Chapter 6 Prices

What are the goals of buyers and sellers in a competitive market economy?

Buyers want to find good deals at low prices, and sellers hope for high prices and large profits.

What happens to the equilibrium price and equilibrium quantity in the figure shown here when the supply curve moves from S to S1?

The equilibrium price falls and the equilibrium quantity increases.

What is a price floor? Multiple choice question.

The lowest legal price that can be paid by law

What happens when there is a surplus in a competitive market? Multiple choice question.

The market price tends to go down.

What happens whenever a shortage occurs in a competitive market?

The market price tends to rise toward its equilibrium level.

What happens whenever there is an equilibrium price?

The quantity demanded will be exactly equal to the quantity supplied.

True or false: A price is part of a network of signals that influences economic behavior on both the supply and the demand side of the market.

True

When will a competitive market have a shortage?

Whenever the quantity demanded is greater than the quantity supplied at a certain price

What would happen to market prices without competition and voluntary exchange?

Without competition, a seller could raise prices unconditionally. Without voluntary exchange, buyers may be forced to pay higher prices.

If a market is competitive and transactions are voluntary, the price of a product will be Multiple choice question.

about right for buyers and sellers, or the sale would not occur.

Because prices are determined by "tug-of-war" bargaining in competitive markets, we can say that prices

are a compromise between buyers and sellers.

A price ceiling is established whenever a price is set its equilibrium level

below, underneath, or under

In competitive markets, prices are a compromise between buyers and sellers because

buyers and sellers have about the same amount of power.

A shortage is a situation in which the quantity demanded is ______ the quantity supplied at a given price. Multiple choice question.

greater than

In a competitive market, the equilibrium price is the

highest price that the supplier can hope to get. lowest price that the buyer can hope to get. price that represents a compromise between the buyer and seller.

Whenever there is a shortage in a competitive market, we would expect to see the market price

increase or rise

When historically high gasoline prices encouraged farmers to devote more of their crops to gasohol and less to milled grains used in bread,

increasing bread prices proved that prices connect markets. farmers were responding to the incentives that prices provide.

In a market economy, buyers and sellers have exactly the goals. Listen to the complete question

opposite

The monetary value of a product is called its .

price

The equilibrium price in the supply and demand graph shown here is the

price at which the two curves intersect. price at which the quantity supplied equals the quantity demanded.

When high gasoline prices encouraged farmers to grow more corn to make gasohol, we have a good example of how

prices connect markets.

Whenever there is an equilibrium price, there will also be an equilibrium .

quantity

A system of allocating goods and services without prices, which is called , was used widely during World War II.

rationing

Under a system of allocation called , the government decides everyone's "fair share."

rationing

Whenever a surplus occurs in a competitive market, we know that the market price is

too high