Question 1

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 B)) If there is an 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? A) The equilibrium point will move from B to A. B) The equilibrium point will move from B to C. 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 shift the supply curve to the right (SS2U1B12S2U1B0), while a decrease in tastes for sugar-sweetened soft drinks will shift the demand curve to the left (DS2U1B11S2U1B0). The new equilibrium point will be at C, where the new supply and demand curves intersect.

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, causing a decrease in the supply of women's clothing. This is represented in panel (b) as a leftward shift in the supply curve, resulting in a higher equilibrium price and a lower equilibrium quantity.

Question 3

An increase in input costs in the production of electric automobiles caused the price of electric automobiles to rise.Holding everything else constant,how would this affect the market for gasoline-powered automobiles (a substitute for electric automobiles)?
A) The supply of gasoline-powered automobiles would increase and the equilibrium price of gasoline-powered automobiles would decrease.
B) The demand for gasoline-powered automobiles would increase and the equilibrium price of gasoline-powered automobiles would increase.
C) The demand for gasoline-powered automobiles would decrease because consumers could afford to buy fewer gasoline-powered automobiles.
D) The demand for gasoline-powered automobiles would increase and the equilibrium price of gasoline-powered automobiles would decrease.

Accepted Answer

An increase in the price of electric automobiles, a substitute for gasoline-powered automobiles, would lead consumers to consider purchasing gasoline-powered automobiles instead. This would increase the demand for gasoline-powered automobiles and, as a result, increase the equilibrium price of gasoline-powered automobiles.

Question 4

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)) 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? A) The equilibrium point will move from A to B. 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 graph...

Question 5

"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...

Question 6

Figure 3-7 
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for Fruitopia,a soft drink.Which panel describes what happens in the market for Fruitopia when the price of Snapple,a substitute product,decreases?
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 7

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

When there is a decrease in demand for soft drinks due to changes in consumer tastes, the equilibrium quantity and price will decrease. However, when there is an increase in the supply of soft drinks as a result of reductions in input prices, the equilibrium quantity may increase or decrease depending on the magnitude of the increase in supply. Therefore, the equilibrium price of soft drinks will decrease, but the equilibrium quantity may either increase or decrease depending on the relative magnitudes of the changes in demand and supply. Therefore, the correct answer is C.

Question 8

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 9

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 10

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...

Question 11

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)) If the price of oranges, a substitute for apples, decreases and the wages of apple workers increase, how will the equilibrium point change? A) The equilibrium point will move from A to E. 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 graph...

Question 12

Positive technological change in the production of LCD televisions caused the price of LCD televisions to fall.Holding everything else constant,how would this affect the market for Blu-ray players (a complement to LCD televisions)?
A) The supply of Blu-ray players would increase and the equilibrium price of Blu-ray players would decrease.
B) The demand for Blu-ray players would increase and the equilibrium price of Blu-ray players would increase.
C) The demand for Blu-ray players would decrease because consumers could afford to buy fewer LCD televisions and Blu-ray players.
D) The demand for Blu-ray players would increase and the equilibrium price of Blu-ray players would decrease.

Accepted Answer

The answer of Positive technological change in the production of...

Question 13

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.What 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 14

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 15

Assume that both the demand curve and the supply curve for MP3 players shift to the right 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 both the demand and supply curves shift to the right, the equilibrium quantity will always increase. However, the effect on equilibrium price will depend on the magnitude of the shifts. If the supply curve shifts more than the demand curve, the equilibrium price will decrease and the equilibrium quantity will increase, as more units are being produced and sold at a lower price. Therefore, B is the best choice.

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 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 to the right, the equilibrium price and quantity both increase. However, when the supply curve shifts to the left more than the demand curve, the equilibrium price increases and the equilibrium quantity decreases. Therefore, the combination of these two changes results in an increase in equilibrium price and a decrease in equilibrium quantity.

Question 17

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)) If there is a shortage of apples how will the equilibrium point change? A) The equilibrium point will move from A to B. 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 graph...

Question 18

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

Accepted Answer

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

Question 19

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

In panel (d), the demand curve shifts to the right, causing an increase in the quantity demanded and driving up the equilibrium price. However, the decrease in price expectations by buyers causes the supply curve to shift to the right as well, creating a new equilibrium point where the price is lower than the original equilibrium but higher than the expected future price. Therefore, both demand and supply increase but the price doesn't fall as much as buyers expected.

Question 20

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 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 and a decrease in supply will lead to a shift in the equilibrium point to a higher price, with the quantity traded dependent on the magnitude of the shifts. In this case, since the demand for lobster has increased, consumers will be willing to pay a higher price, which will increase the equilibrium price. However, the decrease in supply from bad weather will limit the quantity of lobster available, which may either increase or decrease depending on the magnitude of the shifts. Therefore, the equilibrium quantity may increase or decrease.

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 women's clothing.Which panel best describes what happens in this market when the wages of seamstresses rise?

An increase in input costs in the production of electric automobiles caused the price of electric automobiles to rise.Holding everything else constant,how would this affect the market for gasoline-powered automobiles (a substitute for electric automobiles) ?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for Fruitopia,a soft drink.Which panel describes what happens in the market for Fruitopia when the price of Snapple,a substitute product,decreases?

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

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 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 used clothing,an inferior good.Which panel describes what happens in this market as a result of a decrease in income?

Positive technological change in the production of LCD televisions caused the price of LCD televisions to fall.Holding everything else constant,how would this affect the market for Blu-ray players (a complement to LCD televisions) ?

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.What panel describes what happens in this market when the price of steak rises?

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

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

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 apples at the intersection of D₁ and S₁ (point A) ) If there is a shortage of apples how will the equilibrium point change?

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

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?

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 bad weather reducing the number of fishermen trapping lobster,will result in

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 women's clothing.Which panel best describes what happens in this market when the wages of seamstresses rise?

An increase in input costs in the production of electric automobiles caused the price of electric automobiles to rise.Holding everything else constant,how would this affect the market for gasoline-powered automobiles (a substitute for electric automobiles) ?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for Fruitopia,a soft drink.Which panel describes what happens in the market for Fruitopia when the price of Snapple,a substitute product,decreases?

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

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 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 used clothing,an inferior good.Which panel describes what happens in this market as a result of a decrease in income?

Positive technological change in the production of LCD televisions caused the price of LCD televisions to fall.Holding everything else constant,how would this affect the market for Blu-ray players (a complement to LCD televisions) ?

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.What panel describes what happens in this market when the price of steak rises?

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

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

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 apples at the intersection of D1 and S1 (point A) ) If there is a shortage of apples how will the equilibrium point change?

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

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?

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 bad weather reducing the number of fishermen trapping lobster,will result in

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) ) If there is a shortage of apples how will the equilibrium point change?