Question 1

Exhibit 4-1 Supply and demand data $$\begin{array} { | c | c | c | } 
\hline \text { Price } & \begin{array} { c } 
\text { Quantity } \
\text { demanded }
\end{array} & \begin{array} { c } 
\text { Quantity } \
\text { supplied }
\end{array} \
\hline \$ 1.00 & 500 & 50 \
1.50 & 450 & 150 \
2.00 & 400 & 250 \
2.50 & 300 & 300 \
3.00 & 150 & 350 \
\hline
\end{array}$$ In Exhibit 4-1, suppose that a reduction in the price of an important input used to produce the good causes an increase in quantity supplied of 150 units at every price level. Assuming that demand does not change, the new equilibrium price will be:
A) $1.00.
B) $1.50.
C) $2.00.
D) $2.50.

Accepted Answer

The new supply curve will shift to the right, increasing the quantity supplied at every price level. The new equilibrium will be at the intersection of the new supply curve and the demand curve, which will be at a lower price and a higher quantity than the original equilibrium.

Question 2

Which of the following is the most likely effect of lower apple juice prices on the price and quantity purchased of orange juice, a substitute product?
A) The price of orange juice will increase, and the quantity purchased will fall.
B) The price of orange juice will fall, and the quantity purchased will increase.
C) The price of orange juice will increase, and the quantity purchased will increase.
D) The price of orange juice will fall, and the quantity purchased will fall.

Accepted Answer

When the price of apple juice decreases, consumers are likely to switch from orange juice to apple juice, reducing the demand for orange juice. This leads to a decrease in both the price and quantity purchased of orange juice.

Question 3

If we observe a decrease in the price of a good and a decrease in the amount of the good bought and sold, this could be explained by a(an):
A) increase in the supply of the good.
B) increase in the demand for the good.
C) decrease in the demand for the good.
D) decrease in the supply of the good.

Accepted Answer

A decrease in the price of a good would typically increase the quantity demanded according to the law of demand. However, the fact that the amount of the good bought and sold decreased suggests that there was a larger decrease in demand than there was an increase in quantity demanded due to the lower price. Thus, we can conclude that the decrease in the amount of the good bought and sold is due to a decrease in the demand for the good.

Question 4

Exhibit 4-2 Supply and demand curves The market shown in Exhibit 4-2 is initially in equilibrium at E₃. Changes in market conditions result in a new equilibrium at E₄. This change is stated as a(n): A) increase in demand and an increase in supply. B) decrease in demand and a decrease in quantity supplied. C) increase in supply and an increase in quantity demanded. D) decrease in supply and a decrease in quantity demanded.

Accepted Answer

The answer of Exhibit 4-2 Supply and demand curves 
The...

Question 5

If the demand for a good decreased, what would be the effect on the equilibrium price and quantity?
A) Price would increase, and quantity would decrease.
B) Price would decrease, and quantity would decrease.
C) Price would increase, and quantity would increase.
D) Price would decrease, and quantity would increase.

Accepted Answer

When the demand for a good decreases, there is excess supply in the market. Producers will have to lower the price of the good to sell it, which leads to a decrease in equilibrium price. Additionally, since fewer people want to buy the good, there will also be a decrease in equilibrium quantity.

Question 6

If we observe a decrease in the price of a good and an increase in the amount of the good bought and sold, this could be explained by a(n):
A) increase in the supply of the good.
B) increase in the demand for the good.
C) decrease in the demand for the good.
D) decrease in the supply of the good.

Accepted Answer

An increase in the supply of a good means that more of the good is available at every price level. This leads to a decrease in the price of the good, as sellers are willing to accept less to sell their higher quantity. At the same time, the lower price makes the good more attractive to buyers, leading to an increase in the quantity bought and sold.

Question 7

Exhibit 4-2 Supply and demand curves In Exhibit 4-2 an increase in supply would cause a movement from which equilibrium point to another, other things being equal? A) E₁ to E₂. B) E₁ to E₃. C) E₄ to E₁. D) E₃ to E₄.

Accepted Answer

The answer of Exhibit 4-2 Supply and demand curves 
In...

Question 8

Exhibit 4-2 Supply and demand curves In Exhibit 4-2, which of the following might cause a shift from S₁ to S₂? A) A decrease in input prices. B) A decrease in consumer prices. C) An increase in input prices. D) An increase in consumer income.

Accepted Answer

The answer of Exhibit 4-2 Supply and demand curves 
In...

