Micro
A perfectly competitive market is a market that meets the conditions of
(1) many buyers and sellers, (2) all firms selling identical products, and (3) significant barriers to new firms entering the market.
Which of the following would cause a shift in the demand curve LOADING... from point A to point B?
An increase in the price of a substitute good. B. A decrease in income (inferior good). C. An increase in income (normal good). D. All of the above.
Which of the following events would cause the supply curve to decrease from S1 to S2?
An increase in the prices of inputs
Deadweight loss is the reduction in economic surplus resulting from a market not being in competitive equilibrium. In the diagram, deadweight loss is equal to the area(s):
C & E.
Consumer and producer surplus measure the _____ benefit rather than the _____ benefit.
net; total
The distinction between substitutes and complements is
substitute goods are used for the same purposes while complementary goods are used together.
Consider the following statement: "An increase in supply decreases the equilibrium price. The decrease in price increases demand." The statement is
false: decreases in price affect the quantity demanded, not demand.
In the diagram to the right, illustrating a binding price ceiling at P3, the amount of producer surplus transferred to consumers is represented by area C and the deadweight loss is equal to areas B and D.
.
In the diagram to the right, illustrating a per-unit tax equal to P2 minus P3, tax revenue is represented by the areas D and F and the excess burden of the tax is represented by areas F and G .
..
According to the law of supply,
1. There is a positive relationship between price and quantity supplied.2. As the price of a product increases, firms will supply more of it to the market.
According to the law of demand LOADING..., there is an inverse relationship between price and quantity demanded. That is, the demand curve for goods and services slopes downward. Why?
When the price of a good increases, consumers' purchasing power falls, and they cannot buy as much of the good as they did prior to the price change.
Panel a Price (dollars per player) Quantity (millions of players per month) $300 30 250 35 200 40 150 45 100 50
a demand curve
A black market is
a market in which buying and selling take place at prices that violate government price regulations
Economic efficiency is
a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum.
In the diagram to the right, when demand decreases, ▼ a shortagea surplusan equilibrium develops at the original price. Equilibrium price will ▼ rise not changefall and equilibrium quantity will ▼ fallrisenot change as a new equilibrium is established.
a shortage rise rise
Panel a Price (dollars per player) Quantity (millions of players per month) $300 50 250 45 200 40 150 35 100 30 The diagram in panel b is an example of
a supply curve
In the diagram to the right, when demand decreases, a shortage develops at the original price. Equilibrium price will rise and equilibrium quantity will fall as a new equilibrium is established.
a surplus fall; rise
In general, the term "ceteris paribus" means
all else equal
Market price is determined by
both supply and demand.
On the diagram to the right, a movement from A to B represents a
change in demand
On the diagram to the right, a movement from B to C represents a
change in quantity supplied
surplus is the difference between the highest price a consumer is willing to pay and the price the consumer actually pays. This component of economic surplus is illustrated in the diagram by area
consumer A
Economic surplus in a market is the sum of _____ surplus and _____ surplus. In a competitive market, with many buyers and sellers and no government restrictions, economic surplus is at a _____ when the market is in _____.
consumer; producer; maximum; equilibrium
In the diagram, point A provides the _____, point B the _____, and point C the _____.
equilibrium price; market equilibrium; equilibrium quantity
In the diagram, marginal benefit ▼ is greater thanis less thanis equal to marginal cost at output level Q2. This output level is considered economically ▼ inefficientneutralefficient.
is equal to efficient
Consider the figure to the right and assume that it is the market for health-care services. When the "baby boomer" generation retires, the number of people who require health care increases by 30%, and, as a result, the number of health-care providers also increases, but by only 25%. What is the effect on the price of health-care services over time?
it increases because demand increased by more than supply
A price ceiling is a legally determined ▼ minimum maximum neutral market clearing price that sellers may charge. A price floor is a legally determined ▼ maximum market clearing minimum neutral price that sellers may receive.
max min
"Rent controls, government farm programs, and other price ceilings and price floors are bad." This is an example of a
normative statement. The statement is concerned with what should be.
▼ Government Consumer Producer surplus is the difference between the lowest price a firm would be willing to accept and the price it actually receives. This component of economic surplus is illustrated in the diagram by area ▼ B C A .
producer B
When the government imposes price floors or price ceilings,
some people win, some people lose, and there is a loss of economic efficiency.
Tax incidence is
the actual division of the burden of a tax between buyers and sellers in a market.
According to the law of demand,
there is an inverse relationship between price and quantity demanded.
The distinction between a normal and an inferior good is
when income increases, demand for a normal good increases while demand for an inferior good falls
