-8 
-The following appeared in a Florida newspaper a week after a hurricane hit the state. "Floridians are relieved that the storm produced no fatalities, but homeowners face weeks, if not months, of rebuilding. Matters are made worse by the soaring prices of plywood and other building materials that always follow in a hurricane's path. Complaints of profiteering and price gouging have not deterred firms from raising their prices by over 100 percent." Which of the following offers the best explanation for the price increases referred to in the article?
A) The hurricane reduced the number of suppliers of building materials.
B) The hurricane created an artificial shortage of building materials.
C) The hurricane caused an increase in the demand for building materials.
D) There was a reduction in supply as firms shipped plywood and other materials to locations not affected by the storm.

Accepted Answer

The answer of Figure 3-8 
-The following appeared in a...

Question 7

Figure 3-8 
-A decrease in the equilibrium price for a product will result
A) when the quantity demanded for the product exceeds the quantity supplied.
B) when there is a decrease in supply and a decrease 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 a decrease in demand and a decrease in the number of firms producing the product.

Accepted Answer

When there is an increase in supply and a decrease in demand for the product, the equilibrium price will decrease due to the surplus created by the excess supply. This is represented by the intersection of the new supply and demand curves, which occurs at a lower price point.

Question 8

Figure 3-8 
-The cost of raising beef cattle has risen at the same time as consumer preference for beef has fallen. In the market for beef, this would be represented by the equilibrium price ________ and the equilibrium quantity ________.
A) increasing; increasing or decreasing
B) increasing or decreasing; decreasing
C) decreasing; increasing or decreasing
D) increasing or decreasing; increasing

Accepted Answer

The answer of Figure 3-8 
-The cost of raising beef...

Question 9

A decrease in the demand for incandescent light bulbs due to changes in consumer tastes, accompanied by a decrease in the supply of incandescent light bulbs as a result of government restrictions, will result in
A) a decrease in the equilibrium quantity of incandescent light bulbs and no change in the equilibrium price.
B) a decrease in the equilibrium price of incandescent light bulbs and no change in the equilibrium quantity.
C) a decrease in the equilibrium price of incandescent light bulbs; the equilibrium quantity may increase or decrease.
D) a decrease in the equilibrium quantity of incandescent light bulbs; the equilibrium price may increase or decrease.

Accepted Answer

A decrease in both demand and supply will result in a decrease in the equilibrium quantity of incandescent light bulbs. However, the effect on equilibrium price is ambiguous as it depends on the magnitude of the decrease in demand and supply. If the decrease in demand is greater than the decrease in supply, the price may increase, while if the decrease in supply is greater than the decrease in demand, the price may decrease.

Question 10

Studies have shown that drinking one glass of red wine per day may help prevent heart disease. Assume this is true, and favorable weather has increased the grape harvest of California vineyards. In the market for red wine, these two developments would
A) increase demand and decrease supply, resulting in an increase in the equilibrium quantity and a decrease in the equilibrium price of red wine.
B) increase demand and increase supply, resulting in an increase in the equilibrium quantity and an uncertain effect on the equilibrium price of red wine.
C) increase demand and increase supply, resulting in an increase in the equilibrium price and an uncertain effect on the equilibrium quantity of red wine.
D) increase demand and increase supply, resulting in an increase in both the equilibrium price and the equilibrium quantity of red wine.

Accepted Answer

The answer of Studies have shown that drinking one glass...

Question 11

Let D = demand, S = supply, P = equilibrium price, Q = equilibrium quantity. What happens in the market for electric vehicles if the government offers incentives to manufacturers to produce more electric vehicles?
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 government incentives will increase the supply of electric vehicles, leading to a decrease in the equilibrium price and an increase in the equilibrium quantity.

