econ ch 3

Refer to the diagram. A government-set price ceiling is best illustrated by:

price A.

Refer to the diagram. A government-set price floor is best illustrated by:

price C.

Consider the supply and demand curves depicted in the diagram above. If the government imposed a price ceiling of $15, then sellers will be willing to sell ___, and a black market could develop where the price would be:

24 units; above $15

Refer to the above graph showing the market for a product. Which of the following would best explain why the shift in demand from D1 to D2 would cause price to rise from P1 to P2?

Because after the shift in the demand, there would be a shortage at price P1

Which of the diagrams illustrates the effect of an increase in automobile worker wages on the market for automobiles?

D only.

Refer to the above diagram for the milk market. There would be a shortage of milk whenever the price is:

Lower than $1.50 per gallon

The ___________ is the only price where quantity demanded is equal to quantity supplied.

equilibrium price

The ____________ is the quantity where quantity demanded and quantity supplied are equal at a certain price.

equilibrium quantity

If new manufacturers enter the computer industry, then (ceteris paribus):

the supply curve shifts to the right.

Refer to the above diagram of the market for corn. If the price in this market is at $4 per bushel, then there will be a:

Surplus and the price will tend to fall

Which of the following would most likely increase the demand for gasoline?

The expectation by consumers that gasoline prices will be higher in the future.

In a competitive market illustrated by the diagram above, a price ceiling of $25 per unit will result in:

The market stays at equilibrium price of $15

If a firm faces ________________________, while the prices for the output the firm produces remain unchanged, a firm's profits will increase.

lower costs of production

If consumer incomes increase, the demand for product X:

may shift either to the right or left.

The demand curve for a typical good has a(n):

negative slope because some consumers switch to other goods as the price rises.

The demand schedule for a good:

indicates the quantities that will be purchased at alternative market prices.

Refer to the diagram. A price of $20 in this market will result in a:

shortage of 100 units.

A drought decreases the supply of agricultural products, which means that at any given price a lower quantity will be supplied; conversely, especially good weather would shift the __________________ .

supply curve to the right

A supply curve is a graphical illustration of the relationship between price, shown on the vertical axis, and ____________, shown on the horizontal axis.

quantity

_________________ refers to the total number of units that are purchased at that price.

quantity demanded

If the supply and demand curves for a product both decrease, then equilibrium:

quantity must decline, but equilibrium price may rise, fall, or remain unchanged.

When economists talk about supply, they are referring to a relationship between price received for each unit sold and the _________________.

quantity supplied

Which of the diagrams illustrate(s) the effect of a decrease in incomes on the market for secondhand clothing?

A only.

In a competitive market illustrated by the diagram above, a price floor of $25 per unit will result in:

A surplus of 200 units

Andy views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect:

Andy's demand for beer to increase.

Refer to the above graph, which shows the market for beef where demand shifted from D1 and D2. The change in equilibrium from E1 to E2 cannot be a result of:

A decrease in the productivity of cattle farms

Refer to the four graphs above. Select the graph above that best shows the changes in demand and supply in the market specified in the following situation: In the market for corn, if gasoline producers use more ethanol from corn, and good weather during the growing season yields a bumper harvest.

Graph A

Refer to the four graphs above. Select the graph that best shows the changes in demand and supply in the market specified in the following situation: In the market for beef, if a new diet fad favoring beef consumption becomes hugely popular, while cattle producers see steeply rising costs of cattle feed.

Graph D

In a market with supply and demand curves as shown above, a price ceiling of $2.50 will result in:

No shortage or surplus

______________ are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling.

Price floors

Which of the following statements is true about productive and allocative efficiency?

Realizing allocative efficiency implies that productive efficiency has been realized.

Refer to the above diagram illustrating the market for corn. If the price in this market is fixed at $2 per bushel, then:

Sellers will quickly run out of corn that they bring to market

The term "ceteris paribus" means that:

all variables except those specified are constant.

The nature of demand indicates that as the price of a good increases:

buyers desire to purchase less of it.

Refer to Figure 3-3. A change from Point A to Point B represents a(n):

increase in quantity supplied.

Refer to Figure 3-3. A change from Point A to Point D represents a(n):

increase in supply.

Allocative efficiency refers to:

the production of the product mix most wanted by society.

When quantity demanded decreases in response to a change in price:

there is a movement up along the demand curve.

But nearly all supply curves share a basic similarity: they slope _______________.

up from left to right

In economics, the demand for a good refers to the amount of the good that people:

will buy at various prices.

In a competitive market illustrated by the diagram above, for a price floor to be effective and alter the market situation, it must be set:

Above $15

Which of the following is a consequence of rent controls established to keep housing affordable for the poor?

All of these are consequences of rent controls.

Refer to the above graph showing the market for a product. Which of the following could not explain the indicated increase in equilibrium price from P 1 to P 2?

An increase in production costs

Which of the diagrams illustrate(s) the effect of a decline in the price of irrigation equipment on the market for corn?

C only.

Which of the diagrams illustrates the effect of a governmental subsidy on the market for AIDS research?

C only.

If the supply of a product decreases and the demand for that product simultaneously increases, then equilibrium:

price must rise, but equilibrium quantity may rise, fall, or remain unchanged.

Refer to the diagram, in which S 1 and D 1 represent the original supply and demand curves and S 2 and D 2 the new curves. In this market the indicated shift in supply may have been caused by:

the development of more efficient machinery for producing this commodity.

Allocative efficiency involves determining:

the mix of output that will maximize society's satisfaction.