Question 1

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)

Question 2

Select the phrase that correctly completes the following statement."A positive change in technology caused an increase in the supply of flat-screen televisions.As a result

Accepted Answer

A) the price of flat-screen televisions decreased and the demand for flat-screen televisions increased." 
B) the equilibrium quantity of flat-screen televisions decreased." 
C) the price of flat-screen televisions decreased and the quantity demanded of flat-screen televisions increased." 
D) the price of flat-screen televisions decreased.The lower price caused the supply of flat-screen televisions to decrease."

Question 3

When the price of a good rises,consumers buy a smaller quantity because of the ________ effect and the ________ effect.

Accepted Answer

A) substitution; income 
B) normal; inferior 
C) substitute; complement; 
D) supply; demand

Question 4

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 5

Suppose a negative technological change in the production of disease-resistant wheat caused the price of wheat to rise.Holding everything else constant,how would this affect the market for corn (a substitute for wheat)?

Accepted Answer

A) The supply of corn would decrease and the equilibrium price of corn would increase. 
B) The demand for corn would increase and the equilibrium price of corn would increase. 
C) The demand for corn would decrease because consumers could afford to buy less wheat and corn. 
D) The demand for corn would increase and the equilibrium price of corn would decrease.

Question 6

Suppose that when the price of hamburgers decreases,the Landry family decreases their purchases of chicken nuggets.To the Landry family

Accepted Answer

A) hamburgers and chicken nuggets are complements. 
B) hamburgers and chicken nuggets are inferior goods. 
C) hamburgers and chicken nuggets are normal goods. 
D) hamburgers and chicken nuggets are substitutes.

Question 7

Cole was discussing the market for cocoa beans with his friend John Schmidt.Cole said,"Ever since Venezuela announced that its cocoa harvest was its lowest ever in fifteen years,the price of cocoa beans has been rising and rising and people are buying more and more.I think the demand for cocoa beans must be upward sloping." Is Cole right? Briefly explain why or why not.

Accepted Answer

The answer of Cole was discussing the market for cocoa...

Question 8

Figure 3-1
 
-Refer to Figure 3-1.If the product represented is a normal good,an increase in income 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 9

Which of the following would cause the equilibrium price of ketchup to increase and the equilibrium quantity of ketchup to decrease?

Accepted Answer

A) a decrease in the price of tomatoes 
B) an increase in the price of tomatoes 
C) an increase in the price of mustard, a substitute for ketchup 
D) an increase in the price of french fries, a complement for ketchup

Question 10

Studies have shown that drinking one glass of red wine per day may help prevent heart disease.Assume this is true,and favorable weather has increased the grape harvest of California vineyards.In the market for red wine,these two developments would

Accepted Answer

A) increase demand and decrease supply, resulting in an increase in the equilibrium quantity and a decrease in the equilibrium price of red wine. 
B) increase demand and increase supply resulting in an increase in the equilibrium quantity and an uncertain effect on the equilibrium price of red wine. 
C) increase demand and increase supply, resulting in an increase in the equilibrium price and an uncertain effect on the equilibrium quantity of red wine. 
D) increase demand and increase supply, resulting in an increase in both the equilibrium price and the equilibrium quantity of red wine.

Question 11

Table 3-2
 $$\begin{array} { | c | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Caviar } \
\text { Price per oz. } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Ari's } \
\text { Quantity } \
\text { Demanded } \
\text { (oz.) }
\end{array} & \begin{array} { c } 
\text { Sonia's } \
\text { Quantity } \
\text { Demanded } \
\text { (oz.) }
\end{array} & \begin{array} { c } 
\text { Rest of } \
\text { Market } \
\text { Quantity } \
\text { Demanded } \
\text { (oz.) }
\end{array} & \begin{array} { c } 
\text { Market } \
\text { Quantity } \
\text { Demanded } \
\text { (oz.) }
\end{array} \
\hline \$ 75 & 6 & 0 & 46 & \
\hline 65 & 18 & 6 & 64 & \
\hline 55 & 28 & 14 & 136 & \
\hline 45 & 36 & 24 & 170 & \
\hline 35 & 44 & 36 & 220 & \
\hline
\end{array}$$
-Refer to Table 3-2.The table above shows the demand schedules for caviar of two individuals (Ari and Sonia)and the rest of the market.At a price of $55,the quantity demanded in the market would be

Accepted Answer

A) 42 oz. 
B) 136 oz. 
C) 178 oz. 
D) 233 oz.

