Question 1

"The price of compact fluorescent light bulbs fell because of improvements in production technology.As a result,the demand for incandescent light bulbs decreased.This caused the price of incandescent light bulbs to fall; as the price of incandescent light bulbs fell the demand for incandescent light bulbs decreased even further." Evaluate this statement.

Accepted Answer

A)  The statement is false. A decrease in the price of compact fluorescent light bulbs would decrease the demand for incandescent light bulbs, but a decrease in the price of incandescent light bulbs would not cause the demand for incandescent light bulbs to decrease. 
B)  The statement is false because the demand for incandescent light bulbs would increase as the price of compact fluorescent light bulbs fell. 
C)  The statement is false because compact fluorescent light bulbs producers would not reduce their prices as a result of improvements in technology; doing so would reduce their profits. 
D)  The statement is false because it confuses the law of demand with the law of supply.

Question 2

Figure 3-5 
-Refer to Figure 3-5.At a price of $10,the quantity sold

Accepted Answer

A)  is 2 units. 
B)  is 4 units. 
C)  is 6 units. 
D)  is 8 units.

Question 3

For each of the following pairs of products state which are complements,which are substitutes,and which are unrelated.
a.Blu-ray discs and video-on-demand
b.Fiat 500 and Mini Cooper S
c.Toothpaste and toothbrush
d.Popcorn and snowboards
e.Razors and razor blades

Accepted Answer

The answer of For each of the following pairs of...

Question 4

Figure 3-7 
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for used clothing,an inferior good.Which panel describes what happens in this market as a result of a decrease in income?

Accepted Answer

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

Question 5

Figure 3-6 
-Refer to Figure 3-6.The figure above represents the market for canvas tote bags.Assume that the price of tote bags is $15.At this price

Accepted Answer

A)  the quantity demanded exceeds the quantity supplied of tote bags by 75. The price will eventually rise to $25 where quantity demanded will equal quantity supplied. 
B)  the demand exceeds the supply of tote bags by 55. Some consumers will have an incentive to offer to buy tote bags at a higher price. 
C)  there is a shortage, equal to 55 tote bags, that will be eliminated when the price rises to $25. 
D)  there is a shortage equal to 55 tote bags; the price of tote bags will rise until demand is equal to supply.

Question 6

Assume that both the demand curve and the supply curve for MP3 players shift to the right but the demand curve shifts more than the supply curve.As a result

Accepted Answer

A)  both the equilibrium price and quantity of MP3 players will increase. 
B)  the equilibrium price of MP3 players will increase; the equilibrium quantity may increase or decrease. 
C)  the equilibrium price of MP3 players may increase or decrease; the equilibrium quantity will increase. 
D)  the equilibrium price of MP3 players will decrease; the equilibrium quantity may increase or decrease.

Question 7

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 8

If a decrease in income leads to an increase in the demand for sardines,then sardines are

Accepted Answer

A)  an inferior good. 
B)  a neutral good. 
C)  a necessity. 
D)  a normal good.

Question 9

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?

Accepted Answer

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

Question 10

In 2004,hurricanes destroyed a large portion of Florida's grapefruit crop.How did this affect the market price and market quantity of grapefruit?

Accepted Answer

The answer of In 2004,hurricanes destroyed a large portion of...

Question 11

Auctions in recent years have resulted in higher prices paid for letters written by John Wilkes Booth than those written by Abraham Lincoln.What is a reason for this difference in price?

Accepted Answer

A)  There is a surplus of letters written by Booth and a shortage of letters written by Lincoln. 
B)  Many people are more fascinated by villains and anti-heroes than by heroic figures. 
C)  There are more letters available for collectors to buy that were written by Lincoln than there are letters that were written by Booth. 
D)  Booth was a well-known actor; the demand for his letters rose as wealthy actors attempted to buy them.

Question 12

Figure 3-6 
-Refer to Figure 3-6.The figure above represents the market for canvas tote bags.Compare the conditions in the market when the price is $50 and when the price is $35.Which of the following describes how the market differs at these prices?

