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) Let D = demand, S = supply, P = equilibrium price, Q= equilibrium quantity. What happens in the market for walnuts if the Centers for Disease Control and Prevention announces that consuming a half cup of walnuts each week helps to lower bad levels of cholesterol?
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
3) 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.
4) 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.
5) Orange juice drinkers want to consume more orange juice at a lower price. Which of the following events would have this effect?
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
6) 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
7) Which of the following would cause both the equilibrium price and equilibrium quantity of potatoes (assume that potatoes are an inferior good) to decrease?
A) an increase in consumer income
B) a freeze that sharply reduces potato output
C) a decrease in consumer income
D) a technological advancement that results in a bumper crop of potatoes
8) 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
9) 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.
10) Assume that the price for swimming pool maintenance services has risen and sales of these services have fallen. One can conclude that
A) the law of supply has been violated.
B) the demand for swimming pool maintenance services has increased.
C) the supply of swimming pool maintenance services has decreased.
D) swimming pool maintenance services are becoming more technologically advanced.
