Question 1

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 2

In most countries in South America,the legal driving age is 18.If the legal driving age in the United States was raised from 16 to 18,how would this affect the market for new and used automobiles? What would happen to the equilibrium price and quantity of new and used automobiles?

Accepted Answer

The answer of In most countries in South America,the legal...

Question 3

Explain the difference between substitutes and complements.

Accepted Answer

The answer of Explain the difference between substitutes and complements....

Question 4

Even when the demand for one good is high,the price of the good is also affected by supply.The textbook illustrates this by comparing the price of two items that were auctioned on the same day.Which of the following describes the results of the auction?

Accepted Answer

A) A letter written by Abraham Lincoln sold for a higher price than a letter written by John Wilkes Booth. 
B) A letter written by Abraham Lincoln was sold for a higher price than a letter written by Adam Smith. 
C) A letter written by John Wilkes Booth sold for a higher price than a letter written by Lee Harvey Oswald. 
D) A letter written by John Wilkes Booth sold for a higher price than a letter written by Abraham Lincoln.

Question 5

Figure 3-5 
-Refer to Figure 3-5.At a price of $20,the quantity sold

Accepted Answer

A) is 0 units. 
B) is 4 units. 
C) is 8 units. 
D) cannot be determined.

Question 6

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

Accepted Answer

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

Question 7

How has the growing popularity of factory outlet stores affected the market for clothing at retail department stores?

Accepted Answer

A) The demand curve for clothing at retail department stores shifts to the right. 
B) The demand curve for clothing at retail department stores shifts to the left. 
C) The supply curve for clothing at retail department stores shifts to the right. 
D) The supply curve for clothing at retail department stores shifts to the left.

Question 8

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

Accepted Answer

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

Question 9

If the demand curve for a product shifts to the right and the supply curve for the product shifts to the left,equilibrium price and equilibrium quantity will both increase.

Accepted Answer

A) True 
 B)False

Question 10

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 11

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

Accepted Answer

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

Question 12

Select the phrase that correctly completes the following statement."A decrease in the expected future price caused an increase in the supply of smartphones.As a result,

Accepted Answer

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

Question 13

Figure 3-2 
-Refer to Figure 3-2.An increase in the expected future 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 14

In April,market analysts predict that the price of titanium will fall in May.What happens in the titanium market in April,holding everything else constant?

Accepted Answer

A) The supply curve shifts to the right. 
B) The supply curve shifts to the left. 
C) The quantity demanded and the quantity supplied increase. 
D) The demand curve shifts to the right.

Question 15

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 D1 and S1 (point A).If the price of motorcycle engines increases,and the wages of motorcycle 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 16

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

Accepted Answer

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

Question 17

If the demand for a product decreases and the supply of the product does not change,equilibrium price and equilibrium quantity will both increase.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following would cause a decrease in the equilibrium price and decrease in the equilibrium quantity of papayas?

Accepted Answer

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

Question 19

Suppose that when the price of pickles decreases,Teddy increases his purchase of ketchup.To Teddy,

Accepted Answer

A) pickles and ketchup are complements. 
B) pickles and ketchup and substitutes. 
C) pickles and ketchup are normal goods. 
D) pickles are a normal good and ketchup is an inferior good.

Question 20

Electric car enthusiasts want to buy more electric cars at a lower price.All of the following events would have this effect except

Accepted Answer

A) technological advancement in the production of electric car batteries. 
B) an increase in the number of manufacturers of electric cars. 
C) a decrease in the price of lithium,which is used in the electric car batteries. 
D) an increase in the price of gasoline.

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