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3. The only way for quantities bought and sold to increase without a significant change in price, is for both supply and demand to increase, as shown in the graph to the right. The correct answer must be an explanation consistent with these changes. A reduction in manufacturing costs will cause supply to increase, and an increase in the popularity of VCRs is just another way of saying demand has shifted out.

Let's look at the other choices given:

The price of televisions has risen and the popularity of VCRs has increased. An increase in the price of televisions, a complement to VCRs, would decrease demand and an increase in the popularity of VCRs would increase demand. Neither would shift supply, and both a supply and a demand shift are required.
The cost of video tape rentals has fallen and consumer tastes have remained unchanged. A drop in the cost of video tape rentals (a complement to VCRs) would increase demand. But again, there is no supply shift.
VCR manufacturing costs have decreased and the popularity of VCRs has increased.
Production technology has remained unchanged and the popularity of VCRs has increased. This would only be an increase in demand.
Manufacturing costs have risen and more and more consumers think VCRs are only for mindless jerks. This would be an increase in supply and a decrease in demand, causing the price to fall unambiguously.