Final

What happens when the quantity demanded equals the quantity supplied?

• A) Surplus
• B) Shortage
• C) Market Equilibrium
• D) Price Ceiling

If there is a surplus in the market, prices will generally fall.

• True
• False

When demand increases and supply remains unchanged, the equilibrium price will:

• A) Decrease
• B) Stay the same
• C) Increase
• D) Become zero

At the equilibrium point, the market is said to be in a state of ________.

A shortage occurs when:

• A) Supply exceeds demand
• B) Demand exceeds supply
• C) Price is above equilibrium
• D) Market forces are absent

Price floors set below the equilibrium price cause shortages.

• True
• False

What does the Law of Diminishing Marginal Utility state?

• A) Total utility decreases with each additional unit consumed
• B) Marginal utility increases with each additional unit consumed
• C) Marginal utility decreases as more of a good is consumed
• D) Consumers gain unlimited satisfaction

Total utility is the sum of all marginal utilities obtained from consuming a good.

• True
• False

When a consumer reaches maximum satisfaction, they are said to be in a state of ________.

If a consumer's income increases, their consumption of normal goods will likely:

• A) Decrease
• B) Remain the same
• C) Increase
• D) Become zero