Question 1

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 2

If the price of smartphones was to increase, then

Accepted Answer

A)  the demand for smartphone apps would decrease. 
B)  the demand for smartphone apps would increase. 
C)  the quantity of smartphone apps demanded would increase. 
D)  the quantity of smartphone apps demanded would decrease.

Question 3

Select the phrase that correctly completes the following statement. "A decrease in the number of manufacturers caused a decrease in the supply of sailboats. As a result,

Accepted Answer

A)  the price of sailboats increased and the demand for sailboats decreased." 
B)  the equilibrium quantity of sailboats increased." 
C)  the price of sailboats increased and the quantity demanded of sailboats decreased." 
D)  the price of sailboats increased. The higher price caused the supply of sailboats to increase."

Question 4

If in the market for peaches, the supply curve has shifted to the left,

Accepted Answer

A)  the supply of peaches has increased. 
B)  the supply of peaches has decreased. 
C)  the quantity of peaches supplied has increased. 
D)  the quantity of peaches supplied has decreased.

Question 5

The market for smartphones has become very competitive. The increase in competition in this market is an example of how the market responds to

Accepted Answer

A)  decreases in the price of desktop computers (a substitute for the product). 
B)  increases in income. 
C)  changes in population. 
D)  changes in consumer tastes.

Question 6

From a supply perspective, what impact would an increase in the price of motorcycles have on the market for motorcycles?

Accepted Answer

The answer of From a supply perspective, what impact would...

Question 7

Figure 3-8 
-Which of the following statements is true?

Accepted Answer

A)  An increase in supply causes a change in equilibrium price; the change in price does not cause a further change in demand or supply. 
B)  A decrease in supply causes equilibrium price to rise; the increase in price then results in a decrease in demand. 
C)  If both demand and supply increase, there must be an increase in equilibrium price; equilibrium quantity may either increase or decrease. 
D)  If demand decreases and supply increases, one cannot determine if equilibrium price will increase or decrease without knowing which change is greater.

Question 8

If the price of peaches, a substitute for plums, decreases, the demand for plums will increase.

Accepted Answer

A) True 
 B)False

Question 9

Figure 3-1 
-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 10

Draw a supply and demand graph showing an equilibrium price of $50 and an equilibrium quantity of 200 units. Explain what would happen if the selling price was $75, and illustrate this on the graph. Explain what would happen if the selling price was $25, and illustrate this on the graph. Be sure to label each axis and curve on the graph.

Accepted Answer

The answer of Draw a supply and demand graph showing...

Question 11

Orange juice drinkers want to consume more orange juice at a lower price. Which of the following events would have this effect?

Accepted Answer

A)  a decrease in the price of orange juice processing 
B)  an increase in the cost of fertilizer used for orange groves 
C)  a decrease in income, assuming orange juice is a normal good 
D)  a decrease in the population

Question 12

Which of the following would shift the supply curve for MP3 players to the right?

Accepted Answer

A)  an increase in the price of a substitute in production 
B)  an increase in consumer income (assuming that all MP3 players are normal goods) 
C)  a decrease in the number of firms that produce MP3 players 
D)  a decrease in the price of an input used to produce MP3 players

Question 13

Peanut butter and jelly are complements. If the price of peanut butter increases, the demand for jelly will increase.

Accepted Answer

A) True 
 B)False

Question 14

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 15

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.

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