ECON 201 (WVU)-EXAM 2
Which of the following suggests that the "laws" of supply and
demand are being disobeyed? - ANSWERS-Persistent shortages or
surpluses occur.
When a shortage occurs in the market for a good, quantity -
ANSWERS-demanded exceeds quantity supplied and the market
mechanism pushes the price up, which in turn encourages more
production and less consumption.
Markets coordinate output decisions by pushing - ANSWERS-up
price when there is a shortage.
If a surplus exists in a market we know that the actual price is -
ANSWERS-above equilibrium price and quantity supplied is greater
than quantity demanded.
Suppliers recognize there is a shortage in the market for their product
when they notice that - ANSWERS-inventories are falling.
A shortage occurs whenever - ANSWERS-price is less than
equilibrium price
When there is excess demand for a product in a market, - ANSWERS-
price must be below the equilibrium price.
,The price of a good will tend to fall when - ANSWERS-there is
excess supply of the good.
Free market prices will eliminate - ANSWERS-shortages and
surpluses.
In 1986, the price of coffee increased sharply because of a major
earthquake and weather-induced crop failures. As a result,
conservation was immediately practiced mainly by those consumers
who - ANSWERS-considered the prices of products when they made
decisions about buying them.
When oil prices increased to record levels in the 1970s, salaries
dramatically increased for petroleum geologists skilled in finding oil.
Those geologists who moved from other areas to the higher paying
jobs were - ANSWERS-following the guidance of the invisible hand
and probably serving society's best interests as well as their own.
When an unusually bad frost reduces the apple crop in Washington
state, the price of canned apple juice may rise immediately in
supermarkets, even though the juice on the shelves was made from
last year's plentiful crop. The invisible hand theory tells us that the
profit-seeking merchants who raise their prices in such situations -
ANSWERS-are profiting by rationing the juice, which is now more
scarce to the consumers willing to pay the most for the now more
limited supply.
, When experts first predicted major weather-related coffee crop
failures in Central and South America in 1986, the price of coffee
already on grocery shelves in the United States increased sharply.
When coffee became temporarily more scarce, the usefulness to
society of "coffee conservation" increased. The immediate sharp price
increase (which soon leveled off) gave consumers an incentive to -
ANSWERS-start conserving coffee immediately and switch to other
beverages if it was easy to do so.
When a conflict arises in a major oil-exporting area of the world, such
as the Middle East, the price of gasoline already in the storage tanks
at local gas stations usually increases. Which of the following best
explains this occurrence? - ANSWERS-Gas station owners anticipate
higher replacement costs for their supply of gasoline and, therefore,
raise their prices in response to this higher expected cost.
A hurricane damaged much of the housing in Miami. Shortly
thereafter, the price of plywood rose significantly. The events suggest
that - ANSWERS-an increase in the demand for plywood caused the
price of plywood to rise.
When competition is present and property rights protected and
enforced, market prices will - ANSWERS-encourage self-interested
individuals to develop skills that are expected to be valuable in the
future.
Prices direct economic activity in a market economy by - ANSWERS-
influencing the actions of buyers and sellers.
Which of the following suggests that the "laws" of supply and
demand are being disobeyed? - ANSWERS-Persistent shortages or
surpluses occur.
When a shortage occurs in the market for a good, quantity -
ANSWERS-demanded exceeds quantity supplied and the market
mechanism pushes the price up, which in turn encourages more
production and less consumption.
Markets coordinate output decisions by pushing - ANSWERS-up
price when there is a shortage.
If a surplus exists in a market we know that the actual price is -
ANSWERS-above equilibrium price and quantity supplied is greater
than quantity demanded.
Suppliers recognize there is a shortage in the market for their product
when they notice that - ANSWERS-inventories are falling.
A shortage occurs whenever - ANSWERS-price is less than
equilibrium price
When there is excess demand for a product in a market, - ANSWERS-
price must be below the equilibrium price.
,The price of a good will tend to fall when - ANSWERS-there is
excess supply of the good.
Free market prices will eliminate - ANSWERS-shortages and
surpluses.
In 1986, the price of coffee increased sharply because of a major
earthquake and weather-induced crop failures. As a result,
conservation was immediately practiced mainly by those consumers
who - ANSWERS-considered the prices of products when they made
decisions about buying them.
When oil prices increased to record levels in the 1970s, salaries
dramatically increased for petroleum geologists skilled in finding oil.
Those geologists who moved from other areas to the higher paying
jobs were - ANSWERS-following the guidance of the invisible hand
and probably serving society's best interests as well as their own.
When an unusually bad frost reduces the apple crop in Washington
state, the price of canned apple juice may rise immediately in
supermarkets, even though the juice on the shelves was made from
last year's plentiful crop. The invisible hand theory tells us that the
profit-seeking merchants who raise their prices in such situations -
ANSWERS-are profiting by rationing the juice, which is now more
scarce to the consumers willing to pay the most for the now more
limited supply.
, When experts first predicted major weather-related coffee crop
failures in Central and South America in 1986, the price of coffee
already on grocery shelves in the United States increased sharply.
When coffee became temporarily more scarce, the usefulness to
society of "coffee conservation" increased. The immediate sharp price
increase (which soon leveled off) gave consumers an incentive to -
ANSWERS-start conserving coffee immediately and switch to other
beverages if it was easy to do so.
When a conflict arises in a major oil-exporting area of the world, such
as the Middle East, the price of gasoline already in the storage tanks
at local gas stations usually increases. Which of the following best
explains this occurrence? - ANSWERS-Gas station owners anticipate
higher replacement costs for their supply of gasoline and, therefore,
raise their prices in response to this higher expected cost.
A hurricane damaged much of the housing in Miami. Shortly
thereafter, the price of plywood rose significantly. The events suggest
that - ANSWERS-an increase in the demand for plywood caused the
price of plywood to rise.
When competition is present and property rights protected and
enforced, market prices will - ANSWERS-encourage self-interested
individuals to develop skills that are expected to be valuable in the
future.
Prices direct economic activity in a market economy by - ANSWERS-
influencing the actions of buyers and sellers.
