Question 1

Which of the following has occurred as the baby-boom generation ages?

Accepted Answer

A)  The demand for soft drinks has increased in the U.S. market. 
B)  The demand for soft drinks has decreased in the U.S. market. 
C)  The global demand for soft drinks has decreased. 
D)  The global demand for soft drinks has remained relatively low.

Question 2

The following appeared in a Florida newspaper a week after a hurricane hit the state."Floridians are relieved that the storm produced no fatalities but homeowners face weeks,if not months,of rebuilding.Matters are made worse by the soaring prices of plywood and other building materials that always follow in a hurricane's path.Complaints of profiteering and price gouging have not deterred firms from raising their prices by over 100 percent." Which of the following offers the best explanation for the price increases referred to in the article?

Accepted Answer

A)  The hurricane reduced the number of suppliers of building materials. 
B)  The hurricane created an artificial shortage of building materials. 
C)  The hurricane caused an increase in the demand for building materials. 
D)  There was a reduction in supply as firms shipped plywood and other materials to locations not affected by the storm.

Question 3

Discuss the correct and incorrect economic analysis in the following statement.
"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."

Accepted Answer

The answer of Discuss the correct and incorrect economic analysis...

Question 4

Figure 3-4 
-Refer to Figure 3-4.If the current market price is $10,the market will achieve equilibrium 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 5

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

Accepted Answer

A) True 
 B)False

Question 6

Figure 3-8 
-Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for sugar at the intersection of D1 and S2 (point B)) If there is an decrease in the price of fertilizer used on sugar cane and there is a decrease in tastes for sugar-sweetened soft drinks, how will the equilibrium point change?

Accepted Answer

A)  The equilibrium point will move from B to A. 
B)  The equilibrium point will move from B to C. 
C)  There will be no change in the equilibrium point. 
D)  The equilibrium point will move from B to E.

Question 7

Blu-ray players were introduced to the market in 2006,and new technology has allowed for the cost of manufacturing the players to decline significantly since the initial introduction.How did this change in technology affect the market for Blu-ray players?

Accepted Answer

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

Question 8

What is the law of supply? What does this law imply about the shape of the supply curve?

Accepted Answer

The answer of What is the law of supply? What...

Question 9

Olive oil producers want to sell more olive oil at a higher price.Which of the following events would have this effect?

Accepted Answer

A)  an increase in the price of olive oil presses 
B)  a decrease in the cost of transporting olive oil to markets 
C)  an increase in the price of land used to plant olives 
D)  research finds that consumption of olive oil reduces the risk of heart disease

Question 10

The law of demand implies,holding everything else constant,that

Accepted Answer

A)  as the price of bagels increases, the quantity of bagels demanded will decrease. 
B)  as the price of bagels increases, the demand for bagels will decrease. 
C)  as the price of bagels increases, the quantity of bagels demanded will increase. 
D)  as the price of bagels increases, the demand for bagels will increase.

Question 11

The popularity of digital cameras has enticed large discount stores like Wal-Mart and Costco to offer digital photo printing services.How does this affect the digital photo printing market?

Accepted Answer

A)  The demand curve for digital photo printing services shifts to the right. 
B)  The demand curve for digital photo printing services shifts to the left. 
C)  The supply curve for digital photo printing services shifts to the right. 
D)  The supply curve for digital photo printing services shifts to the left.

Question 12

What is the difference between an "increase in demand" and an "increase in quantity demanded"?

Accepted Answer

A)  There is no difference between the two terms; they both refer to a shift of the demand curve. 
B)  An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve. 
C)  There is no difference between the two terms; they both refer to a movement downward along a given demand curve. 
D)  An "increase in demand" is represented by a movement along a given demand curve, while an "increase in quantity demanded" is represented by a rightward shift of the demand curve.

Question 13

Buyers rush to purchase stocks in California vineyards following a forecast of a 30 percent decline in this year's grape harvest.What happens in the California wine market as a result of this announcement?

Accepted Answer

A)  The demand curve for California wine shifts to the left in anticipation of higher prices in the future. 
B)  The demand curve for California wine shifts to the right in anticipation of higher prices in the future. 
C)  The supply curve for California wine shifts to the right in anticipation of higher prices in the future. 
D)  The supply curve for California wine shifts to the left in anticipation of lower quantities in the future.

Question 14

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 15

Let D= demand,S = supply,P = equilibrium price,Q= equilibrium quantity.What happens in the market for tropical hardwood trees if the governments restrict the amount of forest lands that can be logged?

Accepted Answer

A)  D decreases, S no change, P and Q decrease 
B)  S decreases, D no change, P increases, Q decreases 
C)  D and S decrease, P and Q increase 
D)  D no change, S decreases, P increases, Q increases

Question 16

Which of the following is evidence of a surplus of bananas?

Accepted Answer

A)  Firms raise the price of bananas. 
B)  The price of bananas is lowered in order to increase sales. 
C)  The equilibrium price of bananas rises due to an increase in demand. 
D)  The quantity demanded of bananas is greater than the quantity supplied.

Question 17

Figure 3-2 
-Refer to Figure 3-2.A decrease in productivity would be represented by a movement from

Accepted Answer

A)  A to B. 
B)  B to A. 
C)  S1 to S2. 
D)  S2 to S1.

Question 18

Which of the following will shift the demand curve for a good?

Accepted Answer

A)  a change in the technology used to produce the good 
B)  an increase in the price of the good 
C)  a decrease in the price of a complementary good 
D)  a decrease in the price of the good

Question 19

At a product's equilibrium price

Accepted Answer

A)  the product's demand curve is the same as the product's supply curve. 
B)  the quantity of the product demanded is greater than the quantity of the product supplied. 
C)  the quantity of the product demanded is less than the quantity of the product supplied. 
D)  the product's demand curve crosses the product's supply curve.

Question 20

Figure 3-7 
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for women's clothing.Which panel best describes what happens in this market when the wages of seamstresses rise?

Accepted Answer

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

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