ECON-2006EG Study Guide - Quiz Guide: Economic Equilibrium, Shortage, Free Market

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ceruleanraccoon367

7 Mar 2021

School

Laurentian

Department

Economics / Science Èconomique

Course

ECON-2006EG

Professor

Byron Eastman

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Document Summary

Le cture 2: dema nd, supply a nd e quilibrium. Free market: the market simply refers to the coming together of buyers (demanders) and sellers (suppliers). We look at demand first, then at supply and then put the two together to show how price is determined. In the real world, the government often intervenes in the market. Examples include price fixing, taxes or subsidies on various goods and services, directly taking over production, and rules and regulations governing the supply of certain goods. Demand: the relationship between various possible prices and the corresponding quantities that an individual or the market is willing and able to buy per period of time, ceteris paribus. Individual demand refers to an individual consumer whereas the market demand refers to the whole market. As the price per unit of a product rises, quantity demanded per time period decreases, ceteris paribus and vice versa.

Related Questions

1. In economics, the demand for a good refers to the amount of the good that people:
a. Will buy at alternative income levels
b. Need to achieve a minimum standard of living.
c. Will buy at various prices
d. Would like to have if the good were free
2. The term ceteris paribus means that:
a. What is for the individual is not necessarily true for the whole
b. All variables except those specified are constant
c. Everything is variable
d. No one knows which variables will change and which will remain constant.
3. When economist talk about supply, they are referring to a relationship between price received for each unit sold and the ____________________.
a. Quantity supplied
b. Demand schedule
c. Demand curve
d. Market price
4. But nearly all supply curves share a basic similarity: they slop______________.
a. Up from left to right
b. Down from left to right
c. Up from right to left
d. Down from right to left
5. The nature of demand indicates that as the price of a good increases:
a. Suppliers wish to sell less of it.
b. Buyers desire to purchase less of it
c. More of it is desired
d. More of it is produced
6. Any given demand or supply curve is based on the certeris paribus assumption that _______.
a. Everything is variable
b. All else is held equal
c. No one knows which variables will change and which will remain constant
d. What is true for the individual is not necessary true for the whole.
7. Economist refer to the relationship that a higher price leads to lower quantity demand as the ______________.
a. Price model
b. Law of demand
c. Market equilibrium
d. Income gap
8. A perfect elastic supply curve is:
a. Vertical
b. Downward sloping to the left
c. Horizontal
d. Upward sloping to the right
9. A 10 percent increase in the price of soda leads to a 20 percent increase in the quantity of iced tea demanded. It appears that:
a. Elasticity of demand for iced tea is 2 and is elastic
b. Cross-price elasticity of demand for iced tea is -2
c. Cross-price elasticity of demand for soda is -0.5
d. Elasticity of demand for soda 0.5 AND IS INELASTIC
10. ___________ is the change in what is on the horizontal axis (quantity) divided by the change in what is the vertical axis (price).
a. Elasticity
b. Supply
c. Demand
d. Revenue
11. A severe freeze has once again damaged the Florida orange crop. The impact on the market for orange juice will be a leftward shift of:
a. The supply curve and the rightward shift of the demand curve resulting in a higher equilibrium price
b. Both the supply and demand curves
c. The supply curve
d. The demand curve, as consumers try to economize because the shortage.
12. Got the answer.
13. 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 _____________.
a. Demand curve to the right
b. Supply curve to the left
c. Supply curve to the right
d. Demand curve to the left
14. Interpret the following statements:

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1.When the term "price" is used in the law of demand, price refers to Select one:

a. the price of the well relative to the price of another good.

b. the nominal price of the well relative to its nominal price in the previous year.

c. the absolute price of the good.

d. the dollar price of the good.

2.In economics, the meaning of demand refers to Select one:

a. the quantities of a good that people will sell at various prices.

b. the total satisfaction that consuming good provides people at different prices.

c. how badly someone wants a good.

d. the quantities of a good that people will buy at various prices.

3.Which of the following illustrates the law of demand?

Select one:

a. College enrollment increases when federal tuition grants are readily available to students.

b. More people watch college basketball in March than in November.

c. The number of long-distance calls in the United States is greater on Christmas than on Valentine's Day.

d. The prevailing wage rate in an industry determines how many people choose to work in the industry.

4.The absolute price of a good is its

Select one:

a. money price.

b. projected price.

c. relative price.

d. subjective price.

5.The only variable that can affect a movement along the demand curve is

Select one:

a. the number of buyers.

b. income levels.

c. the price of the good itself.

d. the number of substitutes.

