Deck 4: Equilibrium

Question 1

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

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.

Answer 1

quantity demanded equals quantity supplied.

Question 2

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) 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

Answer 2

6; 2; surplus of 4 units

Question 3

Suppose that the equilibrium price in the market is $10. If the current market price is $7.50:

A) the equilibrium price will fall to $7.50.
B) competition among buyers will increase the current price.
C) the current price will fall below $7.50 as sellers compete for market share.
D) There is not enough information provided to answer the question.

Answer 3

competition among buyers will increase the current price.

Question 4

A shortage of a good occurs when:

A) the quantity supplied equals the quantity demanded.
B) the quantity supplied is greater than the quantity demanded.
C) the quantity supplied is less than the quantity demanded.
D) supply does not exist.

Question 5

Figure: Price Adjustment Refer to the figure. If the price of the product is $14, there is a:

A) shortage of 30 units of the product, and the price will rise to $16.
B) surplus of 20 units of the product, and the price will rise to $16.
C) shortage of 50 units of the product, and the price will rise to $16.
D) surplus of 40 units of the product, and the price will rise to $16.

Question 6

When there is a surplus of a good:

A) sellers will lower the price in order to increase quantity demanded.
B) sellers will raise the price in order to decrease quantity demanded.
C) sellers will compete with buyers.
D) this is an indication the buyers do not value the good.

Question 7

Use the following to answer questions:
Figure: Market Equilibrium
(Figure: Market Equilibrium) Refer to the figure. At a price of $1, the market is characterized by a(n):

A) excess supply of 2 units.
B) excess demand of 4 units.
C) surplus of 4 units.
D) shortage of 6 units.

Question 8

When a surplus exists in a market, we know that the actual price is:

A) above equilibrium price, and quantity supplied is greater than quantity demanded.
B) above equilibrium price, and quantity demanded is greater than quantity supplied.
C) below equilibrium price, and quantity demanded is greater than quantity supplied.
D) below equilibrium price, and quantity supplied is greater than quantity demanded.

Question 9

When the quantity supplied of a good exceeds the quantity demanded, there is a(n):

A) shortage.
B) surplus.
C) equilibrium.
D) opportunity cost.

Question 10

In free markets, surpluses lead to:

A) lower prices.
B) higher prices.
C) stable prices.
D) unexploited gains from trade.

Question 11

In a market, the equilibrium condition is given by the following:

A) quantity demanded = quantity supplied
B) quantity demanded × quantity supplied
C) quantity demanded / quantity supplied
D) price × quantity demanded = quantity supplied

Question 12

In free markets, shortages lead to:

A) lower prices.
B) higher prices.
C) surpluses.
D) unexploited gains from trade.

Question 13

A market can be described by the equations Q_d = 50 - 3P and Q_s = 2P. What are the equilibrium price and quantity in this market?

A) The equilibrium price is $20 and the equilibrium quantity is 10 units.
B) The equilibrium price is $50 and the equilibrium quantity is 100 units.
C) The equilibrium price is $30 and the equilibrium quantity is 10 units.
D) The equilibrium price is $10 and the equilibrium quantity is 20 units.

Question 14

When there is a shortage of 1,000 units of a particular good:

A) the price of the good will rise.
B) the price of the good will fall.
C) the quantity demanded of the good will equal 1,000 units.
D) there will be no change in the price of the good.

Question 15

If sellers want to sell more products than buyers are willing to purchase, we know that:

A) the current price is less than the equilibrium price.
B) quantity demanded exceeds quantity supplied.
C) the current price is greater than the equilibrium price.
D) the demand curve will likely increase.

Question 16

For each good produced in a free market economy, demand and supply determine:

A) the price of the good, but not the quantity.
B) the quantity of the good, but not the price.
C) both the price and the quantity of the good.
D) neither price nor quantity; sellers determine the price.

Question 17

Suppose that a market is characterized as follows: consumers are willing and able to purchase 100 units and sellers are willing and able to sell 70 units. Which of the following statements are true?

A) There is a shortage of 30 units.
B) The market is in equilibrium.
C) The price in the market will decrease.
D) Quantity demanded will increase.

