Question : 3.4   The Effect of Demand and Supply Shifts Equilibrium 1) Let : 1267042

3.4   The Effect of Demand and Supply Shifts on Equilibrium

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?

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

2) In 2004, hurricanes destroyed a large portion of Florida’s orange and grapefruit crops. In the market for citrus fruit,

A) the supply curve shifted to the right resulting in an increase in the equilibrium price.

B) the supply curve shifted to the left resulting in an increase in the equilibrium price.

C) the demand curve shifted to the right resulting in an increase in the equilibrium price.

D) the demand curve shifted to the left resulting in a decrease in the equilibrium price.

3) Olive oil producers want to sell more olive oil at a higher price. Which of the following events would have this effect?

A) an increase in the price of olive oil presses

B) a decrease in the cost of transporting olive oil to markets

C) an increase in the price of land used to plant olives

D) research finds that consumption of olive oil reduces the risk of heart disease

4) Which of the following would cause both the equilibrium price and equilibrium quantity of cotton (assume that cotton is a normal good) to increase?

A) an increase in consumer income

B) a drought that sharply reduces cotton output

C) a decrease in consumer income

D) unusually good weather that results in a bumper crop of cotton

5) Which of the following would cause the equilibrium price of white bread to decrease and the equilibrium quantity of white bread to increase?

A) a decrease in the price of flour

B) an increase in the price of flour

C) an increase in the price of rye bread, a substitute for white bread

D) an increase in the price of butter, a complement for white bread

6) Assume that the hourly price for the services of tarot card readers has risen and sales of these services have also risen.  One can conclude that

A) the law of demand has been violated.

B) the number of tarot card readers has increased.

C) the demand for tarot card readers has increased.

D) tarot card readers are deliberately charging high prices because they provide services for superstitious clients.

7) Prices of California Merlot wine (assume that this is a normal good) have risen steadily in recent years. Over this same period, prices for French oak barrels used for wine storage have dropped and consumer incomes have risen. Which of the following best explains the rising prices of California Merlots?

A) The supply curve for Merlot has shifted to the right while the demand curve for Merlot has shifted to the left.

B) The demand curve for Merlot has shifted to the right more than the supply curve has shifted to the right.

C) The demand curve and the supply curve for Merlot have both shifted to the left.

D) The supply curve for Merlot has shifted to the right more than the demand curve has shifted to the right.

8) In recent years the cost of producing organic produce in the U.S. has decreased largely due technological advancement. At the same time, more and more Americans prefer organic produce over conventional produce.  Which of the following best explains the effect of these events in the organic produce market?

A) The supply curve has shifted to the left and the demand curve has shifted to the right.  As a result there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price.

B) Both the supply and demand curves have shifted to the right.  As a result, there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price.

C) Both the supply and demand curves have shifted to the right.  As a result, there has been an increase in both the equilibrium price and the equilibrium quantity.

D) The supply curve has shifted to the left and the demand curve has shifted to the right.  As a result, there has been an increase in the equilibrium price and an uncertain effect on the equilibrium quantity.

9) An article in the Wall Street Journal in early 2001 noted two developments in the market for laser eye surgery. The first development concerned side effects from the surgery, including blurred vision. The second development was that the companies renting eye-surgery machinery to doctors had reduced their charges. In the market for laser eye surgeries, these two developments

A) decreased demand and decreased supply, resulting in a decrease in the equilibrium quantity and an increase in the equilibrium price of laser eye surgeries.

B) decreased demand and increased supply resulting in an increase in both the equilibrium quantity and the equilibrium price of laser eye surgeries.

C) decreased demand and increased supply, resulting in a decrease in the equilibrium price and an uncertain effect on the equilibrium quantity of laser eye surgeries.

D) decreased demand and increased supply, resulting in a decrease in both the equilibrium price and the equilibrium quantity of laser eye surgeries.

10) An increase in the demand for lobster due to changes in consumer tastes, accompanied by a decrease in the supply of lobster as a result bad weather reducing the number of fishermen trapping lobster, will result in

A) a decrease in the equilibrium quantity of lobster and no change in the equilibrium price.

B) an increase in the equilibrium price of lobster and no change in the equilibrium quantity.

C) an increase in the equilibrium price of lobster; the equilibrium quantity may increase or decrease. 

D) a decrease in the equilibrium quantity of lobster; the equilibrium price may increase or decrease.