Question 1

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 2

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 3

Let D = demand,S = supply,P = equilibrium price,and Q = equilibrium quantity.What happens in the market for electric vehicles if the government offers incentives to manufacturers to produce more electric vehicles?

Accepted Answer

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

Question 4

Figure 3-2 
-Refer to Figure 3-2.A decrease in the price of inputs 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 5

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 6

"Because apples and oranges are substitutes,an increase in the price of oranges will cause the demand for apples to increase.This initial shift in demand for apples results in a higher price for apples;this higher price will cause the demand curve for apples to shift to the right." Which of the following correctly comments on this statement?

Accepted Answer

A) The statement will be true if consumer tastes for apples and oranges do not change. 
B) The statement is false because a change in the price of apples would not change the demand for apples. 
C) The statement is false because oranges are inferior goods;apples are normal goods. 
D) The statement is false because one cannot assume that apples and oranges are substitutes for all consumers.

Question 7

If the price of pork rinds falls,the substitution effect due to the price change will cause

Accepted Answer

A) an increase in the demand for pork rinds. 
B) an increase in the demand for corn chips,a substitute for pork rinds. 
C) an increase in the quantity of pork rinds demanded. 
D) a decrease in the quantity of pork rinds demanded.

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

If the number of firms producing mouthwash increases and consumer preference for mouthwash increases,the equilibrium price of mouthwash will definitely 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 rice.What happens in this market if buyers expect the price of rice to fall?

Accepted Answer

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

Question 11

Holding everything else constant,a decrease in the price of bicycles will result in

Accepted Answer

A) a decrease in the quantity of bicycles demanded. 
B) an increase in the demand for bicycles. 
C) a decrease in the supply of bicycles. 
D) an increase in the quantity of bicycles demanded.

Question 12

Which of the following would cause the equilibrium price of ketchup to increase and the equilibrium quantity of ketchup to decrease?

Accepted Answer

A) a decrease in the price of tomatoes 
B) an increase in the price of tomatoes 
C) an increase in the price of mustard,a substitute for ketchup 
D) an increase in the price of french fries,a complement for ketchup

Question 13

Buyers scrambled to secure stocks of Australian wool following a forecast of an 11 percent decline in wool production.What happens in the Australian wool market as a result of this announcement?

Accepted Answer

A) The demand curve for Australian wool shifts to the left in anticipation of higher prices in the future. 
B) The demand curve for Australian wool shifts to the right in anticipation of higher prices in the future. 
C) The quantity of Australian wool demanded increases in anticipation of higher prices in the future. 
D) The quantity of Australian wool demanded decreases in anticipation of lower quantities in the future.

Question 14

The income effect of a price change refers to the change in the quantity demanded of a good that results from a change in the price of a substitute product.

Accepted Answer

A) True 
 B)False

Question 15

The income effect of a price change refers to the change in the quantity demanded of a good that results from a change in the price of a complementary product.

Accepted Answer

A) True 
 B)False

Question 16

Figure 3-1 
-Refer to Figure 3-1.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) D1 to D2. 
D) D2 to D1.

Question 17

As the number of firms in a market increases,the supply curve will shift to the right and the equilibrium quantity will rise.

Accepted Answer

A) True 
 B)False

Question 18

Tomas increased his consumption of potato chips when the price of pistachios increased.For Tomas,potato chips and pistachios are

Accepted Answer

A) substitutes in consumption. 
B) both inferior goods. 
C) complements in consumption. 
D) both luxury goods.

Question 19

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 20

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

Accepted Answer

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

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

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?

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?

Let D = demand,S = supply,P = equilibrium price,and Q = equilibrium quantity.What happens in the market for electric vehicles if the government offers incentives to manufacturers to produce more electric vehicles?

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

If the price of pork rinds falls,the substitution effect due to the price change will cause

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

If the number of firms producing mouthwash increases and consumer preference for mouthwash increases,the equilibrium price of mouthwash will definitely increase.

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for rice.What happens in this market if buyers expect the price of rice to fall?

Holding everything else constant,a decrease in the price of bicycles will result in

Which of the following would cause the equilibrium price of ketchup to increase and the equilibrium quantity of ketchup to decrease?

Buyers scrambled to secure stocks of Australian wool following a forecast of an 11 percent decline in wool production.What happens in the Australian wool market as a result of this announcement?

The income effect of a price change refers to the change in the quantity demanded of a good that results from a change in the price of a substitute product.

The income effect of a price change refers to the change in the quantity demanded of a good that results from a change in the price of a complementary product.

Figure 3-1 -Refer to Figure 3-1.A decrease in the price of the product would be represented by a movement from

As the number of firms in a market increases,the supply curve will shift to the right and the equilibrium quantity will rise.

Tomas increased his consumption of potato chips when the price of pistachios increased.For Tomas,potato chips and pistachios are

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

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