economics chapter 6

Which scenario would cause the market for fish tanks to clear?

150 fish tanks demanded and 150 fish tanks supplied

An art gallery offers the most modern art at the lowest prices per unit in the city, but sales are low. At the same time. The gallery's demand for Victorian art has increased. With which of these concepts is the company most likely struggling?

Allocative Efficiency

While the demand curve for a sports magazine shifts rightward, the supply curve also moves rightward but to a greater degree. This would cause the equilibrium price to...

Decrease

Suppose the supply and demand curves for cameras shift leftward. As a result, equilibrium quantity..

Decreases

A change in producers' expectations will cause the supply curve to shift but not the demand curve.

False

A decrease in the demand for computers will cause the supply curve for computers to shift T/F?

False

Changes in technology usually have no effect on any given supply curve. T/F?

False

Disequilibrium is a permanent condition. T/F?

False

Due to the effects of bounded rationality, people always can be expected to solve complex production or consumption problems optimally. T/F?

False

Government intervention always puts and end to shortages and surpluses. T/F?

False

If the demand and supply curves shift in opposite directions, equilibrium quantity will always increase. T/F?

False

It has been shown that charging people on Medicaid a small amount of money for visits to the doctor has no effect on their number of visits. T/F?

False

Once the equilibrium price is reached, it will no longer change in the future. T/F?

False

Psychologists have confirmed that people have unlimited willpower when it comes to economic decision making. This means they have complete self-control and can follow through with every decision. T/F?

False

To pursue long-term goals, people must first make sure that their immediate desires are satisfied. T/F?

False

A market finds equilibrium through the independent and voluntary actions of a small number of buyers and sellers. T/F?

False. A market finds equilibrium through the independent and voluntary actions of thousands, or even millions, of buyers and sellers.

The leftward shift of a given supply curve reduces price and increases quantity. T/F?

False. If the supply curve shifts rightward, price decreases but quantity increases. If supply shifts leftward, price increases but quantity decreases.

Technological breakthroughs can shift a demand curve but not a supply curve. T/F?

False. It can only shift the supply curve.

A price floor must be set below the equilibrium price to be effective. T/F?

False. It must be set above the equilibrium price.

The convergence of economics and psychology created a new field of study called neuroeconomics. T/F?

False. It's behavioral economics.

Only consumers benefit from the market, not producers. T/F?

False. Market exchange is a voluntary activity in which both sides of the market expect to benefit and usually do. Neither buyers nor sellers would participate in the market unless they expected to become better off. A buyer values the product purchased at least as much as the money paid for it. A seller values the money received at least as much as the product sold.

Achieving productive efficiency guarantees success in the market. T/F?

False. Producing at the lowest possible cost per unit is no guarantee that firms are producing what consumers most prefer

A surplus takes any pressure off the market that might cause the price of a good to change. T/F?

False. Suppliers' desire to eliminate the surplus puts downward pressure on the price. As long as the quantity supplied exceeds the quantity demanded, the surplus forces the price lower.

If the government was concerned about affordable housing, it might enact a price floor. T/F?

False. They would enact a price ceiling.

When facing complex financial decisions, people are prone to _____ even when making no decision may cost them money.

Inertia

Both the demand curve and the supply curve for pencils shift rightward. How is the price of pencils affected?

It cannot be determined from the info given

Describe how markets affect transactions costs

Markets sort out conflicting views of price between demanders and suppliers. Markets also reduce transaction costs or the cost of time and info needed to carry out a market exchange.

Which of these does NOT drive a market?

Non-consumers

The minimum legal price

Price floor

Which of the following terms refers to producing output at the lowest possible cost?

Productive Efficiency

A price ceiling set below the equilibrium price causes which of the following?

Shortage

A firm that produces lightweight glasses frames supplies 10 million frames. however , consumers demand 11 million frames. Which of the following statements describes the result of this situation?

Shortage of frames

If a company that produces high-end pajamas supplies 5 million pairs but consumers demand 2 million pairs of pajamas, which of the following describes the result of this situation?

Surplus of pajamas

An automobile plant employs most of the people in town. The plant suddenly shuts down production. What effects might a local burger joint feel as a result?

The demand curve for burgers would shift leftward.

Identify two scenarios that would shift the airline ticket supply curve

The price of gas drops, and there are new airports added

What will happen to the price of a good when there is a shortage of that good?

The price will increase

If the cost of producing baseball cards declines...

The supply curve for baseball cards will shift rightward and their price will fall

If the price of vitamins decreases while the quantity demanded increases, how would this be reflected in the supply curve?

The supply curve would not be affected.

Which of these is based on what people DO in response to a change in their economic circumstances?

Traditional Economics

A decrease in the price of ketchup could affect the demand for french fries. T/F?

True

A price ceiling set below equilibrium price will cause a shortage

True

Adam Smith described the "invisible hand" of market competition. T/F?

True

An increase in the number of shops that sell coats in one mall could shift the supply curve for coats. T/F?

True

If both demand and supply increase, the equilibrium quantity will always increase. T/F?

True

If both the demand and supply curves of chocolate shift to the left, the equilibrium quantity will decrease. T/F?

True

If both the demand and supply curves shift to the left, but the demand curve shifts more than the supply curve, the equilibrium price will decrease. T/F?

True

If both the supply and demand curves shift rightward, but the supply curve shifts more than the demand curve, equilibrium price will decrease. T/F?

True

Most of the time, when something is provided for free, people consumer it until their marginal benefit is zero. T/F?

True

Once they make an economic decision, people tend to stay with that option even when circumstances change. T/F?

True

Prices help both producers and consumers recognize what's happening in the market and make choices based on this information. T/F?

True

Producing at the lowest possible cost per unit is no guarantee that firms are producing what consumers most prefer. T/F?

True

Psychologists have come to believe that people are not as good at making decisions as economists assume. T/F?

True

Researchers in the field of neuroeconomics examine how economic decision-making affects areas of the brian. T/F?

True

Researchers in the field of neuroeconomics use magnetic resonance imaging (MRI) to measure activity in the part sof the brain associated with economic choices. T/F?

True

The market is allocatively efficient when the marginal benefit that consumers derive from a good equals the marginal cost of producing that good. T/F?

True

The simplest rule of thumb in the face of a difficult decision is to avoid making it. T/F?

True

When a firm achieves allocative efficiency, it is "making the right stuff." T/F?

True

Your rational self-interest is sometimes in conflict with your ethical sense of fairness. T/F?

True

an equilibrium price is achieved when quantity supplied is equal to quantity demanded. T/F?

True

A shortage results when the quantity demanded exceeds the quantity supplied. T/F?

True.

If the opportunities for employment among independent building contractors are extremely low, what could the government do to help these contractors achieve a stable income?

Undertake new public building projects

One assumption of traditional economics is that once people make a decision, they have _____. They have complete self-control and follow through with every decision.

Unlimited Willpower

Which of these guarantees allocative efficiency?

market competition

Behavioral economics borrows insights from ____ to better explain some economic decisions.

psychology

Consumer surplus is defined as the difference between the total amount the consumer would be willing and able to pay for that quantity and the total amount they actually do pay. T/F?

true

Market exchange both benefits consumers and producers. T/F?

true

The demand and supply curve intersect at the equilibrium point T/F?

true