Supply, Demand & Equilibrium Practice

Which statement expresses a central idea of how the laws of supply and demand work?

• The government sets the prices for goods and services.

• Prices are determined by the interaction of producers and consumers.

• Consumers alone determine the prices for goods and services.

• Technology dictates the prices charged for goods and services.

Which of the following best refers to the market equilibrium price?

• Surpluses depress the number of goods supplied.

• Shortages and surpluses will have no effect on the market.

• The government will not intervene in the market.

• The quantity demanded is the same as the quantity supplied.

What does the Latin phrase Ceteris paribus literally mean?

• "other things being equal."

• "after this therefore because of this."

• "to respond slowly to a change in price."

• "There's no such thing as a free lunch."

New technology advances the rate at which furniture can be assembled. Why does this change the supply?

• There is a change in cost of production.

• The number of producers changes.

• The expectations of consumers changes.

• The output rate declines.

Which situation is most likely to lead to the lowest prices?

• There is only one producer making the good.
• Businesses secretly agree to share their profits.
• Competition between businesses is prohibited.
• Several producers compete to sell goods to the public.

Which of the following would NOT be a determinant of demand?

• The price of related goods

• Income

• Tastes

• The prices of the inputs used to produce the good

Legal maximum that can be charged for a good.

• price ceiling
• excess demand
• equilibrium
• disequilibrium

If the price of a substitute to good X increases, then

• The demand for good X will increase.

• The market price of good X will decrease.

• The demand for good X will decrease.

• The demand for good X will not change.

Refer to Graph 4-1. The movement from point A to point B on the graph shows

• a decrease in demand.

• an increase in demand.

• an increase in quantity demanded.

• a decrease in quantity demanded.

Refer to Graph 4-5. According to the graph, what are the equilibrium price and quantity?

• $7, 20.

• $7, 60.

• $5, 40.

• $3, 60.