Question 1

Which of the following would cause both the equilibrium price and equilibrium quantity of oysters (assume that oysters are a normal good)to decrease?
A)an increase in consumer income
B)an oil spill that sharply reduces oyster output
C)a decrease in consumer income
D)a technological advancement in the production of oysters

Accepted Answer

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

Question 2

Hurricane Katrina damaged a large portion of oil refining and pipeline capacity in the Gulf coast states.In the market for gasoline
A)the supply curve shifted to the left resulting in an increase 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

Hurricane Katrina damaged oil refining and pipeline capacity in the Gulf coast states, resulting in a decrease in the supply of gasoline. This caused the supply curve to shift to the left, resulting in an increase in the equilibrium price of gasoline.

Question 3

Let D = demand,S = supply,P = equilibrium price,Q = equilibrium quantity.What happens in the market for sushi if the Surgeon General announces that a majority of the raw fish that is imported to make sushi contains high levels of toxic mercury?
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 decrease.
D)D no change,S increases,P decreases,Q decreases.

Accepted Answer

The Surgeon General's announcement will cause a decrease in demand for sushi as consumers become aware of the health risks associated with consuming raw fish that contains toxic mercury. However, there will be no change in supply, as the toxic mercury does not affect the supply of raw fish. As a result, the equilibrium price and quantity will both decrease as a result of the decrease in demand.

Question 4

Let D = demand,S = supply,P = equilibrium price,Q = equilibrium quantity.What happens in the market for solar panels if the government offers tax breaks to encourage manufacturers to produce more solar panels?
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

Tax breaks for manufacturers lower the cost of production, leading to an increase in supply (S increases) without directly affecting consumer demand (D no change). With more supply and the same demand, the equilibrium price (P) decreases to entice more consumers to buy, while the equilibrium quantity (Q) increases because more products are available at a lower price.

Question 5

Electric car enthusiasts want to buy more electric cars at a lower price.All of the following events would have this effect except
A)technological advancement in the production of electric car batteries.
B)an increase in the number of manufacturers of electric cars.
C)a decrease in the price of lithium,which is used in the electric car batteries.
D)an increase in the price of gasoline.

Accepted Answer

An increase in the price of gasoline would make electric cars relatively cheaper and more attractive to consumers, leading to an increase in demand for electric cars. Therefore, it would have the opposite effect of the other options listed, which all would lead to a decrease in the price of electric cars and increase in demand.

Question 6

Assume that the price for lawn care has fallen and sales of lawn care services have also fallen.One can conclude that
A)the law of supply has been violated.
B)the number of lawn care service companies has increased.
C)the demand for lawn care service has decreased.
D)lawn care services are deliberately charging low prices because they want to discourage people from maintaining their own lawns.

Accepted Answer

According to the law of demand, as the price of a good or service decreases, the quantity demanded typically increases. However, in this scenario, the price has fallen but the sales have also fallen, which means that there has been a decrease in demand for lawn care services. This could be due to a variety of reasons, such as weather conditions, economic factors or changes in consumer preferences. Option A is incorrect because a decrease in price should lead to an increase in supply, not violate the law of supply. Option B and D are not supported by the information given in the question.

Question 7

Article Summary
More than a million Americans are estimated to have gone to other countries in 2014 for medical procedures.Documentary filmmaker Morgan Spurlock was among those Americans who travelled abroad in 2014 to partake in what is being referred to as "medical tourism." From his own experience and those of others who had also travelled for medical procedures,Spurlock found that there can be distinct advantages to medical tourism for certain patients and procedures.Those advantages include: The level of care offered in many hospitals,with the best hospitals reportedly meeting or exceeding Western standards;Significantly lower costs,examples of which include a heart bypass operation in the United States that typically runs $88,000 can cost as little as $31,500 in Costa Rica,and hip replacement surgery that averages $33,000 domestically is only $12,400 in Thailand;The ability to combine medical procedures with vacations to amazing locations around the globe.
-Refer to the Article Summary.Assume that more foreign governments and hospitals begin to offer and publicize their medical services to American medical tourists and,due to the growing number of aging baby boomers,more Americans desire hip-replacement surgery.All else equal,what will happen in the market for hip-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

With more foreign governments and hospitals offering and publicizing their medical services to American medical tourists, and more Americans desiring hip-replacement surgery, both demand and supply for hip-replacement surgery will increase. This is because the availability of more medical services in more locations will increase the options for potential patients, and the growing number of aging baby boomers will increase the demand for hip-replacement surgery. Therefore, both the demand and supply curves will shift to the right, resulting in an increase in both demand and supply for hip-replacement surgery.

Question 8

Electric car manufacturers want to sell more electric cars at a higher price.Which of the following events would have this effect?
A)technological advancement in the production of electric car batteries.
B)an increase in the number of manufacturers of electric cars.
C)a decrease in the price of lithium,which is used in the electric car batteries.
D)an increase in the price of gasoline.