Question 18

Use the following to answer questions:
Figure: Market Equilibrium
(Figure: Market Equilibrium) According to the figure, the equilibrium price and quantity are:

A) $1 and 4 units.
B) $4 and 8 units.
C) $2 and 4 units.
D) $3 and 6 units.

Question 19

A free market achieves an equilibrium price and quantity due to:

A) the combined actions of buyers and sellers.
B) increased competition among sellers.
C) government regulations placed on market participants.
D) buyers' ability to affect market outcomes.

Question 20

A market can be described by the equations Q_d = 100 - P and Q_s = P. What are the equilibrium price and quantity in this market?

A) The equilibrium price is $50 and the equilibrium quantity is 50 units.
B) The equilibrium price is $100 and the equilibrium quantity is 100 units.
C) The equilibrium price is $0 and the equilibrium quantity is 0 units.
D) The equilibrium price is $0 and the equilibrium quantity is 100 units.

Question 21

Use the following to answer questions:
Figure: Basic Supply and Demand
(Figure: Basic Supply and Demand) In the diagram, which of the following statements is TRUE?

A) The equilibrium price is $3, and the equilibrium quantity is 60 units.
B) The equilibrium price is $4, and the equilibrium quantity is 60 units.
C) The equilibrium price is $2, and the equilibrium quantity is 40 units.
D) The equilibrium price is $3, and the equilibrium quantity is 50 units.

Question 22

Use the following to answer questions:
Figure: Chocolate
(Figure: Chocolate) What is the equilibrium price per pound in the diagram?

A) $4
B) $6
C) $8
D) $10

Question 23

The equilibrium price is:

A) stable because at this price the quantity demanded equals the quantity supplied.
B) unstable because at this price the quantity demanded is less than the quantity supplied.
C) unstable because at this price the quantity demanded exceeds the quantity supplied.
D) stable because at this price all buyers are willing and able to pay.

Question 24

The equilibrium price is:

A) the price at which quantity demanded is equal to quantity supplied.
B) never higher than what most consumers are willing to pay.
C) unstable.
D) the highest price at which all consumers can afford a good.

Question 25

Use the following to answer questions:
Figure: Basic Supply and Demand
(Figure: Basic Supply and Demand) In the diagram, the market price is stable only at a price of:

A) $2.
B) $3.
C) $4.
D) $50.

Question 26

Use the following to answer questions:
Figure: Basic Supply and Demand
(Figure: Basic Supply and Demand) In the diagram, if the market price is $2, then there is a:

A) surplus of 60 units.
B) surplus of 20 units.
C) shortage of 20 units.
D) market equilibrium.

Question 27

Use the following to answer questions:
Figure: Chocolate
(Figure: Chocolate) If the price in the diagram is $5, what will happen?

A) The price will increase because of a shortage.
B) The price will decrease because of a shortage.
C) The price will increase because of a surplus.
D) The price will decrease because of a surplus.

Question 28

Use the following to answer questions:
Figure: Price and Quantity 1
(Figure: Price and Quantity 1) In the diagram, at which price is there a surplus?

A) $80
B) $50
C) $40
D) $0

Question 29

If the price of Nike Air Force 1 sneakers is below the equilibrium price:

A) competition will eventually push the price up.
B) there will be a surplus of sneakers.
C) quantity demanded will increase as the price rises to meet the equilibrium price.
D) quantity supplied will be greater than quantity demanded.

Question 30

If the market for iPads experiences a surplus, then the:

A) supply of iPads will fall.
B) demand for iPads will rise.
C) price of iPads will rise.
D) price of iPads will fall.

Question 31

If the market price is below the equilibrium price, which of the following will occur?

A) Quantity demanded will exceed quantity supplied and the market price will eventually fall.
B) Quantity demanded will exceed quantity supplied and the market price will eventually rise.
C) Quantity supplied will exceed quantity demanded and the market price will eventually fall.
D) Quantity supplied will exceed quantity demanded and the market price will eventually rise.

Question 32

Use the following to answer questions:
Figure: Basic Supply and Demand
(Figure: Basic Supply and Demand) In the diagram, which of the following statements is TRUE?