Question 9

Exhibit 4-2 Supply and demand curves In Exhibit 4-2, a decrease in quantity demanded would cause a movement from which equilibrium point to another, other things being equal? A) E₁ to E₂. B) E₁ to E₃. C) E₄ to E₁. D) E₃ to E₄.

Accepted Answer

The answer of Exhibit 4-2 Supply and demand curves 
In...

Question 10

If there is a decrease in demand for lettuce, we would expect:
A) both the price and quantity sold to increase.
B) both the price and quantity sold to decrease.
C) the price to decrease and the quantity sold to increase.
D) the price to increase and the quantity sold to decrease.

Accepted Answer

A decrease in demand for lettuce would lead to both the price and quantity sold to decrease, as sellers would have to lower prices to attract buyers, and fewer units would be sold due to the lower demand.

Question 11

Exhibit 4-2 Supply and demand curves The market shown in Exhibit 4-2 is initially in equilibrium at E₁. Changes in market conditions result in a new equilibrium at E₂. This change is stated as a(n): A) increase in supply and an increase in quantity demanded. B) increase in supply and a decrease in demand. C) decrease in supply and a decrease in quantity demanded. D) increase in demand and an increase in supply.

Accepted Answer

The answer of Exhibit 4-2 Supply and demand curves 
The...

Question 12

Exhibit 4-2 Supply and demand curves The market shown in Exhibit 4-2 is initially in equilibrium at point E₃. Union negotiations for workers producing good X result in a wage increase. Other things being equal, which of the following is the new equilibrium after this wage increase is in effect? A) E₁. B) E₂. C) E₃. D) E₄.

Accepted Answer

The answer of Exhibit 4-2 Supply and demand curves 
The...

Question 13

Over a ten year period, the monthly charge for cellular phone service decreased from $120 per month to $30 per month. At the same time, the number of subscribers increased from less than 10 million to more than 75 million. Which of the following provides the best explanation for these changes?
A) An increase in consumer income over this ten year period
B) A reduction in the price of residential phone service, a substitute for cellular phone service
C) An increase in the wages of workers in the cellular phone industry
D) Technological improvements that reduced the cost of supplying cellular phone service

Accepted Answer

Technological improvements that reduced the cost of supplying cellular phone service led to a decrease in the monthly charge for the service. This, in turn, led to an increase in the number of subscribers, as the service became more affordable for a larger segment of the population. An increase in consumer income (A) or wages in the industry (C) would not necessarily lead to a decrease in prices or an increase in subscribers. The reduction in the price of residential phone service (B) may have had some impact, but it is unlikely to have been the primary driver of the changes observed in the cellular phone market.

Question 14

Consider the market for grapes. An increase in the wage paid to grape pickers will cause the:
A) demand curve for grapes to shift to the right, resulting in a higher equilibrium price for grapes and a reduction in the quantity consumed.
B) demand curve for grapes to shift to the left, resulting in a lower equilibrium price for grapes and an increase in the quantity consumed.
C) supply curve for grapes to shift to the right, resulting in a lower equilibrium price for grapes and an increase in the quantity consumed.
D) supply curve for grapes to shift to the left, resulting in a higher equilibrium price for grapes and a decrease in the quantity consumed.

Accepted Answer

An increase in the wage paid to grape pickers will increase the cost of production for grape farmers, which will shift the supply curve for grapes to the left. This will result in a higher equilibrium price for grapes and a decrease in the quantity consumed, as the higher cost of production will lead to a decrease in the amount of grapes supplied to the market. Therefore, choice D is the best answer.

Question 15

How would a decrease in the price of the feed grains used to feed cattle affect the market for beef?
A) The demand for beef would increase, increasing beef prices.
B) The demand for beef would decrease, decreasing beef prices.
C) The supply of beef would increase, decreasing beef prices.
D) The supply of beef would decrease, increasing beef prices.

Accepted Answer

A decrease in the price of feed grains used to feed cattle would decrease the cost of producing beef for farmers. This would increase the supply of beef, as farmers are now able to produce more beef at a lower cost. With an increase in supply, the price of beef would decrease as there is now more beef available on the market.

Question 16

How would a decrease in consumer income affect the market for new automobiles, a normal good?
A) Demand would decrease, leading to an increase in price and a reduction in quantity sold.
B) Demand would decrease, leading to a reduction in price and a reduction in quantity sold.
C) Demand would increase, leading to an increase in price and an increase in quantity sold.
D) Demand would increase, leading to a reduction in price and an increase in quantity sold.