Question 12

Article Summary
A growing number of U.S. citizens are going to other countries for elective surgery procedures. Improved quality and significant cost savings abroad have attracted an increasing number of what are being referred to as American medical tourists, especially those who either do not have insurance or whose insurance does not cover the desired procedure. As few as five years ago, Americans tended to travel to countries such as Thailand or Mexico for the procedures, but many are now choosing to go to Europe, where governments and hospitals are now publicizing these services. Many of the procedures being done overseas are joint replacement, and partly in response to the number of patients going abroad for these procedures, programs are being developed to reduce the cost of these surgeries in the United States.
Source: Elizabeth Rosenthal, "The Growing Popularity of Having Surgery Overseas," New York Times, August 6, 2013.
-Refer to the Article Summary. If more European governments and hospitals begin to offer and publicize their services to American medical tourists and, due to the growing number of aging baby boomers, more Americans desire joint-replacement surgery, what will happen in the market for joint-replacement surgery as a result of these two factors?
A) Demand will increase, but these two factors will not shift the supply curve.
B) Supply will increase, but these two factors will not shift the demand curve.
C) Demand and supply will both increase.
D) Demand will increase and supply will decrease.

Accepted Answer

As more European governments and hospitals offer and publicize their surgeries to Americans and more Americans desire joint-replacement surgery due to aging, both demand and supply will increase in the market for joint-replacement surgery.

Question 13

Figure 3-8 
-A decrease in the equilibrium quantity for a product will result
A) when the quantity demanded for the product exceeds the quantity supplied.
B) when there is a decrease in supply and a decrease 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 a decrease in demand and a decrease in the number of firms producing the product.

Accepted Answer

A decrease in both supply and demand will lead to a decrease in the equilibrium quantity, as both shifts reduce the quantity exchanged in the market.

Question 14

Figure 3-8 
-Select the phrase that correctly completes the following statement. "An increase in input prices caused a decrease in the supply of baseballs. As a result ________."
A) the price of baseballs increased and the demand for baseballs decreased
B) the equilibrium quantity of baseballs increased
C) the price of baseballs increased and the quantity demanded of baseballs decreased
D) the price of baseballs increased. The higher price caused the supply of baseballs to increase

Accepted Answer

An increase in input prices causes the supply curve to shift to the left, resulting in a decrease in the quantity supplied at any given price. This will lead to an increase in the price of baseballs and a decrease in the quantity demanded of baseballs. Therefore, option C is the correct answer. Option A is incorrect because an increase in price would decrease the demand only if the good is inferior. Option B and D are incorrect because if the supply decreases, there cannot be an increase in the equilibrium quantity or supply.

Question 15

Figure 3-8 
-Which of the following would cause an increase in the equilibrium price and an increase in the equilibrium quantity of watermelons?
A) an increase in demand and an increase in supply
B) an increase in supply
C) an increase in supply and an increase in demand greater than the increase in supply
D) a decrease in demand and an increase in supply

Accepted Answer

An increase in both supply and demand would cause an increase in both equilibrium price and quantity. However, the increase in demand must be greater than the increase in supply to result in an increase in equilibrium price and quantity. Therefore, choice C is the only option that meets these criteria.

Question 16

Figure 3-8 
-"Because chips and salsa are complements, an increase in the price of chips will cause the demand for salsa to decrease. This initial shift in demand for chips results in a higher price for chips; this higher price will cause the demand curve for chips to shift to the right." Which of the following correctly comments on this statement?
A) The statement will be true if consumer tastes for chips and salsa do not change.
B) The statement is false because a change in the price of chips would not change the demand for chips.
C) The statement is false because salsa is an inferior good; chips are normal goods.
D) The statement is false because one cannot assume that chips and salsa are complements for all consumers.

Accepted Answer

The answer of Figure 3-8 
-"Because chips and salsa are...

Question 17

Figure 3-8 
-What would happen in the market for laser eye surgery if insurance companies started to cover a portion of the price of voluntary procedures?
A) Demand will increase, but this will not shift the supply curve.
B) Supply will increase, but this will not shift the demand curve.
C) Demand and supply will both increase.
D) Demand will increase and supply will decrease.

Accepted Answer

If insurance companies start to cover a portion of the price of voluntary procedures, it will increase the number of people who are willing to have the surgery. This will lead to an increase in demand for laser eye surgery. However, it will not affect the supply of laser eye surgery as the number of doctors or clinics offering the service will remain the same. Thus, demand will increase but it will not shift the supply curve.