A) When the price is $3, the quantity demanded exceeds the quantity supplied by 60 units.
B) When the price is $2, the quantity demanded exceeds the quantity supplied by 40 units.
C) When the price is $4, the quantity demanded is less than the quantity supplied by 40 units.
D) When the price is $2, there is a tendency for the price to rise in the future.

Question 33

A surplus occurs when:

A) workers are more productive than expected.
B) the quantity supplied is greater than the quantity demanded.
C) more people want to buy a good than want to sell it.
D) a market is at equilibrium.

Question 34

When there is a shortage, sellers have an incentive to ______ their price and buyers have an incentive to offer a ______ price.

A) increase; lower
B) decrease; lower
C) decrease; higher
D) increase; higher

Question 35

If the market price is above the equilibrium price, which of the following will occur?

A) Quantity demanded will exceed quantity supplied and the market price will eventually fall.
B) Quantity demanded will exceed quantity supplied and the market price will eventually rise.
C) Quantity supplied will exceed quantity demanded and the market price will eventually fall.
D) Quantity supplied will exceed quantity demanded, and the market price will eventually rise.

Question 36

If there is a surplus of a good, sellers will:

A) lower the price in order to increase quantity demanded.
B) raise the price in order to decrease quantity demanded.
C) compete with buyers.
D) know that the buyers overvalue the good.

Question 37

The yearly shortage of Super Bowl tickets implies that the price of Super Bowl tickets is:

A) set at the equilibrium price since they always sell out.
B) above the equilibrium price.
C) below the equilibrium price.
D) not set by supply and demand, but instead set by the NFL.

Question 38

A shortage occurs when:

A) the price of a good is too high.
B) a market is at equilibrium.
C) the quantity supplied is zero.
D) the quantity demanded is greater than the quantity supplied.

Question 39

If a market has a surplus, how will the market respond?

A) The price will fall and the quantity supplied will fall.
B) The price will fall and the quantity supplied will rise.
C) The price will rise and the quantity supplied will fall.
D) The price will rise and the quantity supplied will rise.

Question 40

When there is a surplus, sellers have an incentive to ______ their price and buyers have an incentive to offer a ______ price.

A) increase; lower
B) decrease; lower
C) increase; higher
D) decrease; higher

Question 41

When there is a shortage in the market, competition will:

A) drive the price down to the equilibrium price.
B) drive the price up to the equilibrium price.
C) cause the demand curve to shift right.
D) cause the supply curve to increase.

Question 42

Use the following to answer questions:
Figure: Price and Quantity 1
(Figure: Price and Quantity 1) In the diagram, at which price is quantity demanded equal to the quantity supplied?

A) $40
B) $50
C) $60
D) $80

Question 43

Use the following to answer questions:
Figure: Demand and Supply
(Figure: Demand and Supply) Refer to the figure. Which statement is TRUE?

A) The gains from trade are maximized at 20 units of output.
B) At 16 units of output, there are unexploited gains from trade.
C) Buyers are willing to pay $20 for the 16th unit of output and it costs sellers $60 to produce that unit.
D) A free market is likely to produce less than 12 units of output.

Question 44

Use the following to answer questions:
Figure: Price and Quantity 1
(Figure: Price and Quantity 1) In the diagram, at a price of $40, the quantity demanded is ______, the quantity supplied is ______, and there is a ______.

A) 40; 60; surplus of 20 units
B) 80; 20; shortage of 60 units
C) 60; 40; shortage of 20 units
D) 20; 60; surplus of 40 units

Question 45

Imagine a free market in which quantity supplied is 40 units and quantity demanded is 50 units at the current price. The market is experiencing a(n):

A) equilibrium.
B) surplus.
C) shortage.
D) shift.

Question 46

In a free market setting where quantity supplied is 50 units and quantity demanded is 50 units, price will:

A) rise.
B) fall.
C) remain the same.
D) move in an indeterminate direction.

Question 47

In a free market equilibrium, prices and quantities are uniquely:

A) stable.
B) unstable.
C) moving in the "right" direction.
D) moving in the "wrong" direction.

Question 48

Imagine a free market in which at a price of $10, quantity supplied is 40 units and quantity demanded is 50 units. Equilibrium price in this market:

A) is equal to $10.
B) is less than $10.
C) is greater than $10.
D) differs from $10 in an indeterminate direction.