6.The price of an MP3 music player increased from $50 to $70 while the price of a music download increased from $1 to $2. The relative price of an MP3 music player in terms of music downloads Select one:

a. increased from 0.04 to 0.05.

b. decreased, but we need more information to know by how much.

c. increased, but we need more information to know by how much.

d. decreased from 50 to 35.

7.The quantity supplied of a particular good is the amount of the good that

Select one:

a. households want firms to sell at each price during a particular time period.

b. firms will actually end up buying at a particular price during a given time period.

c. firms are willing to sell at each price during a particular time period.

d. households are willing to consume at each particular price.

8.An increase in price will lead to an increase in quantity supplied. This statement is

Select one:

a. the law of supply.

b. untrue always.

c. the law of demand.

d. a normative statement.

9.Regarding the law of supply, which of the following statements is correct?

Select one:

a. As demand falls, supply rises.

b. The ceteris paribus assumption does not apply.

c. As the price of a good or service rises, the quantity supplied will increase.

d. As the price of a good or service rises, the quantity supplied will decrease.

10.A given supply curve illustrates Select one:

a. the relationship between expected future prices and quantity supplied.

b. the effect of a change in resource costs on the quantity supplied.

c. the effect of a change in technology on the quantity supplied.

d. the relationship between price and quantity supplied.

11.If there is a decline in the price of milk, an input in the production of ice cream, then there will be a(n)

Select one:

a. decrease in the supply of ice cream and a leftward shift of the supply curve.

b. increase in the supply of ice cream and a rightward shift of the supply curve.

c. increase in the quantity of ice cream supplied and a movement down along the supply curve.

d. decrease in the quantity of ice cream supplied and a movement up along the supply curve.

12. An improvement in technology in the production of computers would

Select one:

a. increase the demand for computers.

b. decrease the supply of computers.

c. decrease the demand for computers.

d. increase the supply of computers.

13.Which of the following is a non-price determinant of supply? Select one:

a. the number of consumers

b. technological advances in production

c. the price of related goods consumers may buy

d. consumers' incomes

14.Which of the following does NOT cause a rightward shift in the supply curve?

Select one:

a. a reduction in resource costs

b. an increase in technology

c. a reduction in the expected future price of the good

d. a reduction in the price of the good

15.Which of the following is a possible outcome of setting a legal maximum rental rate below the market-clearing rental rate?

Select one:

a. a decrease in the quantity of rental housing demanded

b. an increase in the quantity of rental housing supply

c. a black market in rental housing

d. a surplus of rental housing

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Question 26 pts

Which of the following is not a reason why specialization and trade are beneficial to society?

	Specialization fosters learning by doing, thus lowering the unit-costs of products
	Firms and workers become less dependent on others for producing goods and services

	The total output of economic goods may be increased even without any increase in resources
	Scarce resources are utilized more efficiently by exploiting differences among them

Question 27 pts

Laissez-faire capitalism limits the government's economic functions to the following, except:

	Protecting private property rights
	Establishing a legal environment to enforce contracts among individuals

	Setting prices of individual goods and services
	Preventing individuals and firms from coercing others

Question 28 pts

A production system where various workers concentrate on different specialized tasks to contribute towards a whole product is referred to as:

	Roundabout production
	A coincidence of wants

	Freedom of enterprise
	Division of labor

Question 29 pts

The market system is said to be characterized by "consumer sovereignty." This is because:

	A sovereign government determines which consumer goods will be produced
	Firms must match their production decisions to the consumers' choices

	The prices of consumer goods are regulated by a sovereign government
	Consumer goods are considered to be more important than capital goods

Question 30 pts

Consumers express self-interest when they:

	Seek the lowest price for a product
	Reduce business losses

	Exclude others in their thinking
	Collect economic profits

Question 311 pts

Refer to the above graph with three demand curves. An "increase in quantity demanded" would be illustrated by a change from:

	Point 5 to point 1
	Point 4 to point 1

	Point 2 to point 5
	Point 4 to point 6

Question 32 pts

The table below shows the weekly demand for hamburger in a market where there are just three buyers.

Refer to the above table. At a price of $6, the weekly market quantity demanded for hamburger is:

	17
	23

	24
	18

Question 33pts

If farmers withhold some of their current corn harvest from the market because they anticipate a higher price of corn in the near future, then this would cause a(n):

	Movement up along the current supply curve of corn
	Movement down along the current supply curve of corn

	Leftward shift in the current supply of corn
	Rightward shift in the current supply of corn

Question 34 pts

Which of the following will not cause the supply curve to shift?

