Applications of Supply and Demand Quiz

Suppose, in the graph below, there is a price ceiling of $3. Then there is a shortage of:

6 units

The local government is concerned about poverty so it institutes a minimum wage of $9 per hour. If the demand and supply for labor are given in the graph, there will be

a total of 9 workers supplied with a surplus of 6 workers.

A price ceiling creates ________ when it is set ________ the equilibrium price.

excess demand; below

Price ceilings typically result in ________. Responses

shortages

Refer to the figure below. What is total surplus area?

$210

________ describes the loss in social surplus that occurs when the economy produces at an inefficient quantity.

Deadweight loss

Sanjai has two tickets to a P!nk concert this summer in Houston. Heather has two tickets to the Justin Bieber concert this summer. Heather values the P!nk tickets at $250 while she values the Bieber tickets at $150. Sanjai values the Bieber tickets at $300 and the P!nk Tickets at $175. If Heather and Sanjai want to improve their allocative efficiency,

Heather and Sanjai exchange the tickets for a price they agree upon to satisfy both.

The current economy is strong and many people are feeling confident about their future and ability to pay off debt. Because of this they are taking on more bank loans for things like new cars, renovating their homes, or buying new homes. Using the four step process with this type of market, what will banks most likely do with their loans?

They would increase the quantity supplied of loans and increase the interest rate.

If Von's company can produce hang gliders for $10,000 but Valeria is willing to pay $15,000 and finds the model she wants and pays $15,000 for it from his company. Von's company has

a producer surplus of $5,000.

An increase in minimum wage causes the social surplus to ________. Remember that social surplus is the sum of consumer and producer surplus, represented by the area on a graph under the demand curve and above the supply curve until the equilibrium price.

decrease.

When describing consumer surplus, you would say it is the extra benefit consumers receive when they ________.

pay less than they would have been willing to pay