Question 1

Before his pioneering experiments on market equilibrium, Vernon Smith believed that the market equilibrium concept:

Accepted Answer

A)  described reality. 
B)  might describe reality. 
C)  did not describe reality. 
D)  may have described reality. 
A)  described reality. 
B)  might describe reality. 
C)  did not describe reality. 
D)  may have described reality. C

Question 2

A market surplus can be defined as a situation in which the quantity demanded in a market is less than the quantity supplied, at the given price.

Accepted Answer

A) True 
 B)False  True

Question 3

At the competitive market equilibrium the buyers who purchase the product have the highest willingness to pay.

Accepted Answer

A) True 
 B)False  True

Question 4

Imagine a free market in equilibrium. After a sudden decrease in supply (but before the price can adjust), the market experiences a:

Accepted Answer

A)  shortage. 
B)  surplus. 
C)  its initial equilibrium. 
D)  a new equilibrium. 
A)  shortage. 
B)  surplus. 
C)  its initial equilibrium. 
D)  a new equilibrium.

Question 5

Use the following to answer questions: Figure: Market Equilibrium  
-(Figure: Market Equilibrium) Refer to the figure. At a price of $3, quantity supplied is ______ and quantity demanded is ______, leading to a _______.

Accepted Answer

A)  6; 2; surplus of 4 units 
B)  2; 6; shortage of 8 units 
C)  2; 4; surplus of 2 units 
D)  4; 2; shortage of 2 units 
A)  6; 2; surplus of 4 units 
B)  2; 6; shortage of 8 units 
C)  2; 4; surplus of 2 units 
D)  4; 2; shortage of 2 units

Question 6

A shortage will occur at any price below equilibrium price, and a surplus will occur at any price above equilibrium price.

Accepted Answer

A) True 
 B)False

Question 7

There is no difference between saying that there is a change in supply and in saying there is a change in the quantity supplied.

Accepted Answer

A) True 
 B)False

Question 8

Imagine a free market in equilibrium. After a sudden increase in supply (but before the price can adjust), the market experiences a:

Accepted Answer

A)  shortage. 
B)  surplus. 
C)  no change. 
D)  new equilibrium. 
A)  shortage. 
B)  surplus. 
C)  no change. 
D)  new equilibrium.

Question 9

In a competitive market, sellers compete with other sellers.

Accepted Answer

A) True 
 B)False

Question 10

Explain why an increase in demand for a good does not lead to an increase in supply. What does an increase in the demand for a good lead to?

Accepted Answer

An increase in the demand for a good doe

Question 11

The key condition for equilibrium to occur in a market is:

Accepted Answer

A)  the demand curve equals the supply curve. 
B)  quantity demanded equals quantity supplied. 
C)  price equals quantity. 
D)  demand for one good equals demand for all other goods. 
A)  the demand curve equals the supply curve. 
B)  quantity demanded equals quantity supplied. 
C)  price equals quantity. 
D)  demand for one good equals demand for all other goods.

Question 12

Immediately after a hurricane, it is likely that the quantity demanded for tree cutting/removal services will ______ the quantity supplied, causing the price of tree cutting/removal services to ______.

Accepted Answer

A)  equal; remain unchanged 
B)  be less than; rise 
C)  exceed; rise 
D)  decrease; fall 
A)  equal; remain unchanged 
B)  be less than; rise 
C)  exceed; rise 
D)  decrease; fall

Question 13

Use the following to answer questions: Figure: Demand, Supply Shifts  
-(Figure: Demand, Supply Shifts) In the figure, the initial demand curve is D1 and the initial supply curve is S1. Resource prices in this market increase; at the same time, the consumer population declines as migration causes an outflow of population to other regions. What happens to the supply curve and/or demand curve?

Accepted Answer

A)  S1 shifts to S2 but then shifts back to S1. D1 remains at D1. 
B)  S1 shifts to S3 and D1 shifts to D2. 
C)  S1 shifts to S2 and D1 shifts to D3. 
D)  S1 shifts to S2 and D1 shifts to D2. 
A)  S1 shifts to S2 but then shifts back to S1. D1 remains at D1. 
B)  S1 shifts to S3 and D1 shifts to D2. 
C)  S1 shifts to S2 and D1 shifts to D3. 
D)  S1 shifts to S2 and D1 shifts to D2.

