A price ceiling imposed above the market equilibrium price will result in a shortage of the product.
- a. True
b. FalseWhen a rent control is imposed below the current market equilibrium rental rate, the market is likely to develop a shortage of rental housing.
- a. True
b. FalseA rent control set below the market equilibrium price will result in a reduction of rental units supplied in the market, assuming the supply is consistent with the law of supply.
- a. True
b. FalseHistorically the US government has employed various types of programs to subsidize US agricultural sector.
- a. True
b. FalseRegardless of whether the legal tax incidence [who is supposed to collect and remit the tax to the taxing government] of a per-unit sales tax is on the seller or the buyer, the outcome on the quantity traded will be the same in each case.
- a. True
b. FalseExcise taxes can be used to generate revenue to the government, but also to alter the behavior of consumers and discourage consumption of certain products.
- a. True
b. FalseIf both, the supply and the demand increase at the same time, the equilibrium price will definitely increase.
- a. True
b. FalseAssume that the production of corn and wheat utilize the same resources [substitutes in production]. If the price of corn increases, then we can expect the price of wheat to also increase, all else held constant.
- a. True
b. FalseAn upward slopped supply curve is consistent with the law of supply.
- a. True
b. FalseThe equilibrium price is the price level at which there is no surplus or shortage in the market.
- a. True
b. FalseA market can be defined as an institutional arrangement under which buyers and sellers can exchange goods and services for a mutually agreeable price.
- a. True
b. FalseThe ceteris paribus assumption means that all other relevant factors remain unchanged.
- a. True
b. FalseOperating system software such as Windows is a complement product to computer processors. If the price of computer processors declines, then we should expect the demand for operating system software to decrease.
- a. True
b. FalseA given supply curve assumes that input prices, production technology, and any other relevant factors except the price of the product, are held constant
- a. True
b. FalseCar manufactures use many commodities in their production process. If prices of those commodities increase, then we should expect the supply curve to shift downwards [to the right].
- a. True
b. FalseIn the last few years we observed significant volatility in the price of gasoline. If we assume that the demand for gasoline is not price sensitive, then a significant rise in the price of gasoline will increase spending on gasoline and increase spending on inferior goods.
- a. True
b. FalseThe law of supply arises from the fact that the marginal costs are rising with the level of output
- a. True
b. FalseA decline in input prices will cause the quantity demanded in the output market to increase
- a. True
b. FalseIf buyers and sellers of homes start to expect inflation in housing values, then both, the current demand and the supply functions will increase
- a. True
b. FalseWhen the demand decreases while the supply increases, the market equilibrium price declines
- a.
True
b. False
Which of the following will definitely result in an increase in the equilibrium price
Answer and Explanation: The answer is C. Demand increases and supply decreases. In general, equilibrium price will increase when demand increases or supply decreases, or both.
If there is a decrease in supply of goods and services while demand remains the same, prices tend to rise to a higher equilibrium price and a lower quantity of goods and services.
D. A shift to the right of a demand curve along an upward sloping supply curve [all supply curves are upward sloping] will cause the equilibrium price to increase and the equilibrium quantity to increase.
Overview of Changes in Equilibrium Prices
An increase in supply causes the equilibrium price to fall, while a decrease in supply causes the equilibrium price to rise.