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ECN 104 Chapter Notes - Chapter 6: Price Ceiling, Price Floor, Economic Equilibrium

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21 Apr 2011

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The shortage will be equal to the difference between the qd and the qs. *in the long run, supply and demand become more price elastic bigger shortage as a result. The surplus, wasted resources, will be equal to the difference between the qd and the qs o. Taxes: the government can t make you pay a specific amount: tax on buyers shift the demand curve to the left by the amount, while tax on sellers shifts the supply curve to the left by the amount. the price on sellers fall: based on the equilibrium, the tax represents the gap between pb and ps. tax burden falls more heavily on the side of the market that is less elastic. based on the quantity: the more elastic, the less you pay (vice versa) www. notesolution. com www. notesolution. com. Welfare economics: the study of how the allocation of resources affects economic well-being.

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Related Questions

If a price floor is not binding, then

a. the equilibrium price is above the price floor.

b. the equilibrium price is below the price floor.

c. it has no legal enforcement mechanism.

d. More than one of the above is correct.

ultramarineeagle335

1. Which of the following would shift a supply curve in a perfectly competitive market for a good?

A.		a change in the number of buyers
B.		a change in input prices
C.		a change in price of a consumption complement
D.		a change in the good's price

2. Which of the following would not occur in the short run if a binding price floor were raised in perfectly competitive market?

A.		an increase in total surplus
B.		a decrease in consumer surplus
C.		a decrease in the quantity actually traded
D.		an increase in gap between quantity demanded and quantity supplied

3. What is price discrimination?

A.		selling products that are similar to, but not exactly the same as a competitor's products
B.		selling the same product to different consumers at different prices
C.		selling a good at a price above marginal cost
D.		selling a good at a price above average variable cost

4. Assume that the wholesale skim milk market is perfectly competitive. Suppose demand is described by P=5.10-0.80Q and supply is described by P=1.90+0.20Q. If there are no price controls, what would be the equilibrium quantity? (Answers must be within 0.10 of the actual value to be counted as correct.)

__________________________________________________________________________

The primary difference between a change in supply and a change in the quantity supplied is:
Choose one answer.
a. a change in quantity supplied is a shift in the supply curve, and a change in supply is a movement along the supply curve.
b. both a change in quantity supplied and a change in supply are movements along the supply curve, only in different directions.
c. a change in quantity supplied is a movement along the supply curve, and a change in supply is a shift of the supply curve.
d. a change in supply is a movement to the left along the supply curve and a change in quantity supplied is a movement to the right along the supply curve.

Question 2
What is the difference between a shortage and scarcity?
Choose one answer.
a. Scarcity will always exist because choices must be made, but a shortage will only exist if the price is kept below the equilibrium level.
b. Scarcity is a result of two or more alternative uses and will always exist, and quantities of supply and demand adjusting to flexible prices will create shortages.
c. A surplus will exist when a good is scarce; a shortage merely implies that there isn't as much of something as people would like, which is nearly always the case.
d. There is no distinction between the two. They are the same thing.

Question 3
A decrease in supply means:
Choose one answer.
a. a shift to the left of the entire supply curve.
b. moving downward (to the left) along the supply curve with lower prices.
c. less will be demanded at every price.
d. more will be supplied at every price.

Question 4
A decrease in demand, with no change in supply, will lead to ________ in equilibrium quantity and ________ in equilibrium price.
Choose one answer.
a. an increase; an increase
b. an increase; a decrease
c. a decrease; an increase
d. a decrease; a decrease

Question 5
After graduation from college you will receive a substantial increase in your income from a new job. If you decide that you will purchase more T-bone steak and less hamburger, then for you hamburger would be considered a( n ):
Choose one answer.
a. normal good.
b. substitute good.
c. complementary good.
d. inferior good.

Question 6
There is equilibrium in the market when:
Choose one answer.
a. there is no shortage.
b. there is no surplus.
c. price is established where the supply curve and the demand curve intersect.
d. all of the above are true.

Question 7
Which would not cause the supply curve to shift?
Choose one answer.
a. a change in technology
b. a change in factor costs
c. a change in the price of the good
d. a change in the prices of related goods

Question 8
Given that meat and potatoes are complementary goods, if the price of meat decreases substantially, there would be:
Choose one answer.
a. an increase in the demand for potatoes.
b. an increase in the quantity of potatoes demanded.
c. a decrease in the demand for potatoes.
d. no change in the demand for potatoes.

Question 9
Given that milk and cookies are complements, suppose the price of flour (an ingredient in cookies) rises. What happens in the market for milk?
Choose one answer.
a. The equilibrium price and quantity rise.
b. The equilibrium price rises and the equilibrium quantity falls.
c. The equilibrium price and quantity fall.
d. The equilibrium price falls and the equilibrium quantity rises.

Question 10

A temporary price of $2 in this market would result in:
Choose one answer.
a. a surplus of 8,000 bushels.
b. a shortage of 8,000 bushels.
c. a shortage of 10,000 bushels.
d. a surplus of 10,000 bushels.

Question 11
The price of oranges rises. What happens in the market for apples, which are a substitute for oranges?
Choose one answer.
a. The equilibrium price falls, and the equilibrium quantity rises.
b. The equilibrium price rises, and the equilibrium quantity falls.
c. The equilibrium price and quantity rise.
d. The equilibrium price and quantity fall.

Question 12
A market surplus occurs if the:
Choose one answer.
a. price is below the equilibrium price.
b. price is equal to the equilibrium price.
c. equilibrium price is above the actual price.
d. equilibrium price is below the actual price.