Question 14

A(n) ______ causes the equilibrium price to ______ and equilibrium quantity to ______.

Accepted Answer

A)  decrease in supply; rise; fall 
B)  decrease in demand; fall; rise 
C)  increase in supply; rise; rise 
D)  increase in demand; rise; fall 
A)  decrease in supply; rise; fall 
B)  decrease in demand; fall; rise 
C)  increase in supply; rise; rise 
D)  increase in demand; rise; fall

Question 15

If the demand increases, what happens with the supply curve?

Accepted Answer

A)  The supply increases. 
B)  The supply decreases. 
C)  There is a movement rightward along the supply curve. 
D)  There is a movement leftward along the supply curve. 
A)  The supply increases. 
B)  The supply decreases. 
C)  There is a movement rightward along the supply curve. 
D)  There is a movement leftward along the supply curve.

Question 16

A market can be described by the equations Qd = 100 - P and Qs = -20 + P. At a price of $40, will this market experience a shortage or a surplus and what is the amount of this shortage or surplus?

Accepted Answer

Equilibrium price is $60, and

Question 17

A market can be described by the equations Qd = 200 - 3P and Qs = -50 + 2P. At a price of $40, will this market experience a shortage or a surplus and what is the amount of this shortage or surplus?

Accepted Answer

Equilibrium price is $50, and equilibriu

Question 18

When demand increases there is a ______ at the old equilibrium price, which puts ______ pressure on price until the market reaches the new equilibrium.

Accepted Answer

A)  surplus; downward 
B)  surplus; upward 
C)  shortage; upward 
D)  shortage; downward 
A)  surplus; downward 
B)  surplus; upward 
C)  shortage; upward 
D)  shortage; downward

Question 19

An increase in supply causes a temporary surplus at the old equilibrium price.

Accepted Answer

A) True 
 B)False

Question 20

A market can be described by the equations Qd = 100 - P and Qs = -20 + P. Calculate the equilibrium price and quantity in this market.

Accepted Answer

Equilibrium price is

Before his pioneering experiments on market equilibrium, Vernon Smith believed that the market equilibrium concept:

A market surplus can be defined as a situation in which the quantity demanded in a market is less than the quantity supplied, at the given price.

At the competitive market equilibrium the buyers who purchase the product have the highest willingness to pay.

Imagine a free market in equilibrium. After a sudden decrease in supply (but before the price can adjust), the market experiences a:

Use the following to answer questions: Figure: Market Equilibrium -(Figure: Market Equilibrium) Refer to the figure. At a price of $3, quantity supplied is and quantity demanded is , leading to a ___.

A shortage will occur at any price below equilibrium price, and a surplus will occur at any price above equilibrium price.

There is no difference between saying that there is a change in supply and in saying there is a change in the quantity supplied.

Imagine a free market in equilibrium. After a sudden increase in supply (but before the price can adjust), the market experiences a:

In a competitive market, sellers compete with other sellers.

Explain why an increase in demand for a good does not lead to an increase in supply. What does an increase in the demand for a good lead to?

The key condition for equilibrium to occur in a market is:

Immediately after a hurricane, it is likely that the quantity demanded for tree cutting/removal services will the quantity supplied, causing the price of tree cutting/removal services to .

A(n) causes the equilibrium price to and equilibrium quantity to __.

If the demand increases, what happens with the supply curve?

A market can be described by the equations Q_d = 100 - P and Q_s = -20 + P. At a price of $40, will this market experience a shortage or a surplus and what is the amount of this shortage or surplus?

A market can be described by the equations Q_d = 200 - 3P and Q_s = -50 + 2P. At a price of $40, will this market experience a shortage or a surplus and what is the amount of this shortage or surplus?

When demand increases there is a at the old equilibrium price, which puts pressure on price until the market reaches the new equilibrium.

An increase in supply causes a temporary surplus at the old equilibrium price.

A market can be described by the equations Q_d= 100 - P and Q_s = -20 + P. Calculate the equilibrium price and quantity in this market.