Question 18

Figure 3-8 
-Select the phrase that correctly completes the following statement. "A positive change in technology caused an increase in the supply of flat-screen televisions. As a result ________."
A) the price of flat-screen televisions decreased and the demand for flat-screen televisions increased
B) the equilibrium quantity of flat-screen televisions decreased
C) the price of flat-screen televisions decreased and the quantity demanded of flat-screen televisions increased
D) the price of flat-screen televisions decreased. The lower price caused the supply of flat-screen televisions to decrease

Accepted Answer

A positive change in technology caused an increase in the supply of flat-screen televisions. This means that the supply curve shifts to the right. As a result of the increase in supply, the price of flat-screen television decreases and the quantity demanded of flat-screen televisions increases. This is illustrated by a movement along the demand curve. Therefore, the correct answer is C.

Question 19

Figure 3-8 
-"Because apples and oranges are substitutes, an increase in the price of oranges will cause the demand for apples to increase. This initial shift in demand for apples results in a higher price for apples; this higher price will cause the demand curve for apples to shift to the right." Which of the following correctly comments on this statement?
A) The statement will be true if consumer tastes for apples and oranges do not change.
B) The statement is false because a change in the price of apples would not change the demand for apples.
C) The statement is false because oranges are inferior goods; apples are normal goods.
D) The statement is false because one cannot assume that apples and oranges are substitutes for all consumers.

Accepted Answer

The answer of Figure 3-8 
-"Because apples and oranges are...

Question 20

Figure 3-8 
-If more insurance companies decide to cover part of the price of voluntary laser eye surgery and more doctors decide to enter the field of laser eye surgery, what will happen in the market for laser eye surgery as a result of these two factors?
A) Demand will increase, but these two factors will not shift the supply curve.
B) Supply will increase, but these two factors will not shift the demand curve.
C) Demand and supply will both increase.
D) Demand will increase and supply will decrease.

Accepted Answer

If more insurance companies cover the cost of the surgery, more people will demand the surgery, which will shift the demand curve to the right. If more doctors enter the field, the number of surgeries that can be performed will increase, which will shift the supply curve to the right. Therefore, both factors will increase the quantity of laser eye surgeries performed, resulting in an increase in both demand and supply.

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

Suppose favorable weather resulted in a bumper crop of oranges in Florida. In the market for oranges,

Suppose a negative technological change in the production of disease-resistant wheat caused the price of wheat to rise. Holding everything else constant, how would this affect the market for corn (a substitute for wheat) ?

Figure 3-8 -Which of the following would cause a decrease in the equilibrium price and an increase in the equilibrium quantity of salmon?

All else equal, the decrease in consumer preference predicted by Apple for its iPhone 5 would be represented by a

Figure 3-8 -Blu-ray players were introduced to the market in 2006, and new technology has allowed for the cost of manufacturing the players to decline significantly since the initial introduction. How did this change in technology affect the market for Blu-ray players?

Figure 3-8 -A decrease in the equilibrium price for a product will result

Figure 3-8 -The cost of raising beef cattle has risen at the same time as consumer preference for beef has fallen. In the market for beef, this would be represented by the equilibrium price and the equilibrium quantity .

A decrease in the demand for incandescent light bulbs due to changes in consumer tastes, accompanied by a decrease in the supply of incandescent light bulbs as a result of government restrictions, will result in

Studies have shown that drinking one glass of red wine per day may help prevent heart disease. Assume this is true, and favorable weather has increased the grape harvest of California vineyards. In the market for red wine, these two developments would

Let D = demand, S = supply, P = equilibrium price, Q = equilibrium quantity. What happens in the market for electric vehicles if the government offers incentives to manufacturers to produce more electric vehicles?

Figure 3-8 -A decrease in the equilibrium quantity for a product will result

Figure 3-8 -Select the phrase that correctly completes the following statement. "An increase in input prices caused a decrease in the supply of baseballs. As a result ________."

Figure 3-8 -Which of the following would cause an increase in the equilibrium price and an increase in the equilibrium quantity of watermelons?

Figure 3-8 -What would happen in the market for laser eye surgery if insurance companies started to cover a portion of the price of voluntary procedures?

Figure 3-8 -Select the phrase that correctly completes the following statement. "A positive change in technology caused an increase in the supply of flat-screen televisions. As a result ________."

Figure 3-8 -If more insurance companies decide to cover part of the price of voluntary laser eye surgery and more doctors decide to enter the field of laser eye surgery, what will happen in the market for laser eye surgery as a result of these two factors?