What happens after the demand for a fad drops?

Excess supply makes the good easy to obtain.

How did an improvement in the technology for producing digital cameras affect supply?

The supply curve moved to the right.

What does a low price tell suppliers?

Too much of a product is being produced.

How did the market react to an increased supply of digital cameras?

A surplus of cameras forced suppliers to reduce prices.

How does the free market benefit from the profit incentive?

The profit incentive promotes efficient resource allocation.

What does a low price tell suppliers?

Too much of a product is being produced.

How do price changes drive markets toward equilibrium?

They increase or decrease supply or demand.

When is a market at equilibrium?

when quantity demanded equals quantity supplied

Which of the following are ways the government controls markets?

price ceilings and price floors

Why does a government place price ceilings, such as rent control, on some “essential” goods?

to keep the goods from becoming too expensive

What happens to the supply curve for a product when the supply goes down?

The supply curve moves to the left.

What is a main principle of Adam Smith’s The Wealth of Nations?

Businesses should find out what people want and provide it

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Chapter 6 - Prices

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Economics

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Questions 20

Answers

1
What happens after the demand for a fad drops?
The quantity supplied and the price both go up.
The quantity supplied goes down, and the price goes up.
Shortage makes the good difficult to obtain.
Excess supply makes the good easy to obtain.
2
What must be present before a product’s price will naturally move toward its equilibrium price?
high taxes
a free market
price floors
rationing
3
How did an improvement in the technology for producing digital cameras affect supply?
The demand curve moved to the left.
The demand curve moved to the right.
The supply curve moved to the left.
The supply curve moved to the right.
4
What does a low price tell suppliers?
Demand for a product will go down.
Too much of a product is being produced.
Demand for a product will go up.
Not enough of a product is being produced.
5
How did the market react to an increased supply of digital cameras?
Manufacturers produced fewer cameras.
A surplus of cameras forced suppliers to reduce prices.
Suppliers struggle to keep up with consumers' demands
Suppliers increased prices on the cameras.
6
How does the free market benefit from the profit incentive?
The profit incentive leads to rationing.
The profit incentive promotes efficient resource allocation.
The profit incentive is a signal to buy more of a good.
The profit incentive contributes to the wealth of nations.
7
If a baker’s supply of bread exceeds the demand for bread, he should
stop selling bread.
lower the price of bread.
sell only bread.
raise the price of bread.
8
What does a low price tell suppliers?
Demand for a product will go up.
Demand for a product will go down.
Not enough of a product is being produced.
Too much of a product is being produced.
9
How do price changes drive markets toward equilibrium?
They ensure that prices are fair.
They set new price floors and ceilings.
They prevent inflation or deflation.
They increase or decrease supply or demand.
10
How might a firm respond to a higher demand for its goods?
raise prices
cut prices
increase advertising
limit its production
11
When is a market at equilibrium?
when prices equal the cost of production
when suppliers begin to reduce prices
when unsold goods begin to pile up
when quantity demanded equals quantity supplied
12
How does rationing encourage black markets?
Rationing wrecks the market.
Rationing causes criminal behavior.
Rationing creates high supply.
Rationing creates high demand.
13
Which of the following are ways the government controls markets?
price ceilings and price floors
shortages and surpluses
equilibrium price and equilibrium point
subsidies and disequilibrium
14
What happens to the price of a good or service when there is excess demand?
The government sets the price.
The price goes down.
The price stays the same.
The price goes up.
15
Why does a government place price ceilings, such as rent control, on some “essential” goods?
to encourage businesses to produce more
to lower demand for these goods
to keep the goods from becoming too expensive
to keep people from starting new businesses
16
What happens to the supply curve for a product when the supply goes down?
The supply curve moves to the right.
The supply curve moves to the left.
The demand curve moves to the left.
The demand curve moves to the right.
17
What has been reached when buyers purchase exactly as much as sellers are willing to sell?
price floor
equilibrium
shortage
supply and demand
18
What is the government’s goal in buying excess crops or other agricultural products?
to set legal price ceilings
to raise minimum wage
to lower prices
to keep prices from going down
19
What was the purpose of rationing in the United States during World War II?
to stop the black market
to limit production
to give away goods
to deal with shortages
20
What is a main principle of Adam Smith’s The Wealth of Nations?
Businesses should find out what people want and provide it
A price-based system provides few incentives for businesses
The free market system is inefficient
People do not always get what they need

Chapter 6 - Prices Flashcards | StudBud