Homework 2

Which of the following will result in an increase in the price of milk?

A shift to the right of the demand curve for milk

The primary difference between a change in supply and a change in quantity supplied is:

a change in quantity supplied is a movement along the supply curve, and a change in supply is a shift of the supply curve

Demand is defined as:

a schedule that shows how much will be purchased at various prices during a particular period, all other things unchanged

A decrease in supply means:

a shift to the left of the entire supply curve

Price ceiling:

a situation where price charged is set to be less than equilibrium, which may cause a shortage in the good or service

Price floor:

a situation where the price charged is set to be more than the equilibrium price, which may result in a surplus (excess) of the good or service

According to the concept of the invisible hand,

competitive free market systems are efficient under certain conditions

The bulk of the nation's output is produced by

corporations

In the "standard" supply and demand graph,

quantity goes on the horizontal axis and price goes on the vertical axis

If economists say "The price is too high" it means that:

quantity supplied is greater than quantity demanded

A negative relationship between the quantity demanded and price is called:

the Law of Demand

What will always result in an increase in price and quantity?

an increase in demand with no change in supply

An increase in demand, all other things unchanged, will result in

an increase in equilibrium price and an increase in equilibrium quantity

A decrease of a price of a god will, all other things unchanged, result in

an increase in the quantity demanded

It is true that equilibrium quantity will always go up if supply:

and demand both increase

Supply is best defined as:

the relationship between a quantity of a good or service sellers are willing to offer for sale and the independent variables that determine quantity

It's certain that equilibrium price will fall when:

the supply curve shifts to the right and the demand curve shifts to the left

What would not cause a change in the demand for automobiles?

A change in the cost of steel

What can cause a change in the demand for automobiles?

A change in the price of gas, a change in the price of motorcycles, and a change in tastes

What would shift demand for new textbooks to the right?

An increase in college enrollments

Those who make economic policy concerning price controls often do so in order to:

establish a more equitable result based on normative judgements

What would result in a movement along the demand curve?

a change in costs of production

The primary difference between a change in demand and a change in quantity demanded is:

a change in quantity demanded is a movement along the demand curve, and a change in demand is a shift of the demand curve

The U.S. can be characterized as a

mixed economy

What would not result in a MOVEMENT ALONG the demand curve?

a change in tastes, a change in income, and a change in demand

The equilibrium price in a market is established subject to the all other things unchanged condition and therefore, may very well change due to:

a change in the price of resource inputs used to produce the good

A decrease in demand with no change in supply will lead to:

a decrease in equilibrium quantity and a decrease in equilibrium price

A decrease in the price of eggs, all other things unchanged, will result in

a greater quantity of eggs demanded

If a demand curve shifts to the left, then:

a lower equilibrium price and quantity would result

A maximum price set below equilibrium price is called:

a price ceiling

If the government sets out to help low-income people by establishing a maximum amount for rent:

a price ceiling has been set and a shortage of rental units may occur

A market is a set of arrangements where

buyers and sellers can get together to buy and sell

Price controls

can result in inequitable outcomes

A market shortage occurs if the quantity

demanded is greater than the quantity supplied

According to the idea of Laissez Faire

governments should not intervene in markets without a good economic reason

A shift in the demand curve to the right, all other things unchanged, will lead to

increase in equilibrium price and quantity

Dramatic reduction in costs of producing computers in the 1980s and equally dramatic increases in demand for computers resulted in:

increases in the quantity of computers and reductions in the price of computers

A price ceiling will have no effect if:

it is set above the equilibrium price

The concept of the invisible hand is important because

it underlies beliefs in free markets, it suggests that market systems are efficient, it leads to laissez faire

A price ceiling set in the policy of rent controls

may result in some people who rent out units to leave the business because they cannot cover costs

If demand and supply both shift to the right, then

quantity will go up, but price will either go up, down, or stay the same

In a competitive market, when price is below the equilibrium price, there will be pressure for the price to:

rise

A supply curve that is upward sloping means that

suppliers will want to sell more at higher prices

The relationship between the value and the price of a stock suggest that:

the equilibrium price of a stock strikes a balance between those who think that the stock is worth more than the current price and those who think the stock is worth less than the current price; it is the market's best guess regarding the expected value of the company's future profits

The intersection of the supply and demand curve indicates

the equilibrium solution in the market

A persistent shortage may occur if

the government imposes a price ceiling

What is true in sketching market supply and demand curves?

the vertical axis is Price, the horizontal axis is quantity, the upward sloping curve is supply, and the downward sloping curve is demand

There is equilibrium in the market when:

there is no shortage, there is no surplus, and price is established where the supply and demand curves intersect

Price ceilings which lead to shortages will impose costs on society because they:

will lead to long waiting lines, may result in black market prices which are higher than market-determined prices would be, and lead to a smaller quantity offered on the market