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 S2 (point E). If the technology to produce motorcycles improves and the number of buyers increases, how will the equilibrium point change?

Accepted Answer

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.

Question 2

Let D= demand, S = supply, P = equilibrium price, and Q= equilibrium quantity. What happens in the market for walnuts if the Centers for Disease Control and Prevention announces that consuming a half cup of walnuts each week helps to lower levels of bad cholesterol?

Accepted Answer

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.

Question 3

If the price of peaches, a substitute for plums, decreases the demand for plums will increase.

Accepted Answer

A) True 
 B)False

Question 4

If a firm expects that the price of its product will be higher in the future than it is today, then

Accepted Answer

A)  the firm will go out of business. 
B)  the firm has an incentive to increase supply now and decrease supply in the future. 
C)  the firm has an incentive to decrease quantity supplied now and increase quantity supplied in the future. 
D)  the firm has an incentive to decrease supply now and increase supply in the future.

Question 5

Farmers can raise either goats or ostriches on their land. Which of the following would cause the supply of goats to decrease?

Accepted Answer

A)  an increase in the price of ostriches 
B)  a decrease in the price of goats 
C)  an increase in the demand for goats 
D)  an increase in the price of ostrich feed

Question 6

A(n) ________ is represented by a rightward shift of the demand curve while a(n) ________ is represented by a movement along a given demand curve.

Accepted Answer

A)  increase in demand; decrease in demand 
B)  increase in demand; increase in quantity demanded 
C)  decrease in demand; decrease in quantity demanded 
D)  increase in quantity demanded; increase in demand

Question 7

In January, buyers of gold expect that the price of gold will fall in February. What happens in the gold market in January, 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.

Question 8

Figure 3-5 
-Refer to Figure 3-5. In a free market such as that depicted above, a surplus is eliminated by

Accepted Answer

A)  a price increase, increasing the supply and decreasing the demand. 
B)  a price decrease, decreasing the supply and increasing the demand. 
C)  a price decrease, decreasing the quantity supplied and increasing the quantity demanded. 
D)  a price increase, increasing the quantity supplied and decreasing the quantity demanded.

Question 9

A decrease in the number of firms in a market will cause supply to increase.

Accepted Answer

A) True 
 B)False

Question 10

Use the following supply schedule for cherries to draw a graph of the supply curve. Be sure to label the supply curve and each axis, and show each point on the supply curve.

Accepted Answer

The answer of Use the following supply schedule for cherries...

Question 11

Article Summary
World Tourism Day 2017, with its official celebration on September 27 in Qatar, was focused on sustainable tourism. Established by the United Nations World Tourism Organization (UNWTO), World Tourism Day has been celebrated since 1980, and the theme for 2017 was the "International Year of Sustainable Tourism for Development".  The event was designed with two sessions: one focused on 'Tourism as a driver of economic growth', and the other 'Tourism and the Planet: committed to a greener future'.  With over 1.2 billion travellers crossing international borders in 2016,  and that number expected to grow to 1.8 billion  by 2030, sustainable tourism is viewed by many as an important catalyst for diversification and economic growth.
Source: Vicky Karantzavelou, " World Tourism Day 2017 celebrated on the theme Sustainable Tourism — a Tool for Development," traveldailynews.com, August 14, 2017

-Refer to the Article Summary. Assume that more global tourist destinations begin to offer and publicize sustainable tourism to American tourists and, due to the growing number of millennials attracted to sustainability, more Americans choose to embrace sustainable tourism. All else equal, what will happen in the market for sustainable tourism as a result of these two factors?

Accepted Answer

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.

Question 12

Use the following supply schedule for cherries to draw a graph of the supply curve. Be sure to label the supply curve and each axis, and show each point on the supply curve.

Accepted Answer

The answer of Use the following supply schedule for cherries...

Question 13

The market for smart water is becoming more competitive. The increase in competition in this market is an example of how the market responds to

Accepted Answer

A)  changes in consumer tastes. 
B)  decreases in income. 
C)  changes in expected future prices. 
D)  decreases in the price of carbonated soda (a substitute for the product).

Question 14

A change in supply is represented by a shift of the supply curve.

Accepted Answer

A) True 
 B)False

Question 15

Figure 3-5 
-Refer to Figure 3-5. In a free market such as that depicted above, a shortage is eliminated by

Accepted Answer

A)  a price increase, increasing the supply and decreasing the demand. 
B)  a price decrease, decreasing the supply and increasing the demand. 
C)  a price decrease, decreasing the quantity supplied and increasing the quantity demanded. 
D)  a price increase, increasing the quantity supplied and decreasing the quantity demanded.

Question 16

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 S1 (point A). If the price of oranges, a substitute for apples, decreases and the wages of apple workers increase, how will the equilibrium point change?

Accepted Answer

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.

Question 17

Figure 3-1 
-Refer to Figure 3-1. An increase in the price of the product would be represented by a movement from

Accepted Answer

A)  A to B. 
B)  B to A. 
C)  D1 to D2. 
D)  D2 to D1.

Question 18

If virtual reality headsets are considered substitutes for game consoles, an increase in the price of virtual reality headsets would, all else equal,

Accepted Answer

A)  increase the demand for game consoles. 
B)  decrease the demand for game consoles. 
C)  increase the quantity of game consoles demanded. 
D)  decrease the quantity of game consoles demanded.

Question 19

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

Accepted Answer

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.

Question 20

A surplus occurs when the actual selling price is above the market equilibrium price.

Accepted Answer

A) True 
 B)False

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

Let D= demand, S = supply, P = equilibrium price, and Q= equilibrium quantity. What happens in the market for walnuts if the Centers for Disease Control and Prevention announces that consuming a half cup of walnuts each week helps to lower levels of bad cholesterol?

If the price of peaches, a substitute for plums, decreases the demand for plums will increase.

If a firm expects that the price of its product will be higher in the future than it is today, then

Farmers can raise either goats or ostriches on their land. Which of the following would cause the supply of goats to decrease?

A(n) is represented by a rightward shift of the demand curve while a(n) is represented by a movement along a given demand curve.

In January, buyers of gold expect that the price of gold will fall in February. What happens in the gold market in January, holding everything else constant?

Figure 3-5 -Refer to Figure 3-5. In a free market such as that depicted above, a surplus is eliminated by

A decrease in the number of firms in a market will cause supply to increase.

Use the following supply schedule for cherries to draw a graph of the supply curve. Be sure to label the supply curve and each axis, and show each point on the supply curve.

Use the following supply schedule for cherries to draw a graph of the supply curve. Be sure to label the supply curve and each axis, and show each point on the supply curve.

The market for smart water is becoming more competitive. The increase in competition in this market is an example of how the market responds to

A change in supply is represented by a shift of the supply curve.

Figure 3-5 -Refer to Figure 3-5. In a free market such as that depicted above, a shortage is eliminated by

Figure 3-1 -Refer to Figure 3-1. An increase in the price of the product would be represented by a movement from

If virtual reality headsets are considered substitutes for game consoles, an increase in the price of virtual reality headsets would, all else equal,

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 surplus occurs when the actual selling price is above the market equilibrium price.