Accepted Answer

An increase in the price of gasoline would make electric cars more attractive to consumers, as they would see the cost savings associated with electric cars as a better value proposition. This increased demand for electric cars would allow manufacturers to sell them at a higher price, as consumers would be more willing to pay for the benefits they offer. Options A, B, and C all would have the opposite effect, by decreasing the cost of producing electric cars and/or increasing the availability of competing products, which would put downward pressure on prices.

Question 9

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

Accepted Answer

A decrease in both demand and supply leads to a decrease in the equilibrium quantity, since both consumers and producers are buying and selling less of the good. However, the effect on equilibrium price is uncertain. It could increase if the decrease in supply is particularly severe, causing prices to rise. Alternatively, it could decrease if the decrease in demand is larger than the decrease in supply, resulting in a surplus of eggs and downward pressure on prices. Thus, the equilibrium price may increase or decrease, making option D the correct answer.

Question 10

In recent years the cost of producing wines in the U.S.has increased largely due to rising rents for vineyards.At the same time,more and more Americans prefer wine over beer.Which of the following best explains the effect of these events in the wine 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 price and an uncertain effect on the equilibrium quantity.
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 rising rents for vineyards increase the cost of producing wine, thus shifting the supply curve to the left. However, more and more Americans prefer wine over beer, which shifts the demand curve to the right. As a result, there is an increase in the equilibrium price and an uncertain effect on the equilibrium quantity.

Question 11

Prices of commercial airline tickets (assume that this is a normal good)have fallen in recent months.Over this same period,the price of jet fuel has risen and consumer incomes have fallen.Which of the following best explains the falling prices of airline tickets?
A)The supply curve for airline tickets has shifted to the left while the demand curve for airline tickets has shifted to the right.
B)The demand curve for airline tickets has shifted to the left more than the supply curve has shifted to the left.
C)The demand curve and the supply curve for airline tickets have both shifted to the right.
D)The supply curve for airline tickets has shifted to the left more than the demand curve has shifted to the left.

Accepted Answer

The rise in jet fuel prices and fall in consumer incomes are both factors that would shift the demand curve for airline tickets to the left, causing a decrease in quantity demanded and a decrease in price. However, the fact that the prices of airline tickets have fallen suggests that the supply curve for airline tickets has shifted to the right, causing an increase in quantity supplied and a decrease in price. The fact that the price of jet fuel has risen would normally shift the supply curve for airline tickets to the left, but the supply curve has shifted to the right more than the demand curve has shifted to the left, resulting in falling prices. Therefore, option B is the best answer.

Question 12

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

Accepted Answer

The falling prices of smartphones can be attributed to the fact that the supply curve for smartphones has shifted to the right more than the demand curve has shifted to the right. This is due to the fact that the price of components used to produce smartphones has fallen and consumer incomes have risen, leading to an increase in the supply of smartphones. As a result, we have seen an increase in competition among smartphone suppliers, leading to falling prices.

Question 13

Assume that in recent years the cost of producing microbrew beer in the U.S.has decreased largely due to technological improvements.At the same time,more and more Americans prefer microbrew beer over wine.Which of the following best explains the effect of these events in the microbrew beer 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 a decrease 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 decrease in production cost due to technological improvements causes a rightward shift in the supply curve. The increasing preference for microbrew beer over wine causes a rightward shift in the demand curve. Therefore, both the supply and demand curves have shifted to the right. This results in an increase in the equilibrium quantity of microbrew beer, but the effect on the equilibrium price is uncertain as it depends on the magnitude of the shift of both curves. Therefore, choice B is the best explanation.

Question 14

During the 1990s positive technological change in the production of chicken caused the price of chicken to fall.Holding everything else constant,how would this affect the market for pork (a substitute for chicken)?
A)The supply of pork would increase and the equilibrium price of pork would decrease.
B)The demand for pork would decrease and the equilibrium price of pork would decrease.
C)The demand for pork would increase because consumers could afford to buy more chicken and pork.
D)The demand for pork would decrease and the equilibrium price of pork would increase.

Accepted Answer

When the price of chicken falls due to positive technological changes, consumers are likely to substitute chicken for pork, leading to a decrease in the demand for pork. As demand decreases, the equilibrium price of pork would also decrease.

Question 15

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

Accepted Answer

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

Question 16

Which of the following would cause the equilibrium price of ketchup to increase and the equilibrium quantity of ketchup to decrease?
A)a decrease in the price of tomatoes
B)an increase in the price of tomatoes
C)an increase in the price of mustard,a substitute for ketchup
D)an increase in the price of french fries,a complement for ketchup

Accepted Answer

If there is an increase in the price of tomatoes, which is a key ingredient in ketchup, then the cost of producing ketchup will increase, resulting in a decrease in supply. As a result, the equilibrium price will increase and the equilibrium quantity will decrease.

