How do price changes affect equilibrium?

by serving as a tool for distributing goods and services

What happens when any market is in disequilibrium and prices are flexible?

Market forces push toward equilibrium.

Why does a government place price ceilings on some "essential” goods?

to keep the goods from becoming too expensive

What are spillover costs?

production costs paid by the general public

What happens first when the demand for a fad peaks and falls?

Excess supply makes the good easy to obtain.

Why did the former Soviet Union use a command economic system instead of one based on price?

It hoped to create a society in which everyone had the same chance.

What is the main principle of Adam Smith's The Wealth of Nations?

Business prospers by finding out what people want and providing it.

Advances in production, such as new technology, can do which of the following to a good?

transform it from an expensive luxury to a mid-priced good

Which of the following is an example of search costs?

driving to a faraway place to find available goods

What prompts efficient resource allocation in a well-functioning market system?

business operating for a profit

Equilibrium in a market means which of the following?

the point at which quantity supplied and quantity demanded are the same

Why did the United States use rationing during World War II?

because the needs of the armed forces created tremendous shortages

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Economics Chapter 6: Prices

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From Economics: Principles in Action

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Questions 30

Answers

1
How do price changes affect equilibrium?
by preventing inflation or deflation from affecting the supply of goods
by serving as a tool for distributing goods and services
by limiting the market to people who have the most money
by assisting the centrally planned economy
2
when quantity demanded exceeds quantity supplied at a certain price
surplus
fad
shortage
search costs
3
What happens when any market is in disequilibrium and prices are flexible?
Excess demand is created.
Sellers waste their resources.
Market forces push toward equilibrium.
Unsold perishable goods are thrown out.
4
Why does a government place price ceilings on some "essential” goods?
to keep the goods from becoming too expensive
to keep business people from making large profits
to reduce demand for these goods
to prevent inflation during boom times
5
What are spillover costs?
distribution costs paid by the middle person
regular rises in price absorbed by the market
extra distribution costs paid by the manufacturer
production costs paid by the general public
6
business conducted without regard for government controls
free market
supply shock
black market
rationing
7
What happens first when the demand for a fad peaks and falls?
Excess supply makes the good easy to obtain.
The quantity supplied goes down, and the price goes up.
The price goes down, and the quantity supplied goes up.
The quantity supplied and the price both go up.
8
Until 1996, the United States used price supports in agriculture by doing what to create demand? (on page 131)
raising prices
setting legal price ceilings
setting legal price floors
buying excess crops
9
a situation in which resources are distributed according to price
black market
free market
supply shock
rationing
10
Why did the former Soviet Union use a command economic system instead of one based on price?
It wanted goods and services to be less important than a price-based syste
It had major shortages of many goods and services.
It hoped to overcome the advantages of a black market.
It hoped to create a society in which everyone had the same chance.
11
What is the main principle of Adam Smith's The Wealth of Nations?
Profits are in what people need rather than what they want.
Business prospers by finding out what people want and providing it.
Although goods are inexpensive, people do not always get what they need.
A price-based system sets some goods, such as food or housing, out of the r
12
a sudden shortage of a good
supply shock
free market
black market
rationing
13
Advances in production, such as new technology, can do which of the following to a good?
change it from a necessity to an expensive nonessential
transform it from an expensive luxury to a mid-priced good
raise the price as more features become available
make the production so simple that it becomes unnecessary
14
dividing up goods and services without regard to price
free market
rationing
black market
supply shock
15
when quantity supplied exceeds quantity demanded at a certain price
shortage
surplus
fad
search costs
16
a product that reflects the impact of advertising and consumer taste on consumer behavior
surplus
shortage
search costs
fad
17
Which of the following is an example of search costs?
buying goods in some special way that is outside the normal channels
paying a premium cost for goods
driving to a faraway place to find available goods
selling extra goods for a discount price
18
How do falling prices affect supply?
The supply curve moves to the right.
The quantity demanded rises.
The supply curve moves to the left.
The quantity supplied rises.
19
when quantity demanded is more than quantity supplied
disequilibrium
price ceiling
excess demand
equilibrium
20
What prompts efficient resource allocation in a well-functioning market system?
the need for fair allocation of resources
government regulation
the need to buy goods regardless of price
business operating for a profit
21
Equilibrium in a market means which of the following?
the point at which suppliers begin to reduce prices
the point at which unsold goods begin to pile up
the point at which prices fall below the cost of production
the point at which quantity supplied and quantity demanded are the same
22
What is the government-controlled price ceiling on apartment prices called?
floor pricing
rent control
rent monitoring
equilibrium
23
How does a firm generally respond to a higher demand for its goods?
It raises prices.
It cuts prices.
There is no set response to this situation.
It rations goods.
24
Why did the United States use rationing during World War II?
because the needs of the armed forces created tremendous shortages
to create a society in which each person had an equal chance
because it wanted to override the existing black market in goods
to limit production to a few varieties of each product
25
point at which supply and demand come together
disequilibrium
price ceiling
equilibrium
excess demand
26
When the quantity supplied is greater than the quantity demanded, what is the condition known as?
excess availability
abundant supply
disequilibrium
excess supply
27
when quantity supplied is not equal to quantity demanded
disequilibrium
equilibrium
price ceiling
excess demand
28
When the government sets a price floor on earnings, it is called which of the following?
minimum wage
base-level wage
employment guarantee
market equilibrium rate
29
the financial and opportunity costs consumers pay in looking for a good or service
surplus
shortage
search costs
fad
30
legal maximum that can be charged for a good
disequilibrium
excess demand
equilibrium
price ceiling

Economics Chapter 6: Prices Flashcards | StudBud