Economics: Chapter 6 Test Review

A shortage puts upward pressure on price.

• True
• False

If a demand curve shifts to the right, the equilibrium price and quantity will increase.

• True
• False

If a supply curve shifts to the right, the equilibrium price will increase and the quantity with fall.

• True
• False

The concept of bounded rationality helps to explain why consumers make optimal consumption decisions.

• True
• False

People have limited self-discipline in following through with decisions that are in their self-interest.

• True
• False

Market competition promotes both productive efficiency and allocative efficiency.

• True
• False

Which of the following is NOT true of the role of prices in a market economy?

• higher prices encourage producers to allocate fewer resources to the production of the good.
• higher prices encourage consumers to economize by finding substitute goods
• higher prices encourage producers to allocate fewer resources to the production of other goods
• prices help people recognize market opportunities.

Producing at the lowest possible cost per unit guarantees that firms are producing what consumers most prefer.

• True
• False

Competition among sellers encourages producers to supply more of what consumers value the most.

• True
• False

Price controls distort market prices and interfere with the market's ability to allocate resources efficiently.

• True
• False