Question 1

A shortage is defined as the situation that exists when the quantity of a good supplied is greater than the quantity demanded.

Accepted Answer

A shortage occurs when the quantity demanded is greater than the quantity supplied, not the other way around.

Question 2

A surplus occurs when the actual selling price is above the market equilibrium price.

Accepted Answer

A surplus occurs when the quantity supplied exceeds the quantity demanded at a given price, which typically results in a price decrease until the surplus is eliminated and the market reaches equilibrium. Therefore, if the actual selling price is above the market equilibrium price, it implies that there is more supply than demand, leading to a surplus.

Question 3

A surplus is defined as the situation that exists when the quantity of a good supplied is greater than the quantity demanded.

Accepted Answer

This is the correct definition of a surplus. When the supply of a good exceeds the demand for it, a surplus exists, which can lead to lower prices, reduced profits, and an abundance of unsold goods.

Question 4

It is possible for a market for a good to experience a surplus and a shortage at the same time.

Accepted Answer

A market cannot experience a surplus and a shortage at the same time because a surplus occurs when supply exceeds demand, while a shortage occurs when demand exceeds supply. These are mutually exclusive conditions.

Question 5

In response to a surplus the market price of a good will fall; as the price falls, the quantity demanded will increase and quantity supplied will decrease until equilibrium is reached.

Accepted Answer

This statement accurately describes the law of supply and demand. When there is a surplus (quantity supplied exceeds quantity demanded), the market price will fall. As the price falls, consumers will demand more of the good and suppliers will decrease the quantity they are willing to supply. This process continues until the market reaches equilibrium, where quantity demanded equals quantity supplied at a particular price.

Question 6

If the price of a product is above equilibrium, what forces it down?

Accepted Answer

The answer of If the price of a product is...

Question 7

Draw a supply and demand graph showing an equilibrium price of $50 and an equilibrium quantity of 200 units. Explain what would happen if the selling price was $75, and illustrate this on the graph. Explain what would happen if the selling price was $25, and illustrate this on the graph. Be sure to label each axis and curve on the graph.

Accepted Answer

The answer of Draw a supply and demand graph showing...

Question 8

Market equilibrium occurs where the quantity supplied is equal to the quantity demanded.

Accepted Answer

Market equilibrium is the point where the prices of a good or service are such that the quantity supplied by producers is equal to the quantity demanded by consumers.

Question 9

If the demand for letters written by Abraham Lincoln is higher than the demand for letters written by John Wilkes Booth, what would have to be true for the market equilibrium prices for these letters to be equal?

Accepted Answer

In order for the market equilibrium prices for Lincoln and Booth letters to be equal, the supply of Booth letters would have to be less than the supply of Lincoln letters, thus increasing the market price for Booth letters and decreasing the market price for Lincoln letters until they meet at an equilibrium point. This is because, given the higher demand for Lincoln letters, the supply of Booth letters would have to decrease in order for the market price of both types of letters to be equal.

Question 10

In 2004, hurricanes destroyed a large portion of Florida's grapefruit crop. How did this affect the market price and market quantity of grapefruit?

Accepted Answer

The answer of In 2004, hurricanes destroyed a large portion...

Question 11

In response to a shortage, the market price of a good will rise. As the price rises, the demand will decrease and supply will increase until equilibrium is reached.

Accepted Answer

The answer of In response to a shortage, the market...

Question 12

Which of the following is evidence of a shortage of chocolate?

Accepted Answer

If the quantity of chocolate demanded is greater than the quantity supplied, it indicates a shortage of chocolate.

Question 13

A surplus occurs when the market price is lower than the equilibrium price.

Accepted Answer

A surplus occurs when the market price is higher than the equilibrium price. At the equilibrium price, the quantity supplied equals the quantity demanded and there is no excess supply or demand.

Question 14

A competitive market equilibrium is a market equilibrium with many buyers and sellers.

Accepted Answer

In a competitive market equilibrium, there are many buyers and sellers, which leads to a situation where no single buyer or seller can influence the price of the good or service being traded. This results in an efficient allocation of resources, with the market price reflecting the true value of the good or service.

Question 15

Market equilibrium occurs where supply equals demand.

Accepted Answer

The answer of Market equilibrium occurs where supply equals demand....

Question 16

If the quantity demanded for a product exceeds the quantity supplied, the market price will rise until

Accepted Answer

When the quantity demanded exceeds the quantity supplied, there is a shortage. This shortage will cause the market price to rise until the quantity demanded equals the quantity supplied. This is the point of equilibrium where the market is in balance and there is no longer a shortage or surplus. At this point, the market price will equal the equilibrium price.

Question 17

Even when the demand for one good is high, the price of the good is also affected by supply. The textbook illustrates this by comparing the price of two items that were auctioned on the same day. Which of the following describes the results of the auction?

Accepted Answer

The comparison of the two items being auctioned implies that they have some historical significance. Given that Abraham Lincoln is a highly revered and respected figure in American history, it can be assumed that his letter would be highly sought after, making the demand for it high. However, the fact that a letter written by John Wilkes Booth, who is infamous for assassinating Abraham Lincoln, sold for a higher price suggests that the supply of his letters is significantly lower than that of Lincoln's. This limited supply, coupled with Booth's notoriety, would increase the demand for his letters among collectors, driving up the price. Therefore, D is the best choice.

Question 18

A shortage occurs when the market price is lower than the equilibrium price.

Accepted Answer

The answer of A shortage occurs when the market price...

Question 19

Nearly one-fifth of China's 1.38 billion people are under the age of 15. How will this affect high school enrollment over the next fifteen years? The labor market over the next fifteen years?

Accepted Answer

The answer of Nearly one-fifth of China's 1.38 billion people...

Question 20

Scarcity is defined as the situation that exists when the quantity demanded for a good is greater than the quantity supplied.

Accepted Answer

The answer of Scarcity is defined as the situation that...

Quiz 3: Where Prices Come From: the Interaction of Demand and Supply