Question 17

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

Accepted Answer

The news about red wine preventing heart disease would increase demand for red wine. However, the decrease in grape harvest would result in a decrease in supply. This would cause an increase in the equilibrium price of red wine. The effect on the equilibrium quantity would be uncertain because it would depend on the magnitude of the increase in price and the elasticity of demand for red wine.

Question 18

Which of the following would cause the equilibrium price of apple juice to decrease and the equilibrium quantity of apple juice to increase?
A)a decrease in the price of apples
B)an increase in the price of apples
C)an increase in the price of orange juice,a substitute for apple juice
D)a decrease in the price of granola bars,a complement for apple juice

Accepted Answer

A decrease in the price of apples, the main input for apple juice, would lead to an increase in the supply of apple juice, causing a leftward shift in the supply curve. This would cause the equilibrium price of apple juice to decrease and the equilibrium quantity of apple juice to increase.

Question 19

Assume that the hourly price for the services of personal trainers 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 personal trainers has increased.
C)the demand for personal trainers has increased.
D)personal trainers are deliberately charging high prices because they provide services for wealthy clients.

Accepted Answer

The fact that sales of personal training services have increased despite a rise in price indicates that the demand for personal trainers has also increased. This is consistent with the law of demand, which states that as price increases, quantity demanded decreases. Therefore, option A is incorrect. Option B is not necessarily true and cannot be concluded from the given information. Option D is a baseless assumption without any evidence presented in the given information.

Question 20

An increase in the demand for peanuts due to changes in consumer tastes,accompanied by an increase in the supply of peanuts as a result of favorable growing conditions,will result in
A)an increase in the equilibrium quantity of peanuts and no change in the equilibrium price.
B)an increase in the equilibrium price of peanuts and no change in the equilibrium quantity.
C)an increase in the equilibrium price of peanuts;the equilibrium quantity may increase or decrease.
D)an increase in the equilibrium quantity of peanuts;the equilibrium price may increase or decrease.

Accepted Answer

An increase in both demand and supply will lead to an increase in equilibrium quantity. However, the new equilibrium price will depend on the magnitude of the changes in demand and supply. If the increase in demand is greater than the increase in supply, the equilibrium price will increase. If the increase in supply is greater than the increase in demand, the equilibrium price will decrease. Therefore, the equilibrium quantity will increase, but the equilibrium price may increase or decrease.

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

Which of the following would cause both the equilibrium price and equilibrium quantity of oysters (assume that oysters are a normal good) to decrease?

Hurricane Katrina damaged a large portion of oil refining and pipeline capacity in the Gulf coast states.In the market for gasoline

Let D = demand,S = supply,P = equilibrium price,Q = equilibrium quantity.What happens in the market for sushi if the Surgeon General announces that a majority of the raw fish that is imported to make sushi contains high levels of toxic mercury?

Let D = demand,S = supply,P = equilibrium price,Q = equilibrium quantity.What happens in the market for solar panels if the government offers tax breaks to encourage manufacturers to produce more solar panels?

Electric car enthusiasts want to buy more electric cars at a lower price.All of the following events would have this effect except

Assume that the price for lawn care has fallen and sales of lawn care services have also fallen.One can conclude that

Electric car manufacturers want to sell more electric cars at a higher price.Which of the following events would have this effect?

A decrease in the demand for eggs due to changes in consumer tastes,accompanied by a decrease in the supply of eggs as a result of an outbreak of Avian flu,will result in

In recent years the cost of producing wines in the U.S.has increased largely due to rising rents for vineyards.At the same time,more and more Americans prefer wine over beer.Which of the following best explains the effect of these events in the wine market?

Prices of commercial airline tickets (assume that this is a normal good) have fallen in recent months.Over this same period,the price of jet fuel has risen and consumer incomes have fallen.Which of the following best explains the falling prices of airline tickets?

Prices of smartphones (assume that this is a normal good) have fallen in recent years.Over this same period,the price of the components used to produce smartphones has also fallen and consumer incomes have risen.Which of the following best explains the falling prices of smartphones?

Assume that in recent years the cost of producing microbrew beer in the U.S.has decreased largely due to technological improvements.At the same time,more and more Americans prefer microbrew beer over wine.Which of the following best explains the effect of these events in the microbrew beer market?

During the 1990s positive technological change in the production of chicken caused the price of chicken to fall.Holding everything else constant,how would this affect the market for pork (a substitute for chicken) ?

Which of the following would cause both the equilibrium price and equilibrium quantity of barley (assume that barley is an inferior good) to increase?

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

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

Which of the following would cause the equilibrium price of apple juice to decrease and the equilibrium quantity of apple juice to increase?

Assume that the hourly price for the services of personal trainers has risen and sales of these services have also risen.One can conclude that

An increase in the demand for peanuts due to changes in consumer tastes,accompanied by an increase in the supply of peanuts as a result of favorable growing conditions,will result in