Accepted Answer

A decrease in consumer income would likely lead to a decrease in demand for new automobiles as they are a normal good. This decrease in demand would result in a reduction in price and a reduction in quantity sold, as car manufacturers try to entice consumers with lower prices.

Question 17

Suppose a new law requires all piercing studios to pass tougher licensing tests and to begin using more costly sterilization methods. Other things constant, this law would cause:
A) an increase in the supply of piercings and a lower price for piercings.
B) an increase in the supply of piercings and a higher price for piercings.
C) a decrease in the supply of piercings and a higher price for piercings.
D) a decrease in the supply of piercings and a lower price for piercings.

Accepted Answer

The tougher licensing tests and costly sterilization methods would increase the costs for piercing studios, which would decrease the supply of piercings. As a result, this would lead to a higher price for piercings. Therefore, the correct choice is C.

Question 18

Which of the following would decrease the price of packaged hot dogs?
A) A decrease in the price of hot dog buns, a complement to packaged hot dogs.
B) An increase in the price of hamburger meat, a substitute for packaged hot dogs.
C) A technological advance that lowers the cost of producing packaged hot dogs.
D) An increase in the price of beef used to produce packaged hot dogs.

Accepted Answer

A technological advance that lowers the cost of producing packaged hot dogs would decrease the cost of producing hot dogs, leading to a decrease in price for consumers. Option A is incorrect because a decrease in the price of hot dog buns, a complement to packaged hot dogs, would not necessarily affect the price of the hot dogs themselves. Option B is incorrect because an increase in the price of hamburger meat, a substitute for packaged hot dogs, would not directly affect the price of hot dogs. Option D is incorrect because an increase in the price of beef used to produce packaged hot dogs would increase the cost of producing hot dogs, leading to an increase in price for consumers.

Question 19

After a hurricane in Florida knocked out the regional water supply for several days, the demand for bottled water increased sharply. In a market economy, how will this increase in demand affect the equilibrium price and quantity of bottled water?
A) Price will increase, and quantity will decrease.
B) Price will decrease, and quantity will decrease.
C) Price will decrease, and quantity will increase.
D) Price will increase, and quantity will increase.

Accepted Answer

An increase in demand for bottled water will shift the demand curve to the right, causing both the equilibrium price and quantity to increase. As consumers are willing to pay a higher price for the same quantity of water, firms will supply more water at the higher price, leading to an increase in quantity supplied. Therefore, the equilibrium price and quantity of bottled water will increase.

Question 20

If the supply of a good decreased, what would be the effect on the equilibrium price and quantity?
A) Price would increase, and quantity would decrease.
B) Price would decrease, and quantity would decrease.
C) Price would increase, and quantity would increase.
D) Price would decrease, and quantity would increase.

Accepted Answer

A decrease in supply would cause a shift of the supply curve to the left, resulting in a higher equilibrium price and a lower equilibrium quantity. This is because with less supply available, consumers would have to pay more to purchase the same amount of the good, and suppliers would reduce the amount they are willing to offer for sale at the original price level.

Quiz 4: Markets in Action

Which of the following is the most likely effect of lower apple juice prices on the price and quantity purchased of orange juice, a substitute product?

If we observe a decrease in the price of a good and a decrease in the amount of the good bought and sold, this could be explained by a(an) :

Exhibit 4-2 Supply and demand curves The market shown in Exhibit 4-2 is initially in equilibrium at E₃. Changes in market conditions result in a new equilibrium at E₄. This change is stated as a(n) :

If the demand for a good decreased, what would be the effect on the equilibrium price and quantity?

If we observe a decrease in the price of a good and an increase in the amount of the good bought and sold, this could be explained by a(n) :

Exhibit 4-2 Supply and demand curves In Exhibit 4-2 an increase in supply would cause a movement from which equilibrium point to another, other things being equal?

Exhibit 4-2 Supply and demand curves In Exhibit 4-2, which of the following might cause a shift from S₁ to S₂?

Exhibit 4-2 Supply and demand curves In Exhibit 4-2, a decrease in quantity demanded would cause a movement from which equilibrium point to another, other things being equal?

