Ch. 4 Econ 201 quiz
A legally determined maximum that sellers may charge is known as a:
price ceiling
In response to information regarding the salaries of executives at firms receiving bailout funds in the United States, some people called for a limit on the salaries paid to executives. Such a limit on the compensation executives can receive is an example of a
price ceiling
Black markets may arise if
price ceilings exist
A legally determined minimum price that sellers may receive.
price floor
Some people believe there should be a legally determined minimum price for farm products such as milk. A limit on the price of milk would be an example of
price floor
Prolonged shortages arise if:
prices are not allowed to rise to equilibrium
___ is the difference between what a producer receives for a good or service and the lowest amount they would accept for that good or service
producer surplus
At the market equilibrium price
quantity demanded equals quantity supplied
Price performs a(n) __________ function. Inputs or outputs go to the __________ bidders if people are free to exchange voluntarily in the markets without government intervention or other market friction.
rationing, highest
In a price system
relative prices change constantly to reflect changes in supply and demand.
Prolonged agricultural surpluses can arise if governments:
set the price above equilibrium
Price controls that put a price ceiling on goods and services create
shortages
Price controls that put a price floor on goods and services create
surpluses
Given linear demand curves, if demand and supply increase by identical amounts, then
the equilibrium price stays the same and the equilibrium quantity rises.
Given linear demand curves, if demand increases and supply decreases, then __________.
the equilibrium price will increase but the effect on the equilibrium quantity will be ambiguous
All of the following scenarios depict the characteristics of complements except
the price of coffee increases and the demand for cream increases.
The law of demand is the assertion that
the quantity demanded of a product is inversely related to its price.
An increase in the price of a product causes a decrease in quantity demanded because of the income and substitution effects. More specifically
the substitution effect is the decrease in quantity demanded because the product is more expensive relative to other goods and the income effect is the decrease in quantity demanded owing to the decline in consumers purchasing power
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.
If Damarius is willing to pay $100 for his economics textbook but instead only has to pay $80, his consumer surplus is:
$20
On a shopping trip, Sofia decided to buy a light blue coat that had a price tag of $79.95. When she brought the coat to the sales clerk, Sofia was told that the cost was on sale, and she would pay 20% less. After the discount was applied, Sofia paid $63.96 , $15.99 less than the original price. The value of Sofia's consumer surplus from this purchase is
At least $15.99 since this...
For markets to generate the greatest benefit and function in the most efficient manner they must
be perfectly competitive
Because economic surplus is the ___ of the benefit to firms and the benefit to consumers, it is the best measure we have of the benefit to society from the production of a particular good or service. For this reason, it is appropriate to label economic surplus as ___ surplus
Sum; social
Which of the following terms corresponds to a market where buying and selling take place at prices that violate government price regulations?
black market
Market price is determined by
both supply and demand
The difference between the highest price a consumer is willing to pay for a good or service, and the price they actually pay is called
consumer surplus
Consumer surplus is
The difference between the highest price a consumer is willing to pay and the price the consumer actually pays
producer surplus is
The difference between the lowest price a firm would be willing to accept and the price it actually receives
Given linear demand curves, if demand and supply increase but demand increases by a greater amount than shop, then
The equilibrium price and quantity both increase
The market for corn is initially in equilibrium. Suppose that the production of biofuels, which use corn as an input, increase, and at the same time, increase in the price of oil cause farm production cost to rise. Which of the following explains the effect on equilibrium price and quantity in the corn market
The price of corn will rise, but the effect on equilibrium quantity cannot be determined without more info
Washington state had a bumper Apple crop this year, significantly increasing the supply of apples in the u.s. Given this info, choose the statement that correctly describes the effect on the U.S Apple market
The quantity of apples demanded will increase as the price of apples falls
Assume the cost of aluminum user by soft drink companies increases. Which of the following correctly describes the resulting effects in the market for canned soft drinks?
The quantity of soft drinks demanded decreases The supply of soft drinks decreases
Deadweight loss is
The reduction in economic surplus resulting from a market not being in competitive equilibrium
Economic surplus is
The sum of consumer surplus and producer surplus
Which of the following statements about a shortage is correct?
There is no shortage of most scarce goods.
Other things remaining equal, the law of demand says that higher prices will lead to:
a smaller quantity demanded and lower prices to a larger quantity demanded.
How does producer surplus change as the equilibrium price of a good rises or falls
As the price of a good rises the producer surplus increases, as the price of a good falls the producer surplus decreases.
How does consumer surplus change as the equilibrium price of a good rises or falls ?
As the price of a good rises the consumer surplus decreases, as the price of a good falls the consumer surplus increases.
Which of the following will cause an outward(rightward) shift in supply
A technology improvement
economic efficiency
A&b Ends in production and maximum
Economists assume that when there is a change and/or supply, that prices reach a new equilibrium
After an adjustment period that varies
Economist define economic efficiency in this way
All above
Which of the following is consistent with the law of supply
An increase in the market price of MP3 players causes an increase in the production of MP3 players.
Economic surplus in a market is the sum of __ surplus and __ surplus. In a competitive market... surplus is at a ___ when the market is in __
Consumer; producer; maximum; equilibrium
After World War II in 1945, the United States experienced a baby boom... As the first baby boomers become older than 65, the
Demand curve for hospital facilities will shift to the right
Which of the following represents an inferior good
When consumer income increases, the demand for bologna decreases.
rent controls:
make tenants less mobile
If an effective minimum wage is imposed, then:
more workers will be unable to find jobs
