EOC_Answers_Ch05 - Chapter 5: Bringing Supply and Demand...

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Chapter 5: Bringing Supply and Demand Together True or False 1. If the quantity demanded does not equal the quantity supplied, a shortage will always occur. F 2. At the equilibrium price, the quantity demanded equals the quantity supplied. T 3. A decrease in demand results in a lower equilibrium price and a higher equilibrium quantity. F 4. An increase in supply results in a lower equilibrium price and a higher equilibrium quantity. T 5. An increase in supply, combined with a decrease in demand, will decrease the equilibrium price but result in an indeterminate change in the equilibrium quantity. T 6. If supply increases and demand decreases, but the increase in supply is greater than the decrease in demand, the equilibrium quantity will decrease. F 7. An increase in both demand and supply increases the equilibrium quantity. T 8. Neither a price ceiling at the equilibrium price nor a price floor at the equilibrium price would have any effect on the market price or quantity exchanged. T 9. A price ceiling decreases the quantity of a good exchanged, but a price floor increases the quantity of a good exchanged. F 10. A minimum wage (price floor) is likely to be binding in the market for experienced and skilled workers. F Multiple Choice 1. A market will experience a ________ in a situation where quantity supplied exceeds quantity demanded and a _______ in a situation where quantity demanded exceeds quantity supplied. a. shortage; shortage b. surplus; surplus c. shortage; surplus d. surplus; shortage 2. The price of a good will tend to rise when a. a temporary shortage at the current price occurs (assuming no price controls are imposed). b. a temporary surplus at the current price occurs (assuming no price controls are imposed). c. demand decreases. d. supply increases. 3. Other things equal, a decrease in consumer income would a. increase the price and increase the quantity of autos exchanged. b. increase the price and decrease the quantity of autos exchanged. c. decrease the price and increase the quantity of autos exchanged. d. decrease the price and decrease the quantity of autos exchanged. 4. An increase in the expected future price of a good by consumers would, other things equal, a. increase the current price and increase the current quantity exchanged. b. increase the current price and decrease the current quantity exchanged. c. decrease the current price and increase the current quantity exchanged. d. decrease the current price and decrease the current quantity exchanged. 5. Assume that airline travel is a normal good and intercity bus travel is an inferior good. Higher incomes would a. increase both the price and the quantity of airline travel. b. decrease both the price and quantity of airline travel. c.
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This note was uploaded on 03/30/2010 for the course ACCOUNTING BUS2241 taught by Professor Kickland during the Spring '09 term at Troy.

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EOC_Answers_Ch05 - Chapter 5: Bringing Supply and Demand...

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