Question 1

Figure 3-8 
-Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D2 and S1 (point C).Which of the following changes would cause the equilibrium to change to point B?
A)A positive change in the technology used to produce motorcycles and decrease in the price of motorcycle insurance,a complement to motorcycles.
B)An increase in the wages of motorcycle workers and a decrease in the price of motorcycle insurance,a complement to motorcycles.
C)An increase in the number of motorcycle producers and an increase in the number of consumers who prefer riding motorcycles.

D)An increase in the wages of motorcycle workers and an increase in the price of motorcycle insurance,a complement to motorcycles.

Accepted Answer

Point B represents a new competitive equilibrium point with a higher quantity and lower price compared to point C. This can be caused by a decrease in production costs, such as an increase in worker productivity (which can be achieved through higher wages) or a decrease in input prices. Additionally, a decrease in the price of a complement to motorcycles, such as insurance, would also increase demand for motorcycles and shift the demand curve to the right (from D2 to D1), leading to a higher quantity and lower price. Options A and D include a decrease and an increase in the price of motorcycle insurance, respectively, which would have opposing effects on demand and might cancel each other out. Option C represents an increase in both supply and demand, which might lead to an increase in quantity but not necessarily a lower price (depending on the magnitude of the shifts).

Question 2

Figure 3-7 
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for frozen yogurt.Which panel describes what happens in the market for frozen yogurt when the price of ice cream,a substitute product,increases?
A)Panel (a)
B)Panel (b)
C)Panel (c)
D)Panel (d)

Accepted Answer

Panel (c) illustrates an increase in demand for frozen yogurt, which would occur if the price of a substitute product like ice cream increases. This is because consumers would likely switch to frozen yogurt as ice cream becomes more expensive, shifting the demand curve for frozen yogurt to the right.

Question 3

Figure 3-7 
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for tuna.Which panel best describes what happens in this market when there is a decrease in the productivity of commercial fishermen?
A)Panel (a)
B)Panel (b)
C)Panel (c)
D)Panel (d)

Accepted Answer

Panel (b) shows a decrease in supply with no change in demand, resulting in an increase in the equilibrium price and a decrease in the equilibrium quantity. This matches the scenario of a decrease in productivity of commercial fishermen, which would lead to a decrease in the amount of tuna supplied at any given price.

Question 4

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...

Question 5

Figure 3-7 
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for coffee.What happens in this market if buyers expect the price of coffee to rise?
A)Panel (a)
B)Panel (b)
C)Panel (c)
D)Panel (d)

Accepted Answer

In anticipation of a price increase, buyers are likely to purchase more coffee now to avoid higher prices later, shifting the demand curve to the right, as depicted in Panel (c). This shift represents an increase in demand due to the expectation of future price increases.

Question 6

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 7

Figure 3-8 
-Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D1 and S1 (point A).If there is a surplus of motorcycles 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 8

"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 incorrect because a decrease in the price of non-digital cameras would not cause the demand for non-digital cameras to decrease further. Rather, a decrease in the price of digital cameras would reduce the demand for non-digital cameras. Additionally, the statement assumes that the producers of digital cameras would not reduce their prices, but this is not necessarily true as competition in the market may force them to lower their prices in order to remain competitive.

Question 9

Figure 3-7 
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for ramen noodles,an inferior good.Which panel describes what happens in this market as a result of an increase 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 10

Figure 3-8 
-Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D2 and S2 (point
A)The equilibrium point will move from E to A.
B)The equilibrium point will move from E to B.
C)The equilibrium point will move from E to C.
D)The equilibrium point will remain at E.
E).If the technology to produce motorcycles improves and the number of buyers increases,how will the equilibrium point change?

Accepted Answer

As the technology to produce motorcycles improves and the number of buyers increases, the demand curve will shift to the right (from D2 to D1) and the supply curve will shift to the left (from S2 to S1). This will result in a new equilibrium point at the intersection of D1 and S1, which is point A. Therefore, the equilibrium point will move from E to A.

Question 11

Figure 3-7 
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for laptop computers.Which panel best describes what happens in this market when the price of computer hard drives falls?
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 12

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 13

Figure 3-7 
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for mustard and that bratwurst and mustard are complements.What panel describes what happens in this market when the price of bratwurst falls?
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 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 15

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 16

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 17

Figure 3-8 
-Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D1 and S2 (point B).If there is an increase in number of companies producing motorcycles and a decrease in income (assume motorcycles are a normal good),the equilibrium could move to which point?
A)A
B)B

C)C
D)E

Accepted Answer

An increase in the number of companies producing motorcycles would shift the supply curve to the right, from S2 to S3. A decrease in income would decrease demand, shifting the demand curve from D1 to D2. This would result in a new equilibrium at point C, where the quantity supplied is higher and the price is lower than the initial equilibrium at point B. Points A and E are not feasible equilibria given the new market conditions. Point D is not feasible because it is above the initial demand curve, which implies that consumers are not willing to pay that price.

Question 18

Figure 3-8 
-Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D2 and S1 (point C).If the price of motorcycle side cars (a complement to motorcycles)decreases,and the wages of motorcycle workers increase,how will the equilibrium point change?
A)The equilibrium point will move from C to E.
B)The equilibrium point will move from C to B.
C)The equilibrium point will move from C to A.
D)The equilibrium will first move from C to A,then return to C.

Accepted Answer

The answer of Figure 3-8 
-Refer to Figure 3-8.The graph...

Question 19

Figure 3-8 
-Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D1 and S1 (point A).If there is an increase in the wages of motorcycle workers and an increase in the price of motorcycle insurance,a complement to motorcycles,the equilibrium could move to which point?
A)A

B)B
C)C
D)E

Accepted Answer

The answer of Figure 3-8 
-Refer to Figure 3-8.The graph...

Question 20

Figure 3-8 
-Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D1 and S1 (point A).If the price of motorcycle engines increases,and the wages of motorcycle 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...

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

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D2 and S1 (point C) .Which of the following changes would cause the equilibrium to change to point B?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for frozen yogurt.Which panel describes what happens in the market for frozen yogurt when the price of ice cream,a substitute product,increases?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for tuna.Which panel best describes what happens in this market when there is a decrease in the productivity of commercial fishermen?

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,

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for coffee.What happens in this market if buyers expect the price of coffee to rise?

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) ?

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D1 and S1 (point A) .If there is a surplus of motorcycles how will the equilibrium point change?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for ramen noodles,an inferior good.Which panel describes what happens in this market as a result of an increase in income?

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D2 and S2 (point

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for laptop computers.Which panel best describes what happens in this market when the price of computer hard drives falls?

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) ?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for mustard and that bratwurst and mustard are complements.What panel describes what happens in this market when the price of bratwurst falls?

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,

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,

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,