Equilibrium & The Price System Review

Name:

Multiple Choice

Identify the letter of the choice that best completes the statement or answers the question.

According to Figure 6.2, in this market, a price of $1.50 would be

a.	a subsidy	c.	a price ceiling
b.	a price floor	d.	the equilibrium price

According to Figure 6.2, at the equilibrium price, how many slices of pizza will be sold?

a.	250	c.	100
b.	200	d.	150

The price of a slice of pizza is $2.50. At the end of the day, how many unsold slices of pizza will be left, according to Figure 6.2?

a.	50	c.	none
b.	100	d.	200

According to Figure 6.2, in this market, a price of $1.00 would be

a.	a subsidy	c.	a price ceiling
b.	the equilibrium price	d.	a price floor

If the government set a price of $2.00 a slice, how many slices of pizza will be sold each day, according to Figure 6.2?

a.	150	c.	none
b.	200	d.	250

The price ceiling that was used to control the price of housing in New York City and other cities was called which of the following?

a.	rent control	c.	equilibrium price
b.	rent abatement	d.	housing control

What happens when wages are set above the equilibrium level by law?

a.	Firms tend to try to break the law and hire people at the equilibrium level.
b.	Firms employ more workers than they would at the equilibrium wage.
c.	Firms employ fewer workers than they would at the equilibrium wage.
d.	Firms hire more workers but for fewer hours than they would at the equilibrium wage.

What is the name of the smallest amount that can legally be paid to most workers for an hour of work?

a.	price floor	c.	minimum wage
b.	equilibrium price	d.	supply cost

What happens to a market in equilibrium when there is an increase in supply?

a.	Quantity supplied will exceed quantity demanded, so the price will drop.
b.	Quantity demanded will exceed quantity supplied, so the price will drop.
c.	Undersupply means that the good will become very expensive.
d.	Excess supply means that producers will make less of the good.

10.

On which kinds of goods do governments generally place price ceilings?

a.	those that are essential but too expensive for some consumers
b.	those that are essential and cheap
c.	those that are not necessary but have become customary
d.	those that are cheap but could become more expensive without the ceiling

11.

When buyers will purchase exactly as much as sellers are willing to sell, what is the condition that has been reached?

a.	supply and demand	c.	price floor
b.	excess demand	d.	equilibrium

12.

What happens when the supply of a nonperishable good is greater than the consumer wants to buy?

a.	the good becomes a luxury and the price rises
b.	the good is discarded
c.	either the good remains unsold or the price drops
d.	either the good is saved for later sale or the price is raised

13.

Which of the following is an example of a good whose price goes down because of improvements in technology?

a.	typewriters	c.	hard-bound books
b.	computer printers	d.	running shoes

14.

Study the graph showing the equilibrium point for a pizzeria. Which of the following can be said about the equilibrium price and the equilibrium quantity?

a.	The quantity supplied and the quantity demanded are equal at 200 slices per day.
b.	The maximum quantity demanded, 350 per day, is more than the quantity supplied.
c.	The quantity supplied is not equal to the quantity demanded in this market, which should be at 200 per day.
d.	The quantity demanded and the quantity supplied are equal at $2.00 per slice.

15.

Why did Communist governments use a command economic system for many years?

a.	as a way to avoid the expense and difficulties of a free market
b.	to limit the costs of production of many goods
c.	in an attempt to create a society in which everyone was equal
d.	as a method of keeping the consumer from getting what he or she wanted

16.

Which of the following is a situation that makes the market behave inefficiently?

a.	when both consumers and producers are fully informed about a product
b.	when consumers do not have enough information to make good choices
c.	when the market is in perfect competition and prices are high
d.	when producers have the power to find out exactly what to produce

Matching

Identifying Key Terms

Match each term with the correct statement below.

a.	rationing	f.	disequilibrium
b.	price ceiling	g.	search costs
c.	excess demand	h.	supply shock
d.	surplus	i.	spillover costs
e.	equilibrium	j.	price floor

17.

a minimum price for a good or service

18.

costs of production that affect people who have no control over how much of a good is produced

19.

when quantity demanded is more than quantity supplied

20.

a sudden lack of availability of a good

21.

situation in which quantity supplied is greater than quantity demanded

Identifying Key Terms

Match each term with the correct statement below.

a.	supply shock	f.	disequilibrium
b.	shortage	g.	minimum wage
c.	excess supply	h.	price floor
d.	spillover costs	i.	price ceiling
e.	search costs	j.	rent control

22.

a maximum amount that can be legally charged for a good or service

23.

situation in which quantity demanded is greater than quantity supplied

24.

when quantity supplied and quantity demanded are not the same in a market

25.

a sudden lack of goods

26.

when quantity supplied is more than quantity demanded

27.

the financial and opportunity costs consumers pay when looking for a good or service

Short Answer

Reading a Chart

Combined Supply and Demand Schedule
Price of a slice of pizza	Quantity demanded	Quantity supplied
$.50	300	100
$1.00	250	150
$1.50	200	200
$2.00	150	250
$2.50	100	300
$3.00	50	350

Figure 6.1

28.

In Figure 6.1, when the price of a slice of pizza is $.50, what happens to the market?

29.

In Figure 6.1, when the price of a slice of pizza is $2.50, how many slices are sold?

30.

In Figure 6.1, when the price of a slice of pizza is $3.00, how many slices are sold?

31.

In Figure 6.1, what is the equilibrium price?