Question 1

What would happen in the market for knee replacement surgery if insurance companies started to cover a smaller portion of the cost of the surgery,and fewer doctors decide to enter the field of joint replacement surgery?
A)Demand will decrease,but this will not shift the supply curve.
B)Supply will decrease,but this will not shift the demand curve.
C)Demand and supply will both decrease.
D)Demand will decrease and supply will increase.

Accepted Answer

If insurance companies cover a smaller portion of the cost of knee replacement surgery, it will become more expensive for patients, leading to a decrease in demand. Furthermore, if fewer doctors enter the field of joint replacement surgery, this will decrease the supply of surgeons who can perform these procedures. Both of these factors will lead to a decrease in both demand and supply of knee replacement surgery.

Question 2

Suppose consumer preference for beef starts to rise while the cost of raising beef continues to rise.In the market for beef,this would be represented by the equilibrium price ________ and the equilibrium quantity ________.
A)increasing;increasing or decreasing
B)decreasing;increasing or decreasing
C)increasing or decreasing;increasing
D)increasing or decreasing;decreasing

Accepted Answer

When consumer preference for beef rises, demand increases, leading to a higher equilibrium price. Simultaneously, if the cost of raising beef rises, supply decreases, which also pushes the price up. The equilibrium quantity could increase or decrease depending on the relative shifts in demand and supply.

Question 3

An increase in the equilibrium price for a product will result
A)when the quantity of the product demanded exceeds the quantity supplied.
B)when there is a decrease in supply and an increase in demand for the product.
C)when there is a decrease in supply and a decrease in demand for the product.
D)when there is an increase in demand and an increase in the number of firms producing the product.

Accepted Answer

An increase in equilibrium price occurs when there is a decrease in supply and an increase in demand for the product. This causes a shortage, where the quantity demanded exceeds the quantity supplied, leading to an increase in the price until the market reaches equilibrium again. A decrease in supply could be caused by factors such as a decrease in resources or production costs, while an increase in demand could be due to factors such as increased consumer income or improved marketing strategies.

Question 4

A decrease in input costs in the production of LCD televisions caused the price of LCD televisions to decrease.Holding everything else constant,how would this affect the market for video game consoles (a complement to LCD televisions)?
A)The supply of video game consoles would increase and the equilibrium price of video game consoles would decrease.
B)The demand for video game consoles would decrease and the equilibrium price of video game consoles would decrease.
C)The demand for video game consoles would decrease because consumers could afford to buy fewer LCD televisions and video game consoles.
D)The demand for video game consoles would increase and the equilibrium price of video game consoles would increase.

Accepted Answer

When the price of LCD televisions decreases, it makes LCD TVs more affordable, leading to an increase in their demand. Since video game consoles are complements to LCD TVs, the demand for video game consoles would also increase as more people buy LCD TVs and want consoles to use with them. This increased demand for video game consoles would likely lead to an increase in their equilibrium price, as the demand curve shifts to the right.

Question 5

When Toyota introduced its 2010 Prius,it announced that the average retail price of the 2010 model would be lower than the average retail price was for the equivalent 2009 model.Which of the following would explain the price differential?
A)The demand for the Prius had increased,and the supply of the Prius remained unchanged.
B)The supply of the Prius had decreased,and the demand for the Prius remained unchanged.
C)The demand for the Prius had decreased,and the supply of the Prius had increased.
D)The demand for the Prius had increased,and the supply of the Prius had decreased.

Accepted Answer

The price of a product typically decreases if the demand for it decreases while its supply increases, as this creates a surplus of the product in the market, leading to lower prices to stimulate sales.

Question 6

Select the phrase that correctly completes the following statement."A decrease in the number of manufacturers caused a decrease in the supply of sailboats.As a result
A)the price of sailboats increased and the demand for sailboats decreased."
B)the equilibrium quantity of sailboats increased."
C)the price of sailboats increased and the quantity of sailboats demanded decreased."
D)the price of sailboats increased.The higher price caused the supply of sailboats to increase."

Accepted Answer

According to the law of supply and demand, a decrease in supply will cause an increase in price and a decrease in quantity demanded. Therefore, the correct option is C. Option A is incorrect because the price of sailboats would not increase and demand decrease simultaneously. Option B is incorrect because a decrease in supply would not lead to an increase in the equilibrium quantity. Option D is incorrect because a higher price would not cause an increase in supply, but rather a decrease in quantity demanded.

Question 7

"Because Coke and Pepsi are substitutes,a decrease in the price of Pepsi will cause the demand for Coke to decrease.This initial shift in demand for Coke results in a lower price for Coke;this lower price will cause the demand curve for Coke to shift to the left." Which of the following correctly comments on this statement?
A)The statement will be true if consumer tastes for Coke and Pepsi do not change.
B)The statement is false because a change in the price of Coke would not change the demand for Coke.
C)The statement is false because Pepsi is an inferior good;Coke is a normal good.
D)The statement is false because one cannot assume that Coke and Pepsi are substitutes for all consumers.

Accepted Answer

The statement is false because a change in the price of Coke would not change the demand for Coke; it would change the quantity demanded. The demand curve itself shifts due to factors other than the good's own price, such as changes in consumer income, tastes, or prices of related goods. Changes in the good's own price move the quantity demanded along the demand curve, not the position of the demand curve.

Question 8

Because new plastic and recycled plastic are substitutes,as the price of newly produced plastic increases,
A)the demand curve for recycled plastic shifts to the left.
B)the demand curve for recycled plastic shifts to the right.
C)there is a movement up along the demand curve for recycled plastic.
D)there is a movement down along the demand curve for recycled plastic.

