Question 1

If the price of train tickets decreases,what will be the impact in the market for bus travel?

Accepted Answer

A) The demand curve for bus travel shifts to the right. 
B) The quantity of bus travel demanded increases. 
C) The demand curve for bus travel shifts to the left. 
D) The quantity of bus travel demanded decreases.

Question 2

If the demand for letters written by Abraham Lincoln is higher than the demand for letters written by John Wilkes Booth,what would have to be true for the market equilibrium prices for these letters to be equal?

Accepted Answer

A) The supply of Lincoln letters would have to be less than the supply of Booth letters. 
B) The supply of Booth letters would have to be less than the supply of Lincoln letters. 
C) The supply of Lincoln letters and the supply of Booth letters would have to be equal. 
D) If the demand for Lincoln letters is greater than the demand for Booth letters, the market equilibrium price for Lincoln letters will always be greater than the market equilibrium price for Booth letters.

Question 3

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

Accepted Answer

A) Panel (a) 
B) Panel (b) 
C) Panel (c) 
D) Panel (d)

Question 4

Table 3-3
 $$\begin{array} { | c | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Kona Coffee } \
\text { Priceper lb. } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Luke's } \
\text { Quantity } \
\text { Demanded } \
\text { (lb.) }
\end{array} & \begin{array} { c } 
\text { Ravi's } \
\text { Quantity } \
\text { Demanded } \
\text { (lb.) }
\end{array} & \begin{array} { c } 
\text { Rest of } \
\text { Market } \
\text { Quantity } \
\text { Demanded } \
\text { (lb.) }
\end{array} & \begin{array} { c } 
\text { Market } \
\text { Quantity } \
\text { Demanded } \
\text { (lb.) }
\end{array} \
\hline \$ 10 & 3 & 0 & 23 & \
\hline 8 & 9 & 3 & 32 & \
\hline 6 & 14 & 7 & 68 & \
\hline 5 & 18 & 12 & 85 & \
\hline 4 & 22 & 18 & 110 & \
\hline
\end{array}$$
-Refer to Table 3-3.The table above shows the demand schedules for Kona coffee of two individuals (Luke and Ravi)and the rest of the market.If the price of Kona coffee falls from $6 to $4,the market quantity demanded would

Accepted Answer

A) decrease by 89 lb. 
B) increase by 26 lb. 
C) increase by 61 lb. 
D) increase by 110 lb.

Question 5

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 6

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.

Question 7

Last year,the Pottery Palace supplied 8,000 ceramic pots at $40 each.This year,the company supplied the same quantity of ceramic pots at $55 each.Based on this evidence,The Pottery Palace has experienced

Accepted Answer

A) a decrease in supply. 
B) an increase in supply. 
C) an increase in the quantity supplied. 
D) a decrease in the quantity supplied.

Question 8

Figure 3-6
 
-Refer to Figure 3-6.The figure above represents the market for coffee grinders.Assume that the price of coffee grinders is $50.At this price

Accepted Answer

A) the quantity supplied exceeds the quantity supplied by 100.The price will eventually fall to $25 where quantity demanded will equal quantity supplied. 
B) the supply exceeds the demand by 90.Some producers will have an incentive to offer to sell coffee grinders at a lower price. 
C) there is a surplus equal to 90 coffee grinders that will be eliminated when the price falls to $25. 
D) there is a surplus equal to 90 coffee grinders and the price of coffee grinders will fall until demand is equal to supply.

Question 9

An increase in the equilibrium quantity of a product will result

Accepted Answer

A) when the quantity supplied of the product exceeds the quantity demanded. 
B) when there is an increase in supply and an increase in demand for the product. 
C) when there is an increase in supply and a decrease in demand for the product. 
D) when there is an decrease in demand and a decrease in the cost of inputs used to make the product.

Question 10

The Internet has created a new category in the book selling market,namely,the "barely used" book.How does the availability of barely used books affect the market for new books?

Accepted Answer

A) The demand curve for new books shifts to the right. 
B) The demand curve for new books shifts to the left. 
C) The supply curve for new books shifts to the right. 
D) The supply curve for new books shifts to the left.

Question 11

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 12

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?

Accepted Answer

A) Panel (a) 
B) Panel (b) 
C) Panel (c) 
D) Panel (d)

Question 13

Elvira decreased her consumption of bananas when the price of peanut butter increased.For Elvira,peanut butter and bananas are

Accepted Answer

A) substitutes in consumption. 
B) both inferior goods. 
C) complements in consumption. 
D) both luxury goods.

Question 14

Assume that in recent years the cost of producing microbrew beer in the U.S.has decreased largely due to technological improvements.At the same time,more and more Americans prefer microbrew beer over wine.Which of the following best explains the effect of these events in the microbrew beer market?

Accepted Answer

A) The supply curve has shifted to the right and the demand curve has shifted to the left.As a result there has been a decrease in the equilibrium quantity and an uncertain effect on the equilibrium price. 
B) Both the supply and demand curves have shifted to the right.As a result, there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price. 
C) Both the supply and demand curves have shifted to the right.As a result, there has been an increase in both the equilibrium price and the equilibrium quantity. 
D) The supply curve has shifted to the left and the demand curve has shifted to the right.As a result, there has been an increase in the equilibrium price and an uncertain effect on the equilibrium quantity.

Question 15

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)?

Accepted Answer

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.

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

If the price of train tickets decreases,what will be the impact in the market for bus travel?

If the demand for letters written by Abraham Lincoln is higher than the demand for letters written by John Wilkes Booth,what would have to be true for the market equilibrium prices for these letters to be equal?

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

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?

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?

Last year,the Pottery Palace supplied 8,000 ceramic pots at $40 each.This year,the company supplied the same quantity of ceramic pots at $55 each.Based on this evidence,The Pottery Palace has experienced

Figure 3-6 -Refer to Figure 3-6.The figure above represents the market for coffee grinders.Assume that the price of coffee grinders is $50.At this price

An increase in the equilibrium quantity of a product will result

The Internet has created a new category in the book selling market,namely,the "barely used" book.How does the availability of barely used books affect the market for new books?

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

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?

Elvira decreased her consumption of bananas when the price of peanut butter increased.For Elvira,peanut butter and bananas are

Assume that in recent years the cost of producing microbrew beer in the U.S.has decreased largely due to technological improvements.At the same time,more and more Americans prefer microbrew beer over wine.Which of the following best explains the effect of these events in the microbrew beer market?

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) ?