chapter 4 practice questions
When Asian countries went into a recession in 1997, the demand for oil _______ and the price of oil ________.
decreased; decreased
gains from trade are maximized at the:
equilibrium price and quantity
If market supply increases:
equilibrium price will decrease but equilibrium quantity will increase
Immediately after a hurricane, it is likely that the quantity demanded for tree cutting/removal services will ______ the quantity supplied, causing the price of tree cutting/removal services to ______.
exceed; rise
(T or F) A market shortage can be defined as a situation in which the quantity supplied in a market is greater than the quantity demanded, at the given price.
false
(T or F) An increase in supply raises the equilibrium price and increases the equilibrium quantity.
false
(T or F) An increase in the price of corn will lead to a decrease in the DEMAND for corn.
false
(T or F) Free markets maximize consumer plus producer surplus regardless of the level of competition.
false
(T or F) If the equilibrium price is achieved, all willing demanders become buyers
false
(T or F) In a free market, the market moves to an equilibrium because buyers compete against sellers to get the lowest possible prices.
false
Suppose that a market is characterized as follows: consumers are willing and able to purchase 100 units and sellers are willing and able to sell 70 units. Which of the following statements are true?
quantity demanded will increase
In a market, the equilibrium condition is given by the following:
quantity demanded= quantity supplied
In a free market setting where quantity supplied is 40 units and quantity demanded is 50 units, price will:
rise
An increase in demand causes a:
temporary shortage at the old equilibrium price and a higher new equilibrium price and quantity
Which statement most accurately explains the upward trend in the market price of oil since around the year 2000?
the demand for oil has increased faster than the supply of oil has increased
If scientists discover a new form of energy that cuts the cost of producing electricity to the equivalent of $10 a barrel, what will happen to the market for oil?
Demand for oil would decrease over time since no one would pay more than $10 for a barrel of oil to produce energy.
A market can be described by the equations Qd = 50 - 3P and Qs = 2P. What are the equilibrium price and quantity in this market?
The equilibrium price is $10 and the equilibrium quantity is 20 units.
Which of the following would increase the demand of beef?
high consumer income
If supply increases, ceteris paribus, market price will be ______ at the new equilibrium point.
lower
If the market for iPads experiences a surplus, then the:
price of iPads will fall
When supply decreases there is a ______ at the old equilibrium price, which puts ______ pressure on price until the market reaches the new equilibrium.
shortage; upward
If demand decreases, ceteris paribus, the quantity exchanged will be ______ at the new market equilibrium point.
smaller
Imagine a free market in equilibrium. After a sudden increase in supply (but before the price can adjust), the market experiences a:
surplus
Consumers who traded in a used car for a new vehicle under the Cash-for-Clunkers program received a voucher worth up to $4,500 to offset the price of the consumer's new vehicle. What effect did that program's requirement to destroy all trade-in cars have on the market for used cars?
the supply of used cards decreased, increasing the price of used cars
If the demand increases, what happens with the supply curve?
there is a movement rightward along the supply curve
(T or F) In a competitive market, sellers compete with other sellers
true
(T or F) The formation of the Organization of the Petroleum Exporting Countries (OPEC) made it easier for these oil-producing countries to act together and successfully limit the supply of oil, thus raising prices.
true
(T or F) at a free market equilibrium there are no unexploited gains from trade
true