Chapter 6 - Prices - Economics

The ________________ is unique because it is the point where the price and amount supplied are equal to the prince and amount demanded.

• Equilibrium Price

• Excess Demand

• Price Ceiling

• Rent Control

Answer explanation

The Equilibrium Price is the point where the quantity supplied equals the quantity demanded, ensuring market balance. It is unique because it reflects the price at which the market clears.

Nora runs a small bakery. She notices that at the current price of her cupcakes, the quantity she bakes exceeds the quantity her customers want to buy. What term describes this situation?

• Surplus

• Shortage

• Equilibrium

• Price Floor

Answer explanation

A surplus occurs when the quantity supplied exceeds the quantity demanded at a given price. In this case, Nora's cupcakes are being produced in greater quantity than her customers are willing to buy, indicating a surplus.

Which of the following is a government-imposed limit on how low a price can be charged for a product?

• Price Ceiling

• Price Floor

• Equilibrium Price

• Rent Control

Answer explanation

A price floor is a government-imposed limit on how low a price can be charged for a product, ensuring that prices do not fall below a certain level. This is different from a price ceiling, which limits how high prices can go.

When the market is in equilibrium, what is the relationship between quantity demanded and quantity supplied?

• Quantity demanded is greater than quantity supplied

• Quantity supplied is greater than quantity demanded

• Quantity demanded equals quantity supplied

• Quantity demanded is unrelated to quantity supplied

Answer explanation

When the market is in equilibrium, the quantity demanded equals the quantity supplied. This balance ensures that there is no surplus or shortage in the market, making this the correct relationship.

______________ occurs when the quantity demand is more then quantity supplied. This can occur when actual price in a market is lower than equilibrium price

• Excess demand

• Price ceiling

• Rent control

• none of the choices are correct

Answer explanation

Excess demand occurs when the quantity demanded exceeds the quantity supplied, typically when the market price is below the equilibrium price. Thus, the correct answer is 'Excess demand'.

What is the term for a government-imposed limit on how high a price can be charged for a product?

• Price Ceiling

• Price Floor

• Equilibrium Price

• Rent Control

Answer explanation

A price ceiling is a government-imposed limit on how high a price can be charged for a product, ensuring affordability. This is different from a price floor, which sets a minimum price, and rent control, which specifically applies to housing.

Which of the following describes a situation where the market price is above the equilibrium price?

• Surplus

• Shortage

• Equilibrium

• Price Ceiling

Answer explanation

A surplus occurs when the market price is above the equilibrium price, leading to excess supply. This means that producers are willing to sell more than consumers are willing to buy at that price.

What happens to the quantity demanded when the price of a product is set below the equilibrium price?

• It increases

• It decreases

• It remains the same

• It becomes zero

Answer explanation

When the price of a product is set below the equilibrium price, the quantity demanded increases. This is because consumers are more willing to buy the product at a lower price, leading to higher demand.

_______________ are caused by shifts in the supply curve, which causes quantity supplied to exceed quantity demanded. Surpluses can also occur if consumers demand far less of a good than they did previously.

• Surplus

• Demands

• Search cost

• None of the choices are correct

Answer explanation

Surpluses occur when the supply curve shifts, leading to a situation where quantity supplied exceeds quantity demanded. This aligns with the definition of a surplus, making it the correct answer.

The price at which the quantity of a product demanded by consumers equals the quantity supplied by producers

• Price floor

• Market Equilibrium

• Price ceiling

• equilibrium price

Answer explanation

The equilibrium price is the point where the quantity demanded by consumers matches the quantity supplied by producers, ensuring a balance in the market.