market equilibrium and policy

when shortage is eliminated, the market returns to a(n) _________________ where the quantity supplied equals the quantity demanded

equilibrium

when the quantity supplied of a good, service, or resource equals the quantity demanded, this quantity traded is known as the:

equilibrium quantity

a shortage is sometimes called

excess demand

a surplus is sometimes called

excess supply

an $1.01 tax on every pack of cigarette sold, is an example of a(n) __________- tax

excise

an $1.01 tax on every pack of cigarettes sold, is an eample of a(n) ______ tax

excise

an 18.4 cent tax on every gallon of gasoline sold, is an example of _____________ tax

excise

a policy designed to ensure that sellers receive a minimum price that is greater than what would be available at the market is a price ___________

floor

a price fixed above equilibrium that changes the incentives that both buyers and sellers face is called price ________

floor

incentives faced by both buyers and sellers changes in the face of a price

floor

incentives faced by both buyers and sellers changes in the face of a price __________

floor

taxes paid by demanders help fund ________ services

government

the non-price determinants or other factors that affect demand are:

held constant for any given demand curve

the statement "households are on the supply side, and firms are on the demand side." is with reference to which market?

labor

Increased scarcity and inefficiency will result when:

the market is in disequilibrium

when a good or service is taxed in the market

the quantity traded in the market falls

when a tax is imposed on a product, it affects both the quantity supplied and the quantity demanded

true

when both demand and supply change

we can always determine with confidence how price or quantity will change but not both

to pay for needed services, governments

tax economic activity

all other factors held constant, when a non price determinant of supply changes...

- the market adjusts to a new equilibrium price and quantity - the supply curve shifts to the left or right - an entirely new supply relationship is created

excise taxes on cigarettes are likely imposed to accomplish which of the following?

- increase government revenue - reduce smoking

a tax on demanders:

- may be included in the purchase price. - may be paid in addition to the purchase price at the point of sale.

Shortages are usually the result of:

- price controls that do not allow markets to adjust - unforseen events that disrupt supply .

a tax on demanders shifts the:

demand curve to the left

when a binding price ceiling is in effect:

- There is a shortage. - There is a reduction on the prices received by producers. - Market participants have a strong incentive to work around the laws.

Which of the following statements is true?

- a decrease in price is detrimental to consumers since less will be produced. - a decrease in price is beneficial to consumers because they do not have to pay as much.

which of the following statements is true?

- a decrease in supply is a shift to the left. - an increase in supply is a shift to the right

If a nonprice determinant of demand changes:

- an entirely new demand relationship is created - the entire demand curve shifts tot he left or right

taxes:

- change market outcomes - change the prices that buyers and sellers face

theaters do not lower the price for bad movies and raise the price for good one because:

- consumers might view a lower price as a signal that the movie is of poor quality - the movie studio that produced the movie would believe that the price is sending customers negative information about the movie.

roles of government in market economies

- defining property rights - enforcing property rights - determining rules of commerce - enforcing contracts - punishing dishonest behavior

the role of government in market economies includes

- enforcing contracts - punishing dishonest behavior - determining rules of commerce - defining and enforcing property rights

For a market to reach equilibrium

- firms must be able to change the prices of their goods - consumers need information about different suppliers' prices - firms must be able to monitor inventories

the role of government in market economies includes

- punishing dishonest behavior - enforcing contracts - defining and enforcing property rights - determining rules of commerce.

the characteristics of equilibrium include:

- quantity supplied = quantity demanded - Q(s) = Q(d)

taxes are generally imposed to:

- raise revenue to fund government activities - discourage people from consuming a particular good or service.

when there is a change in a non-price determinant of supply, the:

- supply curve shifts and there is a movement along the demand curve - supply curve shifts and there is a change in the quantity demanded

other factors remaining constant, if a non-price determinant of supply changes:

- the supply curve shifts to the left or the right - and entirely new supply relationship is created

b. if a price floor is imposed at $1.50 per bottle, how large will the surplus in the market be?

0 bottles

which of the following would shift the supply curve for soft drinks to the left

a 2 cent per ounce tax on all soft drinks

a nonprice determinant of demand is

a characteristic of the demand for a good, service, or resource other than its own market price

an excise tax is a tax on

a good or service that depends on the units sold.

a price ceiling is

a maximum legal price at which a good, service, or resource can be sold

when more or less of a good, service, or resource is supplied at ever price, there is:

a shift of the supply curve to the right or left.

