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

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Question 101

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

A) A to B.
B) B to A.
C) S₁ to S₂.
D) S₂ to S₁.

E) A) and B)
F) B) and C)

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Question 102

Multiple Choice

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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,

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 demanded of smartphones increased."
D) the price of smartphones decreased.The lower price caused the supply of smartphones to decrease."

E) A) and B)
F) A) and C)

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Question 103

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Table 3-3 -Refer to Table 3-3.The table contains information about the sorghum market.Use the table to answer the following questions. a.What are the equilibrium price and quantity of sorghum? b.Suppose the prevailing price is $6 per bushel.Is there a shortage or a surplus in the market? c.What is the quantity of the shortage or surplus? d.How many bushels will be sold if the market price is $6 per bushel? e.If the market price is $6 per bushel,what must happen to restore equilibrium in the market? f.At what price will suppliers be able to sell 36,000 bushels of sorghum? g.Suppose the market price is $14 per bushel.Is there a shortage or a surplus in the market? h.What is the quantity of the shortage or surplus? i.How many bushels will be sold if the market price is $14 per bushel? j.If the market price is $14 per bushel,what must happen to restore equilibrium in the market?

Hurricane Katrina damaged a large portion of oil refining and pipeline capacity in the Gulf coast states.In the market for gasoline,

Table 3-1 -Refer to Table 3-1.The table above shows the demand schedules for Kona coffee of two individuals (Luke and Ravi) and the rest of the market.If the price of Kona coffee rises from $4 to $5,the market quantity demanded would

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

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

"The price of digital cameras fell because of improvements in production technology.As a result,the demand for non-digital cameras decreased.This caused the price of non-digital cameras to fall; as the price of non-digital cameras fell the demand for non-digital cameras decreased even further." Evaluate this statement.

Table 3-2 -Refer to Table 3-2.The table above shows the demand schedules for cashews of two individuals (Jordy and Amy) and the rest of the market.At a price of $6,the quantity demanded in the market would be

If the demand for a product increases and the supply of the same product decreases,the equilibrium price will increase.

Explain the difference between substitutes and complements.

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?

Figure 3-1 -Refer to Figure 3-1.An increase in the price of a complement would be represented by a movement from

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

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?

At market equilibrium,

Cole was discussing the market for cocoa beans with his friend John Schmidt.Cole said,"Ever since Venezuela announced that its cocoa harvest was its lowest ever in fifteen years,the price of cocoa beans has been rising and rising and people are buying more and more.I think the demand for cocoa beans must be upward sloping." Is Cole right? Briefly explain why or why not.

If a decrease in income leads to an increase in the demand for macaroni,then macaroni is

Suppose a drought resulted in a major reduction in the California lettuce crop.In the market for lettuce,

Figure 3-4 -Refer to Figure 3-4.At a price of $25,how many units will be sold?