Market Equilibrium and Policy SmartBook
When a minimum wage results in unemployment, people may turn to _________ markets to provide their labor.
informal
When the market is in equilibrium, the price that consumers pay and that producers receive exactly balances the
marginal benefit and marginal cost of consuming and producing a good or service.
The ___________ (one word) wage is the most common form of price floor.
minimum
The most common form of price floor is:
the minimum wage.
A shortage occurs when:
the quantity of output demanded is greater than the quantity of output supplied at the current market price.
When the price of a good, service, or resource increases:
the quantity supplied increases.
The revenue collected from a tax equals:
the tax times the quantity traded.
The primary reason that governments tax economic activity is:
to generate the revenue needed to pay for services.
When a tax is imposed on a product, it affects both the quantity supplied and the quantity demanded.
true
When both demand and supply change:
we can always determine with confidence how price or quantity will change - but not both.
When more or less of a good, service, or resource is supplied at every price, there is:
a shift of the supply curve to the right or left.
A situation in which the quantity of output supplied is greater than the quantity of output demanded at the current market price is called _____.
a surplus
A minimum legal price that is set above the market price is called a
binding price floor.
In order for a price floor to be:
binding, the price floor must be set above the equilibrium price.
The change in price or quantity will be indeterminate when:
both demand and supply change.
We can determine how price or quantity will change, but not both, when:
both demand and supply change.
An 18.4 cent tax on every gallon of gasoline sold is an example of a(n) _________ tax (one word).
excise
The tax on a good or service that depends on the units sold, not the price of the good or service is called _____ tax.
excise
A price fixed above equilibrium that changes the incentives that both buyers and sellers face is called price ______.
floor
The non-price determinants or other factors that affect supply are:
held constant for any given supply curve.
With a binding price floor, the market price is set ________ what would occur in a market without price controls.
higher than
The quantity traded times the tax equals the tax __________. (Enter one word in the blank.)
revenue
An increase in supply is shown as a:
rightward shift of the supply curve.
When the price of a good, service, or resource decreases,
the quantity supplied decreases.
When a nonprice determinant of supply changes:
the relationship between the quantity supplied and the price changes.
When a nonprice determinant of supply changes:
the supply curve shifts to the left or right.
The quantity traded times the tax equals:
the tax revenue from a tax.
To pay for needed services, governments
tax economic activity.
Which of the following would shift the supply curve for soft drinks to the left?
A 2 cent per ounce tax on all soft drinks
A price floor is:
a minimum legal price at which a good, service, or resource can be sold.
A maximum legal price at which a good, service, or resource can be sold is called a price _______.
ceiling
Rent control is an example of a price _____.
ceiling
A price floor will:
change the incentives that both buyers and sellers face.
The nonprice determinants or other factors that affect demand are held constant for any given:
demand curve.
A tax:
does not change any nonprice determinant of demand of a good.
A tax:
does not change the benefit of a good.
When a shortage is eliminated, the market returns to a(n) _______ where the quantity supplied equals the quantity demanded. (Use one word for the blank.)
equilibrium
If the quantity supplied equals the quantity demanded:
equilibrium will stay the same if all else is equal.
A surplus is sometimes called:
excess supply.
The role of government in market economies include all the following except:
identifying new markets.
When a minimum wage results in unemployment:
people may turn to informal markets to provide their labor.
A nonbinding price floor is:
a minimum legal price that is not set above the equilibrium price.
Identify which of the following is an example of a shortage.
No snow shovels are available when a blizzard is forecast.
Select all that apply The role of government in market economies includes:
Punishing dishonest behavior Enforcing contracts Defining and enforcing property rights Determining the rules of commerce
Which of the following is true of a normal good?
The quantity demanded falls as the price rises.
Non-price determinants are held _______ (one word) for any given supply curve.
constant
Non-price determinants are held for any given demand curve. (Use one word for the blank.)
constant
When a shortage occurs in a competitive market, there is an incentive for suppliers to ___________ (increase/decrease) the quantity of a good or service supplied to the market. (Choose the answer from the answer options given in the brackets)
increase
A tax:
increases the cost of goods sold and shifts the supply curve to the left.
A tax:
increases the price of goods sold.
When the market is in equilibrium, the price that consumers pay and that producers receive exactly balances the _______ (one word) benefit and marginal cost of consuming and producing a good or service.
marginal
The lowest wage that firms can legally pay employees in the labor market is the _________ wage. (Enter one word in the blank.)
minimum
A minimum legal price that is set below the market price is called a
non-binding price floor.
Other factors remaining constant, when the ________ of a good increases, the quantity supplied increases.
price
A shortage persists when:
price is not allowed to adjust upward.
When the ________ of a good changes, the quantity demanded changes.
price or cost
If _____ were not allowed to adjust, a shortage would persist, and the market would not return to equilibrium. (Use one word for the blank.)
prices
A surplus occurs when:
quantity demanded < quantity supplied.
When a shortage is eliminated:
quantity supplied equals quantity demanded.
Price floors are designed to make sure that:
sellers receive a minimum price that is greater than what would be available at the market equilibrium.
Suppliers have an incentive to increase quantity supplied when there is a _______ (one word) in a competitive market.
shortage
Suppliers have an incentive to increase quantity supplied when there is a ________ (one word) in a competitive market.
shortage
A tax on suppliers shifts the:
supply curve to the left.
By changing the prices that buyers and sellers face in the market:
taxes change market outcomes.
To pay for needed services, governments often _______ (one word) economic activity.
taxes or tax
When the government imposes a new tax (or increases an existing tax),
the amount that consumers pay increases.
In the presence of a tax on suppliers
the cost producing the good or service increases.
The lowest wage firms can legally pay employees in the labor market is
the minimum wage
When both demand and supply change simultaneously
we can determine the effect on either price or quantity - but not both.
Equilibrium means that:
we should expect to see the price and the quantity converge at specific levels.
