Econ CH4

A shortage occurs when the _____ is greater than the quantity supplied.

quantity demanded

If the demand for oil increased:

quantity supplied would increase.

What were OPEC countries able to work together to achieve by the early 1970s?

reduced oil supply and higher oil prices

When the free market maximizes the total gains from trade, the supply of goods is bought by:

the buyers with the highest willingness to pay.

When there is a surplus of a product:

the price will fall.

Suppose that when good X is free, buyers will demand 200 units of it, but the quantity demanded falls by 5 units for every $2 increase in the price. If the price is $30 and the quantity supplied is 125 units:

this market is in equilibrium.

When the free market maximizes the total gains from trade, there are no:

unexploited gains from trade or wasted resources.

When the free market maximizes the total gains from trade, there may be:

unsatisfied wants.

When the free market maximizes the total gains from trade, the supply of goods is sold by the sellers:

with the lowest costs.

The financial crisis of 2007-2010 had a huge impact on the U.S. housing market, causing the number of uninhabited houses to be far greater than the number of people able and willing to buy a house. Which is the best analysis of this situation?

This surplus of houses led to decreases in housing prices.

An increase in demand along a fixed supply curve will result in:

a higher equilibrium price.

Holding supply constant, if the demand curve shifts to the left, there will be a(n) _____ in equilibrium price and a(n) _____ in equilibrium quantity.

decrease; decrease

Equilibrium occurs when the quantity demanded is _____ the quantity supplied.

equal to

An increase in supply is a:

shift in the supply curve to the right.

Which economist began testing the supply and demand model by running experiments with his undergraduate students in 1956?

Vernon Smith

Suppose that when good Y is free, buyers will demand 200 units of the good but that the quantity demanded falls by 5 units for every $2 increase in the price. If the price is $40 and quantity supplied is 125 units:

there is a surplus of 25 units.

Vernon Smith began his laboratory experiments expecting:

to prove that the supply and demand model was wrong.

Which statement about a free market maximizing the gains from trade is false?

All of the buyers and sellers in the market fully intended to maximize total gains from trade.

Lower production costs result in:

a lower equilibrium price.

A decrease in supply along a fixed demand curve results in:

lower equilibrium quantity.

Wasteful trades have probably occurred at:

quantities greater than the equilibrium.

Which illustrates an increase in quantity demanded?

a movement up along a fixed demand curve

From the early twentieth century to the 1970s:

there were modest declines in oil price.

Suppose that when good Z is free, buyers will demand 200 units of it, but the quantity demanded falls by 5 units for every $2 increase in the price. If the price is $24 and the quantity supplied is 125 units:

the price will eventually rise above $24.

What happened to the supply of oil from the early twentieth century to the 1970s?

The supply of oil increased at an even faster pace than demand for oil.

A _____ maximizes the total of producer surplus and consumer surplus.

free market

Bennett is a buyer in Vernon Smith's classroom experiment of the market model. Which does he know?

his own willingness to buy

A movement along a fixed supply curve caused by a rightward shift in the demand curve is best described as a(n):

increase in quantity supplied.