Lesson 7 8 9

How has the Internet dramatically reduced search costs?

By eliminating the need to travel to stores to shop.

How would a bicycle producer likely react to a shortage of its product?

By raising prices and increasing supply.

What role does the profit incentive play when there is a surplus of a good?

it encourages producers to lower their prices.

Which of the following describes a way that the minimum wage and rent control are similar?

Both involve government intervention in the marketplace.

Which of the following explains what typically happens when a market is thrown into disequilibrium?

It moves toward a new equilibrium point as a result of the laws of supply and demand.

What action by the government would most likely increase the supply of gasoline in the short term?

Reduced taxes on the refining of gasoline

If the cost of gasoline increases sharply and continues to rise, how does this development affect the demand curve for cars?

The demand curve for gas-guzzlers shifts to the left, and the demand curve for fuel-efficient cars shifts to the right.