Question 1

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

When the price for swimming pool maintenance services rises and sales fall, it suggests that demand for the service has decreased. This decrease in demand could be due to a variety of factors such as economic conditions, competition or less demand in general. A decrease in demand will lead to a decrease in supply of swimming pool maintenance services.

Question 2

Prices of California Merlot wine (assume that this is a normal good)have risen steadily in recent years.Over this same period,prices for French oak barrels used for wine storage have dropped and consumer incomes have risen.Which of the following best explains the rising prices of California Merlots?
A)The supply curve for Merlot has shifted to the right while the demand curve for Merlot has shifted to the left.
B)The demand curve for Merlot has shifted to the right more than the supply curve has shifted to the right.
C)The demand curve and the supply curve for Merlot have both shifted to the left.
D)The supply curve for Merlot has shifted to the right more than the demand curve has shifted to the right.

Accepted Answer

The drop in prices of French oak barrels used for wine storage and the rise in consumer incomes are both factors that increase the demand for California Merlot. However, since the price of Merlot has also risen steadily, it suggests that the shift in demand has been greater than the shift in supply. Therefore, the best explanation is that the demand curve for Merlot has shifted to the right more than the supply curve has shifted to the right.

Question 3

What is the difference between a market equilibrium and a competitive market equilibrium?

Accepted Answer

The answer of What is the difference between a market...

Question 4

The cost of producing cigarettes in the United States has increased and at the same time,more and more Americans are choosing to not smoke cigarettes.Which of the following best explains the effect of these events in the cigarette market?
A)The supply curve has shifted to the right and the demand curve has shifted to the left.As a result there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price.
B)Both the supply and demand curves have shifted to the right.As a result,there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price.
C)Both the supply and demand curves have shifted to the left.As a result,there has been a decrease in the equilibrium quantity and an uncertain effect on the equilibrium price.
D)The supply curve has shifted to the right and the demand curve has shifted to the left.As a result,there has been an increase in the equilibrium price and an uncertain effect on the equilibrium quantity.

Accepted Answer

The increase in the cost of production would shift the supply curve to the left, while the decrease in the number of people smoking would shift the demand curve to the left as well. This would cause a decrease in the equilibrium quantity and an uncertain effect on the equilibrium price.

Question 5

In much of Europe,the legal age to obtain a driver's license is 18.If the legal driving age in the United States was changed to 18,how would this affect the market for new automobiles? The market for automobile insurance?

Accepted Answer

The answer of In much of Europe,the legal age to...

Question 6

In 2004,hurricanes destroyed a large portion of Florida's orange and grapefruit crops.In the market for citrus fruit in 2004
A)the supply curve shifted to the right resulting in an increase in the equilibrium price.
B)the supply curve shifted to the left resulting in an increase in the equilibrium price.
C)the demand curve shifted to the right resulting in an increase in the equilibrium price.
D)the demand curve shifted to the left resulting in a decrease in the equilibrium price.

Accepted Answer

The destruction of a large portion of the orange and grapefruit crops would decrease the supply of citrus fruit. Therefore, the supply curve would shift to the left, resulting in a decrease in the equilibrium quantity and an increase in the equilibrium price.

Question 7

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 olive trees
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 be able to sell more olive oil at a higher price. Factors A, B, and C do not directly affect the demand for or the value of olive oil.

Question 8

Let D= demand,S = supply,P = equilibrium price,and Q= equilibrium quantity.What happens in the market for tropical hardwood trees if the governments restrict 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 will decrease. This will result in a shift of the supply curve to the left, causing an increase in price (P) and a decrease in quantity (Q) of tropical hardwood trees. The demand for tropical hardwood trees is unlikely to change significantly in the short run, so the demand curve will remain relatively stable. Therefore, the best choice is B, where S decreases, D remains unchanged, and P increases while Q decreases.

Question 9

Table 3-6
 $$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Price per } \
\text { Bushel }
\end{array} & \begin{array} { c } 
\text { Quantity } \
\text { Demanded } \
\text { (bushels) }
\end{array} & \begin{array} { c } 
\text { Quantity } \
\text { Supplied } \
\text { (bushels) }
\end{array} \
\hline \$ 2 & 40,000 & 0 \
\hline 4 & 36,000 & 4,000 \
\hline 6 & 30,000 & 8,000 \
\hline 8 & 24,000 & 16,000 \
\hline 10 & 20,000 & 20,000 \
\hline 12 & 18,000 & 28,000 \
\hline 14 & 12,000 & 36,000 \
\hline 16 & 6,000 & 40,000 \
\hline
\end{array}$$
-Refer to Table 3-6.The table contains information about the sorghum market.Use the table to answer the following questions.
a.What are the equilibrium price and quantity of sorghum?
b.Suppose the prevailing price is $6 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 $6 per bushel?
e.If the market price is $6 per bushel,what must happen to restore equilibrium in the market?
f.At what price will suppliers be able to sell 36,000 bushels of sorghum?
g.Suppose the market price is $14 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 $14 per bushel?
j.If the market price is $14 per bushel,what must happen to restore equilibrium in the market?

Accepted Answer

The answer of Table 3-6
 \[\begin{array} { | c |...

Question 10

Prices of microbrewery beer (assume that this is a normal good)have risen steadily in recent years.Over this same period,prices for fermenting vats used in beer making have also risen and consumer incomes have fallen.Which of the following best explains the rising prices of microbrewery beer?
A)The supply curve for microbrewery beer has shifted to the left while the demand curve for microbrewery beer has shifted to the right.
B)The demand curve for microbrewery beer has shifted to the left more than the supply curve has shifted to the left.
C)The demand curve and the supply curve for microbrewery beer have both shifted to the right.
D)The supply curve for microbrewery beer has shifted to the left more than the demand curve has shifted to the left.

