Question 1

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

Accepted Answer

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.E) A) and B)
F) All of the above

Question 2

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 S2 (point B) .Which of the following changes would cause the equilibrium to change to point C?

Accepted Answer

A)  a positive change in the technology used to produce apples and decrease in the price of oranges,a substitute for apples
B)  an increase in the wages of apple workers and an increase in the price of oranges,a substitute for apples
C)  an increase in the number of apple producers and a decrease in the number of apple trees as a result of disease
D)  a decrease in the wages of apple workers and an increase in the price of oranges,a substitute for applesE) None of the above
F) A) and B)

Question 3

An increase in quantity supplied is represented by a rightward shift of the supply curve.

Accepted Answer

A) True 
 B)False

Question 4

Vineyards can grow either red wine grapes or white wine grapes on their land.Which of the following would cause the supply of red wine grapes to decrease?

Accepted Answer

A)  an increase in the price of white wine grapes
B)  a decrease in the price of white wine grapes
C)  an increase in the demand for red wine grapes
D)  an increase in the price of red wineE) All of the above
F) None of the above

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?

Accepted Answer

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.E) A) and C)
F) A) and D)

Question 6

In June,buyers of titanium expect that the price of titanium will fall in July.What happens in the titanium market in June,holding everything else constant?

Accepted Answer

A)  The demand curve shifts to the right.
B)  The quantity demanded increases.
C)  The quantity demanded decreases.
D)  The demand curve shifts to the left.E) None of the above
F) C) and D)

Question 7

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) ?

Accepted Answer

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.E) A) and B)
F) A) and C)

Question 8

Figure 3-4 
-Refer to Figure 3-4.At a price of $25,how many units will be supplied?

Accepted Answer

A)  400
B)  500
C)  600
D)  800E) A) and D)
F) A) and C)

Question 9

Figure 3-5 
-Refer to Figure 3-5.At a price of $10,the quantity sold

Accepted Answer

A)  is 2 units.
B)  is 4 units.
C)  is 6 units.
D)  is 8 units.E) A) and C)
F) None of the above

Question 10

The law of demand implies,holding everything else constant,that as the price of gelato

Accepted Answer

A)  increases,the demand for gelato will increase.
B)  increases,the quantity of gelato demanded will increase.
C)  decreases,the quantity of gelato demanded will increase.
D)  decreases,the demand for gelato will increase.E) A) and B)
F) B) and C)

Question 11

Suppose a drought resulted in a major reduction in the California lettuce crop.In the market for lettuce

Accepted Answer

A)  the supply curve shifted to the left resulting in an increase in the equilibrium price.
B)  the supply curve shifted to the left resulting in a decrease 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.E) B) and C)
F) A) and D)

Question 12

Figure 3-4 
-Refer to Figure 3-4.At a price of $20,how many units will be sold?

Accepted Answer

A)  400
B)  500
C)  600
D)  800E) A) and B)
F) A) and C)

Question 13

Competitive market equilibrium is a market equilibrium with many buyers and sellers.

Accepted Answer

A) True 
 B)False

Question 14

A decrease in the price of inputs will cause the supply curve for a product to shift to the right.

Accepted Answer

A) True 
 B)False

Question 15

The substitution effect explains why there is an inverse relationship between the price of a product and the quantity of the product demanded.

Accepted Answer

A) True 
 B)False

Question 16

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?

Accepted Answer

A)  Panel (a) 
B)  Panel (b) 
C)  Panel (c) 
D)  Panel (d) E) A) and D)
F) All of the above

Question 17

How has the growing popularity of factory outlet stores affected the market for clothing at retail department stores?

Accepted Answer

A)  the demand curve for clothing at retail department stores shifts to the right.
B)  the demand curve for clothing at retail department stores shifts to the left.
C)  the supply curve for clothing at retail department stores shifts to the right.
D)  the supply curve for clothing at retail department stores shifts to the left.E) B) and C)
F) A) and B)

Question 18

Which of the following statements is true?

Accepted Answer

A)  An increase in demand causes a change in equilibrium price;the change in price does not cause a further change in demand or supply.
B)  A decrease in supply causes equilibrium price to rise;the increase in price then results in a decrease in demand.
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.E) B) and C)
F) All of the above

Question 19

If the demand for a product increases and the supply of the same product decreases,the equilibrium price will increase.

Accepted Answer

A) True 
 B)False

Question 20

Technological advancements have led to lower prices and an increase in the sale of digital cameras.How does this affect the digital photo printing paper market?

Accepted Answer

A)  The demand curve for digital photo printing paper shifts to the right.
B)  The demand curve for digital photo printing paper shifts to the left.
C)  The supply curve for digital photo printing paper shifts to the right.
D)  The supply curve for digital photo printing paper shifts to the left.E) None of the above
F) B) and D)

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

The substitution effect explains why there is an inverse relationship between the price of a product and the quantity of the product demanded.

Correct AnswerverifiedShow Answer

An increase in quantity supplied is represented by a rightward shift of the supply curve.

Correct AnswerverifiedShow Answer

Vineyards can grow either red wine grapes or white wine grapes on their land.Which of the following would cause the supply of red wine grapes to decrease?

Correct AnswerverifiedShow Answer

Figure 3-4 -Refer to Figure 3-4.At a price of $25,how many units will be supplied?

Correct AnswerverifiedShow Answer

Competitive market equilibrium is a market equilibrium with many buyers and sellers.

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

A decrease in the price of inputs will cause the supply curve for a product to shift to the right.

Correct AnswerverifiedShow Answer

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 S2 (point B) .Which of the following changes would cause the equilibrium to change to point C?

Correct AnswerverifiedShow Answer

Figure 3-4 -Refer to Figure 3-4.At a price of $20,how many units will be sold?

Correct AnswerverifiedShow Answer

How has the growing popularity of factory outlet stores affected the market for clothing at retail department stores?

Correct AnswerverifiedShow Answer

If the demand for a product increases and the supply of the same product decreases,the equilibrium price will increase.

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

Figure 3-5 -Refer to Figure 3-5.At a price of $10,the quantity sold

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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) ?

Correct AnswerverifiedShow Answer

In June,buyers of titanium expect that the price of titanium will fall in July.What happens in the titanium market in June,holding everything else constant?

Correct AnswerverifiedShow Answer

Technological advancements have led to lower prices and an increase in the sale of digital cameras.How does this affect the digital photo printing paper market?

Correct AnswerverifiedShow Answer

Suppose a drought resulted in a major reduction in the California lettuce crop.In the market for lettuce

Correct AnswerverifiedShow Answer

The law of demand implies,holding everything else constant,that as the price of gelato

Correct AnswerverifiedShow Answer

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