If there is a decrease in demand for lettuce, we would expect:

Exhibit 4-2 Supply and demand curves The market shown in Exhibit 4-2 is initially in equilibrium at E₁. Changes in market conditions result in a new equilibrium at E₂. This change is stated as a(n) :

Exhibit 4-2 Supply and demand curves The market shown in Exhibit 4-2 is initially in equilibrium at point E₃. Union negotiations for workers producing good X result in a wage increase. Other things being equal, which of the following is the new equilibrium after this wage increase is in effect?

Over a ten year period, the monthly charge for cellular phone service decreased from $120 per month to $30 per month. At the same time, the number of subscribers increased from less than 10 million to more than 75 million. Which of the following provides the best explanation for these changes?

Consider the market for grapes. An increase in the wage paid to grape pickers will cause the:

How would a decrease in the price of the feed grains used to feed cattle affect the market for beef?

How would a decrease in consumer income affect the market for new automobiles, a normal good?

Suppose a new law requires all piercing studios to pass tougher licensing tests and to begin using more costly sterilization methods. Other things constant, this law would cause:

Which of the following would decrease the price of packaged hot dogs?

After a hurricane in Florida knocked out the regional water supply for several days, the demand for bottled water increased sharply. In a market economy, how will this increase in demand affect the equilibrium price and quantity of bottled water?

If the supply of a good decreased, what would be the effect on the equilibrium price and quantity?

Quiz 4: Markets in Action

Which of the following is the most likely effect of lower apple juice prices on the price and quantity purchased of orange juice, a substitute product?

If we observe a decrease in the price of a good and a decrease in the amount of the good bought and sold, this could be explained by a(an) :

Exhibit 4-2 Supply and demand curves The market shown in Exhibit 4-2 is initially in equilibrium at E3. Changes in market conditions result in a new equilibrium at E4. This change is stated as a(n) :

If the demand for a good decreased, what would be the effect on the equilibrium price and quantity?

If we observe a decrease in the price of a good and an increase in the amount of the good bought and sold, this could be explained by a(n) :

Exhibit 4-2 Supply and demand curves In Exhibit 4-2 an increase in supply would cause a movement from which equilibrium point to another, other things being equal?

Exhibit 4-2 Supply and demand curves In Exhibit 4-2, which of the following might cause a shift from S1 to S2?

Exhibit 4-2 Supply and demand curves In Exhibit 4-2, a decrease in quantity demanded would cause a movement from which equilibrium point to another, other things being equal?

If there is a decrease in demand for lettuce, we would expect:

Exhibit 4-2 Supply and demand curves The market shown in Exhibit 4-2 is initially in equilibrium at E1. Changes in market conditions result in a new equilibrium at E2. This change is stated as a(n) :

Exhibit 4-2 Supply and demand curves The market shown in Exhibit 4-2 is initially in equilibrium at point E3. Union negotiations for workers producing good X result in a wage increase. Other things being equal, which of the following is the new equilibrium after this wage increase is in effect?

Over a ten year period, the monthly charge for cellular phone service decreased from $120 per month to $30 per month. At the same time, the number of subscribers increased from less than 10 million to more than 75 million. Which of the following provides the best explanation for these changes?

Consider the market for grapes. An increase in the wage paid to grape pickers will cause the:

How would a decrease in the price of the feed grains used to feed cattle affect the market for beef?

How would a decrease in consumer income affect the market for new automobiles, a normal good?

Suppose a new law requires all piercing studios to pass tougher licensing tests and to begin using more costly sterilization methods. Other things constant, this law would cause:

Which of the following would decrease the price of packaged hot dogs?

After a hurricane in Florida knocked out the regional water supply for several days, the demand for bottled water increased sharply. In a market economy, how will this increase in demand affect the equilibrium price and quantity of bottled water?

If the supply of a good decreased, what would be the effect on the equilibrium price and quantity?

Exhibit 4-2 Supply and demand curves The market shown in Exhibit 4-2 is initially in equilibrium at E₃. Changes in market conditions result in a new equilibrium at E₄. This change is stated as a(n) :

Exhibit 4-2 Supply and demand curves In Exhibit 4-2, which of the following might cause a shift from S₁ to S₂?

Exhibit 4-2 Supply and demand curves The market shown in Exhibit 4-2 is initially in equilibrium at E₁. Changes in market conditions result in a new equilibrium at E₂. This change is stated as a(n) :

Exhibit 4-2 Supply and demand curves The market shown in Exhibit 4-2 is initially in equilibrium at point E₃. Union negotiations for workers producing good X result in a wage increase. Other things being equal, which of the following is the new equilibrium after this wage increase is in effect?