Accepted Answer

The rising prices of fermenting vats have led to higher production costs for microbreweries, resulting in a leftward shift of the supply curve for microbrewery beer. Additionally, the falling consumer incomes have led to a decrease in demand for microbrewery beer, resulting in a leftward shift of the demand curve for microbrewery beer. However, the demand curve has not shifted to the left more than the supply curve, as the increase in production costs would have a greater impact on the supply curve. Therefore, D is the best answer.

Question 11

In recent years,the cost of producing organic produce in the United States has decreased largely due technological advancement.At the same time,more and more Americans prefer organic produce over conventional produce.Which of the following best explains the effect of these events in the organic produce market?
A)The supply curve has shifted to the left and the demand curve has shifted to the right.As a result there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price.
B)Both the supply and demand curves have shifted to the right.As a result,there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price.
C)Both the supply and demand curves have shifted to the right.As a result,there has been an increase in both the equilibrium price and the equilibrium quantity.
D)The supply curve has shifted to the left and the demand curve has shifted to the right.As a result,there has been an increase in the equilibrium price and an uncertain effect on the equilibrium quantity.

Accepted Answer

The answer of In recent years,the cost of producing organic...

Question 12

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

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

Question 13

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 fertilizer 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 lower the cost of producing orange juice, which could lead to a decrease in the price of orange juice for consumers. This would allow orange juice drinkers to consume more orange juice at a lower price.

B) An increase in the cost of fertilizer used for orange groves would increase the cost of producing oranges, which could lead to an increase in the price of orange juice for consumers.

C) A decrease in income, assuming orange juice is a normal good, would lead to a decrease in demand for orange juice, as consumers would have less disposable income to spend on it. This would not result in a simultaneous increase in demand and decrease in price.

D) A decrease in the population would result in a decrease in demand for orange juice, but this would not necessarily result in a decrease in price. The price of orange juice would be determined by the balance of supply and demand, and a decrease in demand due to a decrease in population may not necessarily lead to a lower price if the supply of orange juice remained constant.

Question 14

Table 3-5
 $$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Price per } \
\text { Bushel }
\end{array} & \begin{array} { c } 
\text { Quantity Demanded } \
\text { (bushels) }
\end{array} & \begin{array} { c } 
\text { Quantity Supplied } \
\text { (bushels) }
\end{array} \
\hline \$ 3 & 36,000 & 0 \
\hline 6 & 30,000 & 3,000 \
\hline 9 & 24,000 & 6,000 \
\hline 12 & 19,000 & 10,000 \
\hline 15 & 15,000 & 15,000 \
\hline 18 & 10,000 & 21,000 \
\hline 21 & 7,000 & 28,000 \
\hline 24 & 4,000 & 36,000 \
\hline
\end{array}$$
-Refer to Table 3-5.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 24,000 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 3-5
 \[\begin{array} { | c |...

Question 15

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, which is a key ingredient in making white bread, will lower the cost of production for producers, thus allowing them to lower the price of white bread. As a result, consumers will demand more of the lower-priced white bread, which will cause the equilibrium quantity to increase.

Question 16

Let D= demand,S = supply,P = equilibrium price,and Q= equilibrium quantity.What happens in the market for walnuts if the Centers for Disease Control and Prevention announces that consuming a half cup of walnuts each week helps to lower levels of bad 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 CDC will cause an increase in demand for walnuts as consumers become more aware of their health benefits. This will cause the demand curve to shift to the right, leading to an increase in both equilibrium price and quantity. The increase in demand will not affect supply, so the supply curve will remain unchanged.

Question 17

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

The fact that the sales of tarot card reading services have also increased suggests an increase in demand rather than a violation of the law of demand. This can be due to increasing popularity or perceived value of their services. The increase in price could be a response to the increase in demand. There is no given information to suggest an increase in the number of tarot card readers or that they are deliberately charging high prices.

Question 18

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 19

What is a surplus? What is a shortage?

Accepted Answer

The answer of What is a surplus? What is a...

Question 20

Consider the collectors' market for first editions of two popular children's books,Harry Potter and the Order of the Phoenix by J.K.Rowling and Ruby in the Smoke by Philip Pullman.Sales of the Harry Potter novel are much greater than sales of Ruby in the Smoke yet the price of the Harry Potter novel is much lower than the price of Pullman's novel.
a.On one large diagram,draw a demand and supply graph for first editions of Harry Potter and the Order of the Phoenix and another demand and supply graph for first editions of Ruby in the Smoke.
b.Show how it is possible for the price of the Harry Potter novel to be much lower than the price of Pullman's novel,even though the demand for the Harry Potter novel is much greater than the demand for Ruby in the Smoke.
c.Provide a written explanation to accompany your graphical illustration.

Accepted Answer

The answer of Consider the collectors' market for first editions...

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

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

What is the difference between a market equilibrium and a competitive market equilibrium?

The cost of producing cigarettes in the United States has increased and at the same time,more and more Americans are choosing to not smoke cigarettes.Which of the following best explains the effect of these events in the cigarette market?

In much of Europe,the legal age to obtain a driver's license is 18.If the legal driving age in the United States was changed to 18,how would this affect the market for new automobiles? The market for automobile insurance?

In 2004,hurricanes destroyed a large portion of Florida's orange and grapefruit crops.In the market for citrus fruit in 2004

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

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

Prices of microbrewery beer (assume that this is a normal good) have risen steadily in recent years.Over this same period,prices for fermenting vats used in beer making have also risen and consumer incomes have fallen.Which of the following best explains the rising prices of microbrewery beer?

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?

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

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

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 potatoes (assume that potatoes are an inferior good) to decrease?

What is a surplus? What is a shortage?