Economics - Chapter 3 Quiz

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What is the primary focus of this chapter?

How supply and demand determine market equilibrium (correct)

The impact of government regulations on markets

The role of auctioneers in art markets

The different forms of e-commerce sites

What brings together buyers and sellers in markets?

Supply and demand (correct)

Government regulations

Auctioneers

E-commerce sites

What type of markets are discussed in this chapter?

Local markets involving only national participants

Markets exclusively focused on e-commerce

Highly personal markets with face-to-face contact

Marketplaces with large numbers of standardized products (correct)

How do supply and demand together determine market equilibrium?

By affecting equilibrium prices and quantities Signup and view all the answers

What tool can take us far in understanding how individual markets work?

Supply and demand Signup and view all the answers

What is the role of auctioneers in markets?

To bring together potential buyers and sellers Signup and view all the answers

How do improvements in technology affect the supply of a product?

They reduce production costs and increase supply Signup and view all the answers

How do higher resource prices affect the supply of a product?

They increase production costs and reduce supply Signup and view all the answers

How do subsidies affect the production of a good?

They lower the producers’ costs and increase supply Signup and view all the answers

What happens to the market supply when more firms enter an industry?

It increases Signup and view all the answers

What is the equilibrium price?

The price where quantity demanded equals quantity supplied Signup and view all the answers

Which function of prices ensures that all buyers who are willing and able to pay for a product will obtain it?

Rationing function Signup and view all the answers

What is the Law of Demand?

As the price falls, the quantity demanded rises, and as the price rises, the quantity demanded falls. Signup and view all the answers

What is the demand curve?

A curve that shows the relationship between price and quantity demanded. Signup and view all the answers

What are the basic determinants of demand?

Consumers' tastes (preferences), consumer expectations, and the number of buyers in the market. Signup and view all the answers

What is a change in demand?

It is a shift of the entire demand curve due to a change in factors other than price. Signup and view all the answers

What happens to the demand for beef when there is an increase in consumers' concern over the health hazards of cholesterol and obesity?

The demand for beef decreases Signup and view all the answers

How do changes in consumer preferences affect demand?

Favorable changes increase demand, while unfavorable changes decrease demand. Signup and view all the answers

What type of goods experience an increase in demand as income rises?

Superior goods Signup and view all the answers

What does market demand represent?

The total amount of products that all consumers are willing to purchase at each price. Signup and view all the answers

When two products are substitutes, what happens to the demand for one product if the price of the other product increases?

The demand for the first product decreases Signup and view all the answers

What is the effect on the demand for a related good (such as tea) if the price of a complement (such as sugar) goes up?

The demand for the related good decreases Signup and view all the answers

How do changes in consumer expectations of higher future prices affect current demand?

Changes in consumer expectations increase current demand Signup and view all the answers

What is a change in quantity demanded distinguished from?

Change in price Signup and view all the answers

What is the result of productive efficiency?

Production of any particular good in the least costly way Signup and view all the answers

How does an increase in supply affect equilibrium price and quantity when demand remains constant?

Equilibrium price decreases and equilibrium quantity increases Signup and view all the answers

What happens when demand for a good increases while its supply remains constant?

Equilibrium price decreases and equilibrium quantity increases Signup and view all the answers

What does the intersection of the demand and supply curves indicate?

Marginal benefit equals marginal cost Signup and view all the answers

In a complex case where both supply and demand increase, what happens to equilibrium quantity?

Increases Signup and view all the answers

What is the purpose of establishing price ceilings on specific products?

Enable consumers to obtain affordable essential goods or services Signup and view all the answers

What is the likely outcome when the ceiling price for gasoline is set below the market-clearing price?

A persistent product shortage Signup and view all the answers

What is a likely consequence of rent controls on the supply side of rental housing?

Decreased attractiveness for landlords to offer housing on the rental market Signup and view all the answers

What is the purpose of a price floor set by the government?

To provide a minimum price for certain groups of resource suppliers or producers Signup and view all the answers

What is the likely outcome when a price floor is set above the equilibrium price for wheat?

A surplus or excess supply of wheat Signup and view all the answers

What are the overall effects of government-controlled prices according to the text?

Shortages, surpluses, distorted resource allocation, and negative side effects Signup and view all the answers

What is likely to happen in a market where a government-imposed price ceiling exists?

Creation of black markets with illegal buying and selling at prices above the legal limits Signup and view all the answers

What is a likely consequence of implementing rent controls on the demand side of rental housing?

Reduction in the quantity of rental housing demanded at lower prices Signup and view all the answers

What typically happens to landlords when rent controls make it less attractive to offer housing on the rental market?

Closure of rental units by landlords Signup and view all the answers

What do governments typically do when they feel that free market system has not provided sufficient income for certain groups?

Implement wage floors for certain groups Signup and view all the answers

In a complex case where increase in supply is greater than the increase in demand, what happens to equilibrium price?

Decreases Signup and view all the answers