ECON 2302 Equilibrium
When the price of a good, service, or resource increases:
the quantity supplied increases.
When a nonprice determinant of supply changes:
the relationship between the quantity supplied and the price changes
A price fixed above equilibrium that changes the incentives that both buyers and sellers face is called price .
: floor
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.
Which of the following occurs when the price of a good increases?
An increase in the quantity supplied
Non-price determinants are held for any given demand curve. (Use one word for the blank.)
Blank 1: constant, fixed, non-changing, static, stable, steady, unchanging, or same
Non-price determinants are held (one word) for any given supply curve.
Blank 1: constant, fixed, or unchanging
Incentives faced by both buyers and sellers change in the face of a price .
Blank 1: floor, ceiling, or control
When a shortage occurs in a competitive market, there is an incentive for suppliers to (increase/decrease) the quantity of a good or service supplied to the market. (Choose the answer from the answer options given in the brackets)
Blank 1: increase or raise
A tax (increases/decreases) the cost of goods sold.
Blank 1: increases or raises
When a minimum wage results in unemployment, people may turn to markets to provide their labor.
Blank 1: informal
Suppliers have an incentive to increase quantity supplied when there is a (one word) in a competitive market.
Blank 1: shortage
To pay for needed services, governments often (one word) economic activity.
Blank 1: taxes or tax
Which of the following is not a condition for a market to reach equilibrium?
Consumers need information about different suppliers' costs.
The role of government in market economies includes:
Determining the rules of commerce Defining and enforcing property rights Enforcing contracts Punishing dishonest behavior
Shortage occurs when...
Qd > Qs.
Price floors are designed to make sure that
Sellers receive a minimum price that is greater than what would be available at the market equilibrium.
Which of the following is true of a normal good?
The quantity demanded falls as the price rises.
When a tax is imposed on a product, it affects both the quantity supplied and the quantity demanded.
True
A price floor is:
a minimum legal price at which a good, service, or resource can be sold.
A binding price floor is:
a minimum legal price set above the equilibrium price
A nonbinding price floor is:
a minimum legal price that is not set above the equilibrium price.
A decrease in supply is:
a shift to the left.
A situation in which the quantity of output supplied is greater than the quantity of output demanded at the current market price is called _____.
a surplus
At equilibrium:
anyone who wants to buy or sell a unit of the good can do so at the market price.
Surpluses and Shortages
are denoted in units of the product itself.
Shortages
are usually the product of price controls.
A minimum legal price that is set above the market price is called a
binding price floor.
We can determine how price or quantity will change, but not both, when:
both demand and supply change.
When a tax is imposed on a market:
both producers and consumers are affected, no matter who pays the tax
Rent control is an example of a price .
ceiling
When both demand and supply change:
change in either the equilibrium price or quantity will be indeterminate.
The nonprice determinants or other factors that affect demand are held constant for any given:
demand curve.
A tax:
does not change any nonprice determinant of demand of a good.
A tax:
does not change the benefit of a good.
When a shortage is eliminated, the market returns to a(n) where the quantity supplied equals the quantity demanded. (Use one word for the blank.)
equilibrium
If the quantity supplied equals the quantity demanded:
equilibrium will stay the same if all else is equal.
A shortage is sometimes called
excess demand
A surplus is sometimes called:
excess supply.
An 18.4 cent tax on every gallon of gasoline sold is an example of a(n) tax (one word).
excise
The tax on a good or service that depends on the units sold, not the price of the good or service is called _____ tax.
excise
A minimum legal price at which a good, service, or resource can be sold is a price .
floor
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.
The non-price determinants or other factors that affect supply are:
held constant for any given supply curve.
Shortages and surpluses are represented by the:
horizontal distance between a point on the demand curve at a particular price and a point on the supply curve at the same price.
The role of government in market economies include all the following except:
identifying new markets.
A tax:
increases the cost of goods sold and shifts the supply curve to the left.
A tax:
increases the price of goods sold.
When the market is in equilibrium, the price that consumers pay and that producers receive:
marginal
When the market is in equilibrium, the price that consumers pay and that producers receive exactly balances the
marginal benefit and marginal cost of consuming and producing a good or service.
The (one word) wage is the most common form of price floor.
minimum
The lowest wage that firms can legally pay employees in the labor market is the wage. (Enter one word in the blank.)
minimum
The most common form of price floor is:
minimum wage
When a shift of the supply curve occurs:
more or less is supplied at every price
A minimum legal price that is set below the market price is called a
non-binding price floor.
When a minimum wage results in unemployment:
people may turn to informal markets to provide their labor.
A shortage persists when:
price is not allowed to adjust upward
The primary determinant of the quantity demanded by consumers is the:
price of a good or service.
If _____ were not allowed to adjust, a shortage would persist, and the market would not return to equilibrium. (Use one word for the blank.)
prices
A surplus occurs when
quantity demanded < quantity supplied.
When a shortage is eliminated, the market
returns to an equilibrium where the quantity supplied equals the quantity demanded
When a shortage exists in a competitive market, the price provides incentives for:
suppliers to increase the quantity of a good or service supplied to the market.
a tax on suppliers shifts the:
supply curve to the left.
A situation in which the quantity of output supplied is greater than the quantity of output demanded at the current market price is called a _____.
surplus
By changing the prices that buyers and sellers face in the market:
taxes change market outcomes.
When the government imposes a new tax (or increases an existing tax),
the amount that consumers pay increases.
In the presence of a tax on suppliers
the cost producing the good or service increases
A minimum wage is:
the lowest wage firms can legally pay employees in the labor market.
The price that consumers pay and that producers receive exactly balances the marginal benefit and marginal cost of consuming and producing a good or service when:
the market is in equilibrium.
A price ceiling is:
the maximum legal price at which a good, service, or resource can be sold.
Shortage occurs when...
the quantity of output demanded is greater than the quantity of output supplied at the current market price.
A surplus occurs when
the quantity of output supplied is greater than the quantity of output demanded at the current market price.
When the price of a good, service, or resource decreases,
the quantity supplied decreases.
When a nonprice determinant of supply changes:
the supply curve shifts left or right.
the quantity traded times the tax equals:
the tax revenue from a tax
The revenue collected from a tax equals:
the tax times the quantity traded
The primary reason that governments tax economic activity is:
to generate the revenue needed to pay for services.
When both demand and supply change:
we can always determine with confidence how price or quantity will change but not both
When both demand and supply change simultaneously
we can determine the effect on either price or quantity, but not both
Equilibrium means that
we should expect to see the price and the quantity converge at specific levels.