Question 49

Imagine a free market in which quantity supplied is 50 units and quantity demanded is 50 units at the current price. The market is experiencing a(n):

A) equilibrium.
B) surplus.
C) shortage.
D) shift.

Question 50

In a competitive market:

A) buyers compete with other buyers, and sellers compete with other sellers.
B) buyers compete with sellers, and sellers compete with buyers.
C) sellers alone determine the equilibrium price.
D) buyers alone determine the equilibrium price.

Question 51

When a market is competitive:

A) buyers compete with sellers to try to get lower prices.
B) buyers compete with other buyers, raising prices; and sellers compete with sellers, lowering prices.
C) everybody competes with everybody else.
D) buyers compete with sellers and sellers compete with one another, but buyers do not compete with one another.

Question 52

In a free market setting where quantity supplied is 50 units and quantity demanded is 40 units, price will:

A) rise.
B) fall.
C) remain the same.
D) move in an indeterminate direction.

Question 53

Imagine a free market in which at a price of $10, quantity supplied is 50 units and quantity demanded is 40 units. Equilibrium price in this market:

A) is equal to $10.
B) is less than $10.
C) is greater than $10.
D) differs from $10 in an indeterminate direction.

Question 54

Imagine a free market in which at a price of $10, quantity supplied is 50 units and quantity demanded is 50 units. Equilibrium price in this market:

A) is equal to $10.
B) is less than $10.
C) is greater than $10.
D) differs from $10 in an indeterminate direction.

Question 55

In a free market setting where quantity supplied is 40 units and quantity demanded is 50 units, price will:

A) rise.
B) fall.
C) remain the same.
D) move in an indeterminate direction.

Question 56

Use the following to answer questions:
Figure: Price and Quantity 1
(Figure: Price and Quantity 1) In the diagram, at a price of $80, the quantity demanded is ______, the quantity supplied is ______, and there is ______.

A) 20; 80; a surplus of 60 units
B) 80; 20, a surplus of 60 units
C) 80; 20, a shortage of 60 units
D) 20; 20; no surplus or shortage

Question 57

Table: Supply and Demand Schedule

In the table, a surplus occurs at a price ________, and a shortage occurs at a price _________.

A) of $17; below $15
B) of $15; above $15
C) above $15; of $15
D) above $11; below $17

Question 58

Imagine a free market in which quantity supplied is 50 units and quantity demanded is 40 units at the current price. The market is experiencing a(n):

A) equilibrium.
B) surplus.
C) shortage.
D) shift.

Question 59

How is a class in which students are graded on a curve like a competitive market?

A) In both cases, the quantity supplied equals the quantity demanded.
B) In a competitive market, demanders compete against one another for goods, the same way students compete for grades.
C) In a competitive market, demanders compete against suppliers for goods, the same way students compete for grades.
D) If the price is too high, demanders should blame suppliers, the same way students should blame professors for bad grades.

Question 60

When there is an excess supply in the market, competition will:

A) drive the price down to the equilibrium price.
B) drive the price up to the equilibrium price.
C) cause the demand curve to shift right.
D) cause the supply curve to increase.

Question 61

Why is consuming a quantity above equilibrium wasteful?

A) because there are willing buyers of the good who do not purchase it
B) because resources are used without making society better off
C) because it creates a shortage, which generates waste
D) because it creates a surplus, which generates waste

Question 62

In a free market when there are unexploited gains from trade:

A) the market is slow to adjust to this situation.
B) there are sellers who are unwilling to sell at prices buyers are willing to pay.
C) there are buyers who are willing to pay more for goods than sellers are asking.
D) an equilibrium price and quantity have been reached.

Question 63

Use the following to answer questions:
Figure: Price and Quantity 2
(Figure: Price and Quantity 2) At a cost of $20 per unit in the diagram, the demanders whose wants are satisfied are represented by the section of the demand curve between a price of:

A) $100 and $80.
B) $100 and $50.
C) $0 and $100.
D) $20 and $80.

Question 64

When producers produce more than the equilibrium quantity:

A) resources are wasted producing goods at a higher cost than consumers are willing to pay.
B) the market is operating at an abnormally high level of efficiency.
C) sellers have an incentive to reduce their price.
D) buyers have an incentive to offer a higher price.

