Ch. 6: Prices
Matching
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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 |
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1.
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the smallest amount, by law, that can be paid to a worker for an hour of
labor
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2.
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a maximum amount that can be legally charged for a good or service
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3.
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a sudden lack of goods
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4.
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when quantity supplied is more than quantity demanded
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5.
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situation in which quantity demanded is greater than quantity supplied
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6.
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a price ceiling placed on the amount people pay for housing
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7.
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the financial and opportunity costs consumers pay when looking for a good or
service
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8.
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when quantity supplied and quantity demanded are not the same in a
market
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Multiple Choice
Identify the
choice that best completes the statement or answers the question.
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9.
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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. |
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10.
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On which kinds of goods do governments generally place price ceilings?
a. | those that are cheap but could become more expensive without the
ceiling | b. | those that are not necessary but have become customary | c. | those that are
essential and cheap | d. | those that are essential but too expensive for
some consumers |
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11.
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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. | equilibrium | b. | excess demand | d. | price floor |
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12.
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Which of the following is an example of a good whose price goes down because of
improvements in technology?
a. | computer printers | c. | hard-bound books | b. | running shoes | d. | typewriters |
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13.
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What happens when the supply of a nonperishable good is greater than the
consumer wants to buy?
a. | the good is discarded | b. | the good becomes a luxury and the price
rises | c. | either the good remains unsold or the price drops | d. | either the good is
saved for later sale or the price is raised |
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14.
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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. | in an attempt to
create a society in which everyone was equal | c. | to limit the costs of production of many
goods | d. | as a method of keeping the consumer from getting what he or she
wanted |
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15.
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Why did the U.S. government use rationing for some foods and consumer goods
during World War II?
a. | to guarantee each civilian a minimum standard of living in
wartime | b. | to keep sellers from raising prices on necessary goods | c. | because the English
government had also decided on rationing | d. | to earn more money to support the
military |
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16.
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Which of the following is a situation that makes the market behave
inefficiently?
a. | when consumers do not have enough information to make good
choices | b. | when producers have the power to find out exactly what to produce | c. | when both consumers
and producers are fully informed about a product | d. | when the market is in perfect competition and
prices are high |
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17.
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What happens to a market in equilibrium when there is an increase in
supply?
a. | Excess supply means that producers will make less of the good. | b. | Quantity demanded
will exceed quantity supplied, so the price will drop. | c. | Quantity supplied will exceed quantity
demanded, so the price will drop. | d. | Undersupply means that the good will become
very expensive. |
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18.
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What is it called when the government uses some tool other than money to
allocate goods?
a. | supply management | c. | disequilibrium | b. | rationing | d. | resource
allocation |
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Short Answer
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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 | | | |
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19.
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When the price of a slice of pizza is $2.50, how many slices are sold?
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20.
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What is the equilibrium price?
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21.
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When the price of a slice of pizza is $.50, what happens to the market?
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Essay
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Critical Thinking
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22.
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Recognizing Ideologies Other than rent control, what could a town or city
do to help people who cannot afford rents at the market equilibrium to find a place to live?
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23.
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Drawing Inferences What are the advantages and disadvantages of the
minimum wage for workers?
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24.
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Identifying Central Issues What are the major advantages of a
distribution system based on price?
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