Download Economics - Spring Branch ISD

Economics
Chapter 5.3 & Chapter 6.1
Supply & Equilibrium
Directions; use the information in the text to answer the following questions (worth $40)
I.
Chapter 5; Section Three:
1. Supply is affected by any change in the cost of an input used to produce a
good, such as raw materials, machinery, or labor.
2. True or false;
A rise in the cost of an input will cause a rise in the supply of a good at all price
levels.
3. A rise in the cost of labor or raw materials will translate directly into a higher
marginal cost, thus the supply will fall and the supply curve will shift to the left.
4. True or false;
Advances in technology can lower production cost in many industries.
5. A subsidy is a government payment or discounted loan that supports a business or
market.
6. What are the three reasons governments subsidize produces?
1. To protect farms so that some will be available to grow food in case
import are cut off.
2. Protect the lifestyle and character of the countryside.
3. To protect developing industries from foreign competition.
7. The common U.S. federal subsidized industry is the farming industry.
8. An excise tax is a tax on the production or sale of a good.
9. True or false;
An excise tax decreases production cost by deducting an extra cost for each unit
sold.
10. Regulation is government intervention in a market that affects the price ,
quantity, or quality of a good.
11. Regulations increase the cost of manufacturing cars thus reducing the supply and
shifting the supply curve to the left.
12. The U.S. imports carpets from India. An increase in the wage of Indian workers
would decrease the supply of carpets to the U.S. market.
13. The U.S. imports telephones from Japan. A new technology that decreases the
cost of producing telephones would increase the supply of telephones to the U.S.
14. The U.S. imports oil from Russia. A new oil discovery in Russia would increase
the supply of oil to the U.S. market.
15. An import ban on sugar would eliminate foreign sugar suppliers from the market,
shifting the market supply curve to the left.
16. True or false;
If a seller expects the price of a good to rise in the future, the seller will store the
goods now in order to sell more in the future.
17. Expectations of higher prices will reduce supply now and increase supply later.
18. True or false;
During periods of inflation, the value of cash in a person’s pocket increases from
day to day as prices rise.
19. True or false;
A good will continue to hold its value, provided that it can be stored for a long
period of time.
20. If more suppliers enter a market, what will be the affect upon the supply curve of
that product?
The curve will shift to the right.
II.
Chapter 6; section one:
21. True or false;
Central planning has been judged by economists and consumers to be more
successful than the market system of economics.
22. Equilibrium is the point of balance between price and quantity.
23. True or false;
In the market, quantities supplied and demanded will be equal at only one price
and one quantity.
24. True or false;
The equilibrium price and quantity can be found where quantity supplied equals
quantity demand, or the point where the supply curve crosses the demand curve.
25. Disequilibrium occurs when quantity supplied is not equal to quantity demanded
in the market.
26. Excess demand occurs when quantity demanded is more than quantity supplied.
27. True or false;
As long as there is excess demand, and the quantity demanded exceeds the
quantity supplied, suppliers will keep raising the price.
28. Excess supply occurs when quantity supplied exceeds quantity demanded.
29. True or false;
Whenever the market is in disequilibrium and prices are flexible, market forces
will push the market toward the equilibrium.
30. A price ceiling is a maximum price, set by law, that sellers can charge for a good
or service.
31. Rent control is type of price ceiling.
32. True or false;
Rent control increases the quantity and quality of housing, by helping poor
household afford housing.
33. Price floors are often imposed when government wants sellers to receive some
minimum reward for their efforts.
34. Minimum wage is a type of price floor.
35. True or false;
A full-time worker being paid the federal minimum wage will earn just what the
federal government says is necessary to support a couple with one child.
36. True or false;
If the minimum wage is below the equilibrium rate, it will have no effect because
employers will have to pay at least the equilibrium rate to find workers in a free
market.
Use the following graph to answer questions 37-40.
37. What point on the graph illustrates price and quantity equilibrium?
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38. What point on the graph illustrates a price ceiling?
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39. What point on the graph illustrates a price floor?
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40. What point on the graph illustrates the supply curve?
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