The Big Ideas

The Power of Trade and Comparative Advantage

Supply and Demand

Price Ceilings and Floors

GDP and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth, Capital Accumulation and the Economics of Ideas: Catching up Vs the Cutting Edge

Saving, Investment, and the Financial System

Stock Markets and Personal Finance

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Business Fluctuations: Aggregate Demand and Supply

Transmission and Amplification Mechanisms

The Federal Reserve System and Open Market Operations

Monetary Policy

The Federal Budget: Taxes and Spending

Fiscal Policy

International Trade

International Finance

Political Economy and Public Choice

Filters

Exam 4: Equilibrium: How Supply and Demand Determine Prices

Before his pioneering experiments on market equilibrium, Vernon Smith believed that the market equilibrium concept:

A market surplus can be defined as a situation in which the quantity demanded in a market is less than the quantity supplied, at the given price.

At the competitive market equilibrium the buyers who purchase the product have the highest willingness to pay.

Imagine a free market in equilibrium. After a sudden decrease in supply (but before the price can adjust), the market experiences a:

Use the following to answer questions: Figure: Market Equilibrium -(Figure: Market Equilibrium) Refer to the figure. At a price of $3, quantity supplied is ______ and quantity demanded is ______, leading to a _______.

A shortage will occur at any price below equilibrium price, and a surplus will occur at any price above equilibrium price.

There is no difference between saying that there is a change in supply and in saying there is a change in the quantity supplied.

Imagine a free market in equilibrium. After a sudden increase in supply (but before the price can adjust), the market experiences a:

In a competitive market, sellers compete with other sellers.

Explain why an increase in demand for a good does not lead to an increase in supply. What does an increase in the demand for a good lead to?

The key condition for equilibrium to occur in a market is:

Immediately after a hurricane, it is likely that the quantity demanded for tree cutting/removal services will ______ the quantity supplied, causing the price of tree cutting/removal services to ______.

A(n) ______ causes the equilibrium price to ______ and equilibrium quantity to ______.

If the demand increases, what happens with the supply curve?

A market can be described by the equations Qd = 100 - P and Qs = -20 + P. At a price of $40, will this market experience a shortage or a surplus and what is the amount of this shortage or surplus?

A market can be described by the equations Qd = 200 - 3P and Qs = -50 + 2P. At a price of $40, will this market experience a shortage or a surplus and what is the amount of this shortage or surplus?

When demand increases there is a ______ at the old equilibrium price, which puts ______ pressure on price until the market reaches the new equilibrium.

An increase in supply causes a temporary surplus at the old equilibrium price.

A market can be described by the equations Qd = 100 - P and Qs = -20 + P. Calculate the equilibrium price and quantity in this market.

The Big Ideas

The Power of Trade and Comparative Advantage

Supply and Demand

Price Ceilings and Floors

GDP and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth, Capital Accumulation and the Economics of Ideas: Catching up Vs the Cutting Edge

Saving, Investment, and the Financial System

Stock Markets and Personal Finance

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Business Fluctuations: Aggregate Demand and Supply

Transmission and Amplification Mechanisms

The Federal Reserve System and Open Market Operations

Monetary Policy

The Federal Budget: Taxes and Spending

Fiscal Policy

International Trade

International Finance

Political Economy and Public Choice

Filters

Use the following to answer questions: Figure: Market Equilibrium -(Figure: Market Equilibrium) Refer to the figure. At a price of $3, quantity supplied is and quantity demanded is , leading to a ___.

Immediately after a hurricane, it is likely that the quantity demanded for tree cutting/removal services will the quantity supplied, causing the price of tree cutting/removal services to .

A(n) causes the equilibrium price to and equilibrium quantity to __.

A market can be described by the equations Q_d = 100 - P and Q_s = -20 + P. At a price of $40, will this market experience a shortage or a surplus and what is the amount of this shortage or surplus?

A market can be described by the equations Q_d = 200 - 3P and Q_s = -50 + 2P. At a price of $40, will this market experience a shortage or a surplus and what is the amount of this shortage or surplus?

When demand increases there is a at the old equilibrium price, which puts pressure on price until the market reaches the new equilibrium.

A market can be described by the equations Q_d= 100 - P and Q_s = -20 + P. Calculate the equilibrium price and quantity in this market.