_____________ and _____________ are usually the products of price controls that do not allow markets to adjust or of unforeseen events that disrupt supply.

a shortage a surplus

a situation in which the quantity of output supplied is greater that the quantity of output demanded at the current market price is called __________

a surplus

excise tax

a tax on a good or service that depends on the units sold, not the price of the good or service.

when the market participants of a market that is in disequilibrium respond to rising prices, the market will return to equilibrium, resulting in...

an elimination of a shortage.

assume there is initially a shortage in the market. as market participants respond to rising prices, the market returns to an equilibrium where the quantity supplied equals the quantity demanded, resulting in...

an elimination of shortange

which of the following statements is true?

an increase in demand is a shift to the right a decrease in demand is a shift to the left.

a change in supply is:

an increase or decrease in the quantity supplied at every price.

in order for a price floor to be:

binding, the price floor must be set above the equilibrium price.

we can determine how price or quantity will change, but not both, when:

both demand and supply change

when tax is imposed on a market

both producers and consumers are affected, no matter who pays the tax

A tax paid at the time of a sale is explicitly paid by

buyers

when a shortage exists in a competitive market, the price provides incentives for:

buyers to decrease the quantity of a good or service purchased in the market

when both demand and supply change the:

change in either the equilibrium price or quantity will be indeterminate

non-price determinants are held ______ for any given demand curve.

constant

the _____________ of a good or service is the primary determinant of the quantity demanded by consumers

cost

the equilibrium quantity increases and the equilibrium price is indeterminate when:

demand and supply both change

the equilibrium price decreases and the equilibrium quantity is indeterminate when:

demand decreases and supply increases

when both demand and supply shift, the direction of change in price or quantity:

depends on the relative magnitudes of the changes in demand and supply

the market adjusts to a new equilibrium price and quantity when a non-price __________ of supply changes

determinant

the lack of ___________ results in increased scarcity and inefficiency in the production of a good or service.

equilibrium

the market clearing price is the same as the ______________ price

equilibrium

the quantity traded when the quantity supplied of a good, service, or resource equals the quantity demanded is called the ____________ quantity

equilibrium

in the market for labor:

households are on the supply side, and firms are on the demand side.

the role of government in market economies inculdes all the following except:

identifying new markets

when a shortage occurs in a competitive market, there is an incentive for suppliers to _____________ the quantity of a good or service supplied to the market

increase

a tax _____________ the cost of goods sold

increases

a tax

increases the price of goods sold

if both demand and supply change simultaneously, the effect on either price or quantity will be ________

indeterminate

when the market is in equilibrium, the price that consumers pay and that producers receive exactly balances the ____________ benefit and marginal cost of consuming and producing a good or service.

marginal

the __________ wage is the most common form of price floor

minimum

identify which of the following is an example of a shortage

no snow shovels are available when a blizzard is forecast

a minimum legal price that is not set above the equilibrium price is a ____________ price floor

non-binding

a minimum legal price that is set below the market price is called a

non-binding price floor

other things remaining constant, when a goods _______ falls, its quantity supplied falls

price

when both demand and supply change, the direction of change in:

price or quantity will depend on the magnitude of the shifts in demand and supply

if ______ were not allowed to adjust, a shortage would persist, and the market would not return to equilibrium

prices

when there is a shortage in the market, consumers tend to:

reduce the quantity consumed.

a change in a nonprice determinant of supply will:

result in a shift of the supply curve

the quantity traded times the tax equals the tax

revenue

a _________ is usually the product of price controls that do not allow markets to adjust or of unforeseen events that disrupt supply

shortage

a situation in which the quantity of output demanded is greater than the quantity of output supplied at the current market price is called a ____________

shortage

when a __________ exists in a competitive market, buyers want to purchase more of a good or service than i supplied

shortage

where there is a decrease in both demand and supply

the equilibrium quantity falls, but the change in the equilibrium price is indeterminate

when the supply curve increases

the good becomes less expensive, certeris peribus

the minimum wage is...

the lowest wage firms can legally pay employees in the labor market

when a good or service is taxed in the market

the price rises

when the price of a good, service, or resource decreases

the quantity supplied decreases

When a nonprice determinant of supply changes:

the relationship between the quantity supplied and the price changes

the quantity traded times the tax equals

the tax revenue from a tax