ECON 2301: Chapter 3 SB

Suppose that in the market for computer memory chips, the equilibrium price is $50 per chip. If the current price is $55 per chip, then there will be __ ________ of memory chips.

a surplus

The interaction between buyers and sellers determines the equilibrium price and the __________ quantity.

equilibrium

In general, a firm will ________ the output of a good or service if the price of the good is rising.

increase

Suppose product X is an input in the production of product Y. Product Y in turn is a substitute for product Z. An increase in the price of X can be expected to

increase the demand for Z

A decrease in supply while holding demand constant results in a(n) ______ in equilibrium price, and a(n) ______ in equilibrium quantity.

increase; decrease

All the following are the determinants of demand except ______.

price of substitutes in production

______, while holding demand constant, results in an increase in the equilibrium price of the good, but a decrease in the equilibrium quantity of the good.

A decrease in the supply of a good

Which of the following in the rental market for housing benefits renters, but makes it unprofitable for suppliers or landowners?

A price ceiling

A decrease in equilibrium price and indeterminate result on equilibrium quantity is a result of which of the following?

An increase in supply and a simultaneous decrease in demand

Which of the following has the greatest effect on the quantity supplied?

Price

The supply curve is ______ sloping curve.

an upward

The rationing function of prices refers to the ability of the competitive forces of supply and demand to establish a price at which ______.

buying and selling decisions are consistent

A price _______ is the maximum legal price a seller may charge for a product or service.

ceiling

Price controls or ______ mandated in the apartment rental market benefit the consumer by establishing a price ______ the free market equilibrium price.

ceilings; below

The concept of demand can be summarized by a schedule or curve showing the quantity of a product that would be ______.

consumed at various possible prices

A change in the number of buyers is a determinant of market _______

demand

According to the law of supply, price and quantity supplied have a(n) ______ relationship.

direct

True or false: A price at or above the price floor is illegal.

false

A demand curve shows the ______.

inverse relationship between price and quantity demanded for a product

A price ceiling is the maximum legal price a seller may charge for a product or service where a price at or below the ceiling is ______ and a price above the price ceiling is ______.

legal; illegal

On a simple supply model, a change in quantity supplied is illustrated by a ______ and a change in supply is illustrated by a ______.

movement along the supply curve; shift of the supply curve

The production of a good or service in the least costly way is known as ______ efficiency.

productive

Competition among corn producers forces them to use the best technology and right mix of productive resources; otherwise their costs will be too high relative to the market price and they will be unprofitable. This is best described as ______.

productive efficiency

A ______ the demand curve represents a change in demand while a ______ the demand curve represents a change in the quantity demanded.

shift of; movement along

A change in demand is represented by a ______ the demand curve while a change in quantity demanded is represented by a _______ the demand curve.

shift of; movement along

What is the price where the intentions of buyers and sellers match?

the equilibrium price

True or false: Resource costs or changes in these costs to production are responsible for shifts in the supply curve.

true

In which of the following situations do governments intervene to prevent prices from rising above or falling below their equilibrium levels?

- prices are too high for consumers - prices are too low for firms

Choose all of the following that will cause a change in supply, not quantity supplied.

- producer expectations - technology - number of sellers

Which of the following are determinants of supply?

- resource prices - technology - taxes and subsidies

All competitive markets involve which of the following?

- supply - demand - price - quantity

According to the law of demand, which of the following statements are true, all other things being equal?

- As price increases, quantity demanded decreases. - As price decreases, quantity demanded increases.

The supply curve measures quantity ______ on the horizontal axis and ______ on the vertical axis.

supplied; price

Market ______ is a schedule or curve showing the various amounts of a product that producers are willing and able to make available for sale at each possible price during a specific period.

supply

Which of the following specifically refers to demand?

The buyer side of any market

Which of the following are the characteristics of a competitive market?

- Standardized products - A large number of buyers and sellers

Which of the following are determinants of demand?

- consumer taxes - number of buyers - consumer expectations - prices of related goods - consumer income

Which of the following is likely to cause an increase in the demand for a good or service?

An increase in the number of buyers

Which of the following shows the effects on equilibrium price and quantity due to an increase in supply and a simultaneous decrease in demand?

Equilibrium price falls and the change in equilibrium quantity is indeterminate.

A decrease in demand while holding supply constant results in ______ in both equilibrium price and quantity.

a decline

A decrease in demand while holding supply constant results in _______.

a decrease in both equilibrium price and quantity

The effects on equilibrium price and quantity due to an increase in supply and a simultaneous decrease in demand are shown by ______.

a decrease in equilibrium price and an indeterminate change in equilibrium quantity

The inverse relationship between price and quantity demanded can be graphically illustrated by ______.

a downward sloping curve

Government may place legal limits on prices when it is determined that prices are unfairly _____ for buyers or unfairly _____ for sellers.

high; low

If costs of production rise, the producer has an incentive to produce _____ output.

less

A price ceiling will result in a shortage only if the ceiling price is _____ ______ the equilibrium price.

less than

The equilibrium price where the quantity demanded equals the quantity supplied is otherwise known as the ________- clearing price.

market

The relationship between the price of a good or service and the quantity demanded of that good or service described by the law of demand is

negative

The determinants of the supply of a good are any factors other than the product's ______ that cause the supply curve of the good to shift.

price

When drawing a supply curve, _____ is labeled on the vertical axis.

price

The supply curve illustrates the relationship between ______.

price and quantity supplied

If the equilibrium price in a market is $20, and the government imposes a price ceiling of $16, what will be the resulting market condition?

shortage

What determines market price and equilibrium output in a market?

the interaction of buyers and sellers

The ability of the competitive forces of supply and demand to establish a price at which selling and buying decisions are consistent is called ______.

the rationing function of prices