Chapter 6/7 Review

What do low prices signal buyers to do?

• nothing

• buy more

• buy less

• substitute

In a competitive market economy, prices are considered _______

• dictated

• uncompromising

• favorable

• neutral

Without prices, the three basic questions of WHAT, HOW, and FOR WHOM to produce are answered by _______

• consumers

• producers

• government

• markets

What do most economists believe is the most efficient way to allocate resources?

• competitive markets

• rationing

• government action

• distorted incentives

Equilibrium is reached when what occurs?

• quantity supplied equals quantity demanded

• there is no change in the quantity supplied

• price increases

• prices are inelastic

Which is the opposite of a surplus?

• inelastic

• shortage

• equilibrium

• floor

What effect would a bumper crop most likely have on the price of that crop?

• increase

• decrease

• equilibrium

• no effect

What do price ceilings and price floors prevent?

• shortages

• surpluses

• price reaches equilibrium

• benefits to consumers

Which term best describes rent control?

• price ceiling

• subsidy

• equilibrium price

• nonrecourse

Why have agricultural products been the object of many price stabilization efforts?

• their prices would not otherwise reach equilibrium

• their prices are exempt from supply and demand

• their prices are easily controllable

• their prices tend to fluctuate widely