Question 65

Use the following to answer questions:
Figure: Demand and Supply
(Figure: Demand and Supply) Refer to the figure. At the equilibrium quantity, total surplus is:

A) $960.
B) $480.
C) $320.
D) $240

Question 66

Figure: Basic Supply and Demand
M
In a free market, as illustrated in the diagram, total gains from trade are greatest when:

A) 60 units are sold at a price of $2.
B) 40 units are sold at a price of $3.
C) 60 units are sold at a price of $4.
D) 50 units are sold at a price of $3.

Question 67

In a free market in which an equilibrium price and quantity prevails:

A) consumer surplus is less than producer surplus.
B) consumer surplus is greater than producer surplus.
C) consumer surplus is the same as producer surplus.
D) consumer surplus and producer surplus are maximized.

Question 68

Use the following to answer questions:
Figure: Gains from Trade
(Figure: Gains from Trade) Refer to the figure. What are the unexploited gains from trade at the free market equilibrium?

A) $1,000
B) $500
C) $0
D) $1,500

Question 69

Gains from trade are maximized when:

A) the market price is higher than the equilibrium price.
B) the market price is less than the equilibrium price.
C) the market price is equal to the equilibrium price.
D) there are additional potential trades available that have not been completed.

Question 70

Gains from trade will be maximized at the free market equilibrium price and quantity because the supply of goods is:

A) bought by the buyers who have the highest willingness to pay.
B) bought by the buyers who have the lowest willingness to pay.
C) sold by the sellers with the highest opportunity cost.
D) sold by the sellers that minimize producer surplus.

Question 71

Use the following to answer questions:
Figure: Gains from Trade
(Figure: Gains from Trade) Refer to the figure. What are the total gains from trade at the free market equilibrium?

A) $1,000
B) $500
C) $0
D) $1,500

Question 72

When the price of a good equals the equilibrium price:

A) there will still be some wasted resources.
B) gains from trade are minimized.
C) opportunity cost is minimized.
D) there are no unexploited gains from trade.

Question 73

Gains from trade are maximized in a competitive market when:

A) quantity supplied equals quantity demanded.
B) quantity supplied exceeds quantity demanded.
C) quantity demanded exceeds quantity supplied.
D) quantity supplied equals zero.

Question 74

Gains from trade are maximized at the:

A) equilibrium price and quantity.
B) midpoint on the demand curve.
C) point at which output is maximized.
D) vertical intercept on the supply curve.

Question 75

For suppliers to sell more than the equilibrium quantity, it would mean that:

A) it costs suppliers less to produce the good than its value to buyers.
B) it costs suppliers more to produce the good than its value to buyers.
C) the gains from trade increase.
D) suppliers gain from trade while buyers are unaffected.

Question 76

It costs suppliers $1 to produce each additional widget, and widgets sell for $2. Some consumers are not willing to pay $2 for a widget but are nevertheless willing to pay more than $1. Which of the following statements is TRUE?

A) The market is at equilibrium.
B) Suppliers must be reaping big profits.
C) There are unexploited gains from trade.
D) Consumers will bid up prices.

Question 77

Use the following to answer questions:
Figure: Price and Quantity 2
(Figure: Price and Quantity 2) At a cost of $20 per unit in the diagram, the value of the unexploited gains from trade is represented by areas:

A) A + B + E.
B) A + B + C + D.
C) E + F.
D) B + C + E + F.

Question 78

The equilibrium quantity is the quantity at which:

A) consumers' willingness to pay equals producers' willingness to sell.
B) buyers have no unsatisfied wants.
C) gains from trade are minimized.
D) suppliers' production is maximized.

Question 79

Figure: Supply and Demand 1 At a market quantity of 5, the shaded region in the figure represents:

A) satisfied wants.
B) unexploited gains from trade.
C) the value of wasted resources.
D) willingness to pay.

Question 80

Tim values treats for his dog at $10 per box, and John values them at $6 per box. If the price of dog treats is $3 per box but only one box is available between these two buyers, then gains from trade will be maximized when:

A) Tim buys the treats.
B) John buys the treats.
C) either buys the treats, since they both value them more than the market price.
D) consumer surplus is equal to $3.