Question 12

If the price of peaches,a substitute for plums,increases the demand for plums will decrease.

Accepted Answer

A) True 
 B)False

Question 13

Digital video recorders (DVRs)were introduced to the market in 1999,and new technology has allowed for the cost of manufacturing the recorders to decline significantly since the initial introduction.How did this change in technology affect the market for DVRs?

Accepted Answer

A) The new technology caused an increase in the supply of DVRs and a decrease in price of DVRs. 
B) The new technology caused an increase in the supply of DVRs and an increase in price of DVRs. 
C) The new technology caused an decrease in the demand for DVRs. 
D) The new technology caused an increase in the quantity of DVRs supplied.

Question 14

Scarcity is defined as the situation that exists when the quantity demanded for a good is greater than the quantity supplied.

Accepted Answer

A) True 
 B)False

Question 15

In each of the following situations,list what will happen to the equilibrium price and the equilibrium quantity for a particular product,which is a normal good.
a.The population increases and the price of inputs increase
b.The price of a complement increases and technology advances
c.The number of firms in the market increases and income increases
d.Price is expected to increase in the future
e.Consumer preference increases and the price of a substitute in production decreases

Accepted Answer

The answer of In each of the following situations,list what...

Question 16

Draw a supply and demand graph showing an equilibrium price of $50 and an equilibrium quantity of 200 units.Explain what would happen if the selling price was $75,and illustrate this on the graph.Explain what would happen if the selling price was $25,and illustrate this on the graph.Be sure to label each axis and curve on the graph.

Accepted Answer

The answer of Draw a supply and demand graph showing...

Question 17

All else equal,as the price of a product falls,the quantity supplied decreases.

Accepted Answer

A) True 
 B)False

Question 18

Figure 3-4
 
-Refer to Figure 3-4.If the price is $25

Accepted Answer

A) there would be a surplus of 300 units. 
B) there would be a shortage of 300 units. 
C) there would be a surplus of 200 units. 
D) there would be a shortage of 200 units.

Question 19

An increase in the demand for LED light bulbs due to changes in consumer tastes,accompanied by an increase in the supply of LED light bulbs as a result of government subsidies,will result in

Accepted Answer

A) an increase in the equilibrium quantity of LED light bulbs and no change in the equilibrium price. 
B) an increase in the equilibrium price of LED light bulbs and no change in the equilibrium quantity. 
C) an increase in the equilibrium price of LED light bulbs; the equilibrium quantity may increase or decrease. 
D) an increase in the equilibrium quantity of LED light bulbs; the equilibrium price may increase or decrease.

Question 20

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.

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

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?

Select the phrase that correctly completes the following statement."A positive change in technology caused an increase in the supply of flat-screen televisions.As a result

When the price of a good rises,consumers buy a smaller quantity because of the effect and the effect.

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

Suppose a negative technological change in the production of disease-resistant wheat caused the price of wheat to rise.Holding everything else constant,how would this affect the market for corn (a substitute for wheat) ?

Suppose that when the price of hamburgers decreases,the Landry family decreases their purchases of chicken nuggets.To the Landry family

Figure 3-1 -Refer to Figure 3-1.If the product represented is a normal good,an increase in income would be represented by a movement from

Which of the following would cause the equilibrium price of ketchup to increase and the equilibrium quantity of ketchup to decrease?

Studies have shown that drinking one glass of red wine per day may help prevent heart disease.Assume this is true,and favorable weather has increased the grape harvest of California vineyards.In the market for red wine,these two developments would

If the price of peaches,a substitute for plums,increases the demand for plums will decrease.

Digital video recorders (DVRs) were introduced to the market in 1999,and new technology has allowed for the cost of manufacturing the recorders to decline significantly since the initial introduction.How did this change in technology affect the market for DVRs?

Scarcity is defined as the situation that exists when the quantity demanded for a good is greater than the quantity supplied.

All else equal,as the price of a product falls,the quantity supplied decreases.

Figure 3-4 -Refer to Figure 3-4.If the price is $25

An increase in the demand for LED light bulbs due to changes in consumer tastes,accompanied by an increase in the supply of LED light bulbs as a result of government subsidies,will result in

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