Chapter 4 MCQ Flashcards
If customers are allowed to steal the iced cappuccinos without paying, this would still be a market. TF
- False. Transactions would not be voluntary and there would be no incentive to supply the product to consumers.
The price should cover what it costs to make the iced cappuccinos, but not thecost of Apu’s time. TF
False. Price should cover all opportunity costs.
In order for price and quantity adjustments to occur in this market, Apu needs to beaware of the personal wants of his neighbours. TF
False. Price and quantity adjustments do not require the consumer or business to know anything about anyone’s personal wants or production capabilities.
If Apu prices above the maximum price that consumers are willing to pay, he will end up with excess supply. TF
True. Surplus, with quantity supplied greater than quantity demanded.
If Apu prices below the maximum price that consumers are willing to pay, he will lose out on potential profits. TF
True.
If Apu sets a price that leaves him with no excess demand and no excess supply, he has found the equilibrium price. TF
True. Definition of market-clearing price.
When a market is in equilibrium, consumers who are not willing to pay the market-clearingprice have made a smart choice. TF
False. May not be willing or able to pay the equilibrium price.
When a market is in equilibrium, the market-clearing quantity equals thequantity demanded at the equilibrium price. TF
True. Quantity demanded equals quantity supplied.
If new businesses enter the steel market, the equilibrium price of steel falls and theequilibrium quantity decreases. TF
False. Increased supply causes equilibrium price to fall and quantity to increase.
Suppose the demand for earbuds increases while the cost of producing them decreases.The market-clearing quantity of earbudsincreases and the price always falls. TF
False. Increase in demand and increase in supply increase market-clearing quantity, but effect on price uncertain.
Durham University researchers report Scottish grey seals are having more sexthanks to global warming. This is because, as drinking water becomes scarce, the females must travel farther distances and other males are able to seduce them. The market price for seal coat fur will likely increase. TF
False. Increased supply lowers the price of grey seals, reducing the cost of producing seal coat fur, resulting in a lower price.
Ontario recently had a ratio of 27 students for each full-time professor, while other provinces had a ratio of 18-to-one. It is estimated that Ontario needs 11 000 more professors by the end of the decade. If universities reduced qualification requirements to allow students with college degrees to teach introductory university courses, this would help reduce the shortage. TF
True. Reduced qualifications increases supply.
Producer surplus is the marginal cost of producing a product minus the price ofthe product. TF
False. Price minus marginal cost.
Deadweight loss is the difference between consumer surplus and producer surplus atthe economically efficient outcome. TF
False. Decrease in total surplus compared to economically efficient outcome.
The economically efficient outcome has the smallest deadweight loss. TF
True. Maximum total surplus and zero deadweight loss.