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

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?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for Fruitopia,a soft drink.Which panel describes what happens in the market for Fruitopia when the price of Snapple,a substitute product,decreases?

Which of the following statements is true?

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?

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)?

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?

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?

When deciding on which new products to develop,a firm must devote people,time,and money to designing a new product.Because any firm has only limited resources,it

An ________ is represented by a rightward shift of the demand curve while an ________ is represented by a movement along a given demand curve.

Discuss the correct and incorrect economic analysis in the following statements. "The United Auto Workers Union has successfully negotiated a 9 percent increase in wages for its workers.This increase in the wage rate causes an increase in demand for automobiles,since many consumers now have greater incomes,and also a decrease in the supply of automobiles because the cost of production has increased.These effects cancel each other out resulting in no change in equilibrium price and quantity in the automobile market."

A decrease in the demand for soft drinks due to changes in consumer tastes,accompanied by an increase in the supply of soft drinks as a result of reductions in input prices,will result in

Figure 3-4 -Refer to Figure 3-4.If the price is $20

Which of the following would shift the supply curve for MP3 players to the right?

Assume there is a surplus in the market for hybrid automobiles.Which of the following statements correctly describes this situation?

When the price of a good falls,consumers buy a larger quantity because of the ________ effect and the ________ effect.

If,in response to a decrease in the price of grapes,the quantity of grapes demanded increases,economists would describe this as

The supply curve for umbrellas

Explain the difference between a normal good and an inferior good.

If a decrease in income leads to in a decrease in the demand for ice cream,then ice cream is

Even when the demand for one good is high,the price of the good is also affected by supply.The textbook illustrates this by comparing the price of two items that were auctioned on the same day.Which of the following describes the results of the auction?