Accepted Answer

A)  At each price there is a surplus; the surplus is greater at $35 than at $50. 
B)  The difference between quantity supplied and quantity demanded is greater at $50 than at $35. 
C)  At each price there is a surplus; firms will lower the equilibrium price in order to eliminate the surplus. 
D)  At each price the supply of tote bags exceeds that demand for tote bags.

Question 13

Which of the following would cause a decrease in the equilibrium price and an increase in the equilibrium quantity of salmon?

Accepted Answer

A)  a decrease in demand and an increase in supply 
B)  an increase in supply 
C)  an increase in supply and an increase in demand greater than the increase in supply 
D)  a decrease in demand and a decrease in supply

Question 14

Figure 3-7 
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for almonds.Which panel best describes what happens in this market when there is an increase in the productivity of almond harvesters?

Accepted Answer

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

Question 15

The phrase "demand has decreased" means that

Accepted Answer

A)  a demand curve has shifted to the left. 
B)  there has been an upward movement along a demand curve. 
C)  there has been a downward movement along a demand curve. 
D)  a demand curve has shifted to the right.

Question 16

Figure 3-2 
-Refer to Figure 3-2.A decrease in the price of the product 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 17

Figure 3-5 
-Refer to Figure 3-5.At a price of $20

Accepted Answer

A)  there would be a surplus of 8 units. 
B)  there would be a shortage of 8 units. 
C)  there would be a surplus of 0 units. 
D)  there would be a shortage of 4 units.

Question 18

Figure 3-1 
-Refer to Figure 3-1.A decrease in taste or preference 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 19

Figure 3-1 
-Refer to Figure 3-1.An increase in population 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 20

Assume that the demand curve for MP3 players shifts to the right and the supply curve for MP3 players shift to the left,but the supply curve shifts more than the demand curve.As a result

Accepted Answer

A)  both the equilibrium price and quantity of MP3 players will decrease. 
B)  the equilibrium price of MP3 players will decrease; the equilibrium quantity will increase. 
C)  the equilibrium price of MP3 players may increase or decrease; the equilibrium quantity will decrease. 
D)  the equilibrium price of MP3 players will increase; the equilibrium quantity will decrease.

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

Figure 3-5 -Refer to Figure 3-5.At a price of $10,the quantity sold

For each of the following pairs of products state which are complements,which are substitutes,and which are unrelated. a.Blu-ray discs and video-on-demand b.Fiat 500 and Mini Cooper S c.Toothpaste and toothbrush d.Popcorn and snowboards e.Razors and razor blades

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for used clothing,an inferior good.Which panel describes what happens in this market as a result of a decrease in income?

Figure 3-6 -Refer to Figure 3-6.The figure above represents the market for canvas tote bags.Assume that the price of tote bags is $15.At this price

Assume that both the demand curve and the supply curve for MP3 players shift to the right but the demand curve shifts more than the supply curve.As a result

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

If a decrease in income leads to an increase in the demand for sardines,then sardines are

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?

In 2004,hurricanes destroyed a large portion of Florida's grapefruit crop.How did this affect the market price and market quantity of grapefruit?

Auctions in recent years have resulted in higher prices paid for letters written by John Wilkes Booth than those written by Abraham Lincoln.What is a reason for this difference in price?

Figure 3-6 -Refer to Figure 3-6.The figure above represents the market for canvas tote bags.Compare the conditions in the market when the price is $50 and when the price is $35.Which of the following describes how the market differs at these prices?

Which of the following would cause a decrease in the equilibrium price and an increase in the equilibrium quantity of salmon?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for almonds.Which panel best describes what happens in this market when there is an increase in the productivity of almond harvesters?

The phrase "demand has decreased" means that

Figure 3-2 -Refer to Figure 3-2.A decrease in the price of the product would be represented by a movement from

Figure 3-5 -Refer to Figure 3-5.At a price of $20

Figure 3-1 -Refer to Figure 3-1.A decrease in taste or preference would be represented by a movement from

Figure 3-1 -Refer to Figure 3-1.An increase in population would be represented by a movement from

Assume that the demand curve for MP3 players shifts to the right and the supply curve for MP3 players shift to the left,but the supply curve shifts more than the demand curve.As a result