Question 1

When a shortage exists in a market,

Accepted Answer

A shortage occurs when the quantity demanded exceeds the quantity supplied at the current price, resulting in excess demand. This means that buyers are unable to purchase as much of the product as they desire, and there are insufficient quantities of the product available for purchase. As a result, producers can increase the price to reduce the quantity demanded and increase the quantity supplied, eventually leading to a market clearing price where the quantity demanded equals the quantity supplied. Therefore, the current price is below the market clearing price and the price will rise to eliminate the shortage.

Question 2

What happens as the result of a shortage?

Accepted Answer

A shortage occurs when demand exceeds supply. This leads to upward pressure on prices as consumers are willing to pay more to obtain the good.

Question 3

What happens as the result of a surplus?

Accepted Answer

When there is a surplus, there is an excess supply of the good compared to the demand for it. This means that sellers will have to lower their prices to clear their inventory, resulting in downward pressure on prices.

Question 4

When the current price of an item is greater than the item's market clearing price,

Accepted Answer

When the current price of an item is greater than the item's market clearing price, it means that the quantity supplied is greater than the quantity demanded, leading to a surplus.

Question 5

Which of the following statements is correct?

Accepted Answer

A shortage occurs when there is excess demand for a product at a given price. This means that the quantity demanded is greater than the quantity supplied. Thus, Option C is the correct statement as it defines a shortage correctly. Option A is not correct because scarcity refers to the limited availability of resources, whereas shortage refers to the market condition. Option B and D are incorrect because they define excess supply (surplus) at a price above the market-clearing price and excess demand (shortage) at a price below the market-clearing price, respectively.

Question 6

If there is a surplus,

Accepted Answer

A surplus means that there is an excess supply of the product, which makes it harder for producers to sell their goods. As a result, producers will lower the price in order to entice consumers to buy more of the product and reduce the surplus. This will continue until the price reaches the equilibrium level, where the quantity supplied equals the quantity demanded. Therefore, the price will decline to the equilibrium level.

Question 7

When there is an excess quantity supplied in the market,

Accepted Answer

When there is an excess quantity supplied in the market, it indicates that the supply of the product exceeds the demand at the current price. To eliminate this surplus, sellers will lower the price. This price decrease makes the product more attractive to buyers, increasing the quantity demanded, while suppliers are likely to reduce the quantity they supply due to the lower price, thus moving towards market equilibrium.

Question 8

The market clearing price of a good is

Accepted Answer

The market clearing price is the price at which the quantity demanded of a good equals the quantity supplied, resulting in neither a surplus nor a shortage. At this price, the market is in equilibrium and all buyers who want to buy the good at this price are able to, and all sellers who want to sell the good at this price are able to do so. Therefore, option B is the correct answer. Options A, C, and D do not accurately describe the market clearing price.

Question 9

-In the above figure, what would result if the price was $40?

Accepted Answer

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-In the above figure, what would result...

Question 10

-In the above figure, if the price is equal to $50, there is

Accepted Answer

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-In the above figure, if the price...

Question 11

Suppose that, at an official ticket price of $480, there are 6,000 Justin Timberlake fans wanting to attend his concert, but only 4,000 ticketed seats are available. Which one of the following statements is then true?

Accepted Answer

The market clearing price is more than $480 because the demand (6,000 fans) exceeds the supply (4,000 seats), indicating that the price would need to rise to balance demand and supply.

Question 12

Which of the following occurs when a market is in equilibrium?

Accepted Answer

The answer of Which of the following occurs when a...

Question 13

-Using the above table, the market clearing price for this product is

Accepted Answer

The answer of 
-Using the above table, the market clearing...

Question 14

-Using the above table, the market clearing price is ________ and equilibrium quantity is ________.

Accepted Answer

The answer of 
-Using the above table, the market clearing...

Question 15

What situation gives rise to a surplus?

Accepted Answer

A surplus occurs when the current price of a good is above its market clearing price, leading to a situation where the quantity supplied exceeds the quantity demanded.

Question 16

-Using the above table, at a price of $70, there is

Accepted Answer

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-Using the above table, at a price...

Question 17

Suppose that, at a rental rate of $1000 per month, 650 residents wish to rent apartments and that landlords offer 800 apartments available for rent. Which one of the following statements is then true?

Accepted Answer

The answer of Suppose that, at a rental rate of...

Question 18

If the price of a product increases,

Accepted Answer

When the price of a product increases, producers are motivated to supply more of the product, resulting in an increase in quantity supplied (movement along the supply curve). At the same time, consumers tend to demand less of the product due to the higher price, resulting in a decrease in quantity demanded (movement along the demand curve). Therefore, the correct answer is (D) - there is an increase in quantity supplied and a decrease in quantity demanded.

Question 19

Which of the following situations could generate a shortage?

Accepted Answer

A shortage occurs when the demand for a good exceeds its supply at a particular price. If demand increases but the price is artificially kept from rising, the quantity demanded will surpass the quantity supplied, leading to a shortage.

Question 20

-Using the above table, at a price of $5 there will be a

Accepted Answer