	A technological change in the production of the good
	A change in the prices of other goods that producers could be producing

	A change in the costs of resources needed to produce the good
	A change in the price of the good

Question 35 pts

All of the following would affect the position of the supply curve for cranberries, except the:

	Price of agricultural land for cranberries
	Cost of fertilizers for cranberry production

	Popularity of cranberry drinks
	Development of a new pest control for cranberries

Question 36 pts

When high-school and college graduates apply for jobs in the labor markets,

	Job applicants and employers are both "buyers".
	Job applicants are the "sellers" while employers are the "buyers".

	Job applicants and employers are both "sellers".
	Job applicants are the "buyers" while employers are the "sellers".

Question 37 pts

Refer to the figure above, which shows three supply curves for corn. Which of the following would cause the supply of corn to shift from S₁ to S₂?

	A decrease in consumer incomes, assuming corn is a normal good
	The development of a more effective insecticide against corn rootworm

	An increase in the price of fertilizer
	A change in consumer tastes away from cornbread

Question 38 pts

Which is of the following statements is correct?

	If demand increases, then price will decrease
	If demand decreases, then price will decrease

	If price decreases, then demand will decrease
	If price increases, then demand will decrease

Question 39 pts

Which would be a likely cause of an increase in the demand for pizza?

	A decrease in the price of hamburger sandwiches
	A health report showing eating pizza reduces stress

	A reduced desire for take-out and fast-food dining
	A decrease in the prices of cheese, pepperoni, and mushrooms

Question 40 pts

A market for a product reaches equilibrium when:

	Price falls further after there is a shortage
	The price rises further after there is a surplus

	Buyers intend to buy a quantity equal to the quantity that sellers intend to sell
	The actual quantity bought by buyers equals actual quantity sold by sellers

Question 41 pts

A higher price reduces the quantity demanded for a product because:

	Individuals can afford less of the product and will switch to substitutes
	The financial assets of individuals increase

	Individuals will buy more of the product and less of its substitutes
	The purchasing power of individuals increases

Question 42 pts

The idea of the Law of Demand, as applied to electric cars, assumes which of the following to be constant?

	Price of electric cars
	How much sellers are charging customers for electric cars

	Price of gasoline cars
	Quantity of electric cars demanded by buyers

Question 43 pts

Use the following graph of the demand for coffee:

Refer to the above diagram of three demand curves for coffee. An increase in the price of coffee, other factors constant, would cause a:

	Movement from point a to point b
	Movement from point b to point a

	Shift from D₁ to D₂
	Shift from D₁ to D₃

Question 44 pts

Which of the following factors will decrease the current demand for a product?

	A decrease in the current price of a complementary product
	A decrease in the current price of a substitute product

	An increase in the current price of a substitute product
	An expected increase in the future price of the product

Question 45pts

In competitive markets, a surplus or shortage will:

	Cause shifts in the demand and supply curves that tend to eliminate the surplus or shortage
	Cause changes in the quantities demanded and supplied that tend to intensify the surplus or shortage

	Cause changes in the quantities demanded and supplied that tend to eliminate the surplus or shortage
	Never exist because the markets are always at equilibrium

Question 46 pts

Which of the following would cause a leftward shift in the supply curve for car washes?

	A decrease in taxes on car washes
	An increase in the price of car washing equipment

	A decrease in the price of water
	An increase in the number of cars in the city

Question 47pts

The market system automatically corrects a surplus condition in a competitive market by:

	Raising the price of the commodity in question while decreasing the quantity demanded
	Raising the price of the commodity in question while increasing the quantity demanded

	Reducing the price of the commodity in question while increasing the quantity demanded
	Reducing the price of the commodity in question while decreasing the quantity demanded

Question 48 pts

A leftward shift of the supply curve for oil in the United States is most likely to result from:

	A decrease in the world price of oil
	An increase in the costs of exploration and drilling for oil

	An increase in the subsidy for oil exploration and drilling
	A decrease in the fees that oil companies must pay for drilling licenses

Question 49 pts

A fall in the price of milk, used in the production of ice cream, will:

	Decrease the supply of ice cream
	Have no effect on the supply of ice cream

	Increase the supply of ice cream
	Cause a movement along the supply curve of ice cream

Question 50 pts

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 is most likely to result from:

	An increase in the cost of cattle feed
	A decrease in consumer incomes

	A decrease in the tax on beef products
	An increase in the price of pork

ECON-2006EG Study Guide - Quiz Guide: Economic Equilibrium, Shortage, Free Market

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