Accepted Answer

When the price of newly produced plastic increases, consumers will look for substitutes, such as recycled plastic, leading to an increase in demand for recycled plastic. This causes the demand curve for recycled plastic to shift to the right.

Question 9

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

Accepted Answer

When the demand curve shifts to the left, it indicates a decrease in demand, and when the supply curve shifts to the right more significantly, it indicates an increase in supply. The larger shift in supply compared to demand will lead to a decrease in the equilibrium price due to excess supply. The equilibrium quantity will increase because the increase in supply outweighs the decrease in demand.

Question 10

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

Accepted Answer

A decrease in supply, ceteris paribus, will cause an increase in the equilibrium price and a decrease in the equilibrium quantity of watermelon.

Question 11

An increase in the equilibrium quantity of a product will result
A)when the quantity of the product supplied exceeds the quantity demanded.
B)when there is an increase in supply and an increase 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 an decrease in demand and a decrease in the cost of inputs used to make the product.

Accepted Answer

An increase in equilibrium quantity requires both an increase in supply and an increase in demand for the product. This means that producers are willing and able to supply more of the product while consumers are willing and able to buy more of the product at the same price.

Question 12

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

Accepted Answer

A decrease in supply leads to a higher equilibrium price, which typically results in a decrease in quantity demanded due to the law of demand.

Question 13

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

Accepted Answer

The statement is false because a decrease in the price of non-digital cameras would not necessarily cause a further decrease in demand for non-digital cameras. The law of demand states that as the price of a good decreases, the quantity demanded increases, but it does not necessarily mean that the demand will decrease as the price falls. Additionally, the statement does not consider the possibility of a shift in consumer preferences towards digital cameras rather than non-digital cameras, which would also contribute to a decrease in demand for non-digital cameras.

Question 14

What would happen in the market for knee replacement surgery if insurance companies started to cover a smaller portion of the cost of the surgery?
A)Demand will decrease,but this will not shift the supply curve.
B)Supply will decrease,but this will not shift the demand curve.
C)Demand and supply will both decrease.
D)Demand will decrease and supply will increase.

Accepted Answer

If insurance companies cover a smaller portion of the cost of knee replacement surgery, patients will have to pay more out-of-pocket. This makes the surgery less affordable for some, leading to a decrease in demand. The supply curve, which represents the willingness and ability of producers to offer goods at different prices, would not be directly affected by this change in insurance coverage.

Question 15

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

Accepted Answer

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

Question 16

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

Accepted Answer

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

Question 17

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

Accepted Answer

When the demand curve shifts to the left, it indicates a decrease in demand, and when the supply curve shifts to the right, it indicates an increase in supply. However, since the demand curve shifts more than the supply curve, the dominant effect is a decrease in both the equilibrium price and quantity of DVD players.

Question 18

Which of the following statements is true?
A)A decrease in demand causes a decrease in equilibrium price;the decrease in price causes supply to decrease.
B)A decrease in demand causes equilibrium price to fall;the decrease in price then results in a decrease in quantity supplied.
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

When demand decreases, the equilibrium price falls. This decrease in price, in turn, reduces the quantity supplied. This results in a movement along the supply curve. Therefore, option B is the correct statement. Option A is false because a decrease in demand causes a decrease in equilibrium price, which, in turn, causes a decrease in quantity supplied. Option C is not always true because the change in equilibrium price and quantity depends on the magnitude of the changes in demand and supply. Option D is also incorrect because it assumes that the two effects will cancel each other out, but this is not always the case.

Question 19

Select the phrase that correctly completes the following statement."A decrease in the expected future price caused an increase in the supply of smartphones.As a result
A)the price of smartphones decreased and the demand for smartphones increased."
B)the equilibrium quantity of smartphones decreased."
C)the price of smartphones decreased and the quantity of smartphones demanded increased."
D)the price of smartphones decreased.The lower price caused the supply of smartphones to decrease."

Accepted Answer

When the expected future price decreases, suppliers typically increase their supply. This increase in supply leads to a decrease in the price, which in turn increases the quantity of smartphones demanded. Therefore, choice C correctly completes the statement.

Question 20

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

Accepted Answer

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

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

What would happen in the market for knee replacement surgery if insurance companies started to cover a smaller portion of the cost of the surgery,and fewer doctors decide to enter the field of joint replacement surgery?

Suppose consumer preference for beef starts to rise while the cost of raising beef continues to rise.In the market for beef,this would be represented by the equilibrium price and the equilibrium quantity .

An increase in the equilibrium price for a product will result

A decrease in input costs in the production of LCD televisions caused the price of LCD televisions to decrease.Holding everything else constant,how would this affect the market for video game consoles (a complement to LCD televisions) ?

When Toyota introduced its 2010 Prius,it announced that the average retail price of the 2010 model would be lower than the average retail price was for the equivalent 2009 model.Which of the following would explain the price differential?

Select the phrase that correctly completes the following statement."A decrease in the number of manufacturers caused a decrease in the supply of sailboats.As a result

Because new plastic and recycled plastic are substitutes,as the price of newly produced plastic increases,

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

Which of the following would cause an increase in the equilibrium price and decrease in the equilibrium quantity of watermelon?

An increase in the equilibrium quantity of a product will result

Which of the following statements is true?

What would happen in the market for knee replacement surgery if insurance companies started to cover a smaller portion of the cost of the surgery?

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

Which of the following would cause a decrease in the equilibrium price and decrease in the equilibrium quantity of papayas?

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

Which of the following statements is true?

Select the phrase that correctly completes the following statement."A decrease in the expected future price caused an increase in the supply of smartphones.As a result

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