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Effects of Surplus quiz #1 Flashcards

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Effects of Surplus quiz #1
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  • Which one of the following would NOT occur if the market price was set above the market-clearing (equilibrium) price?
    There would NOT be a shortage; instead, a surplus would occur because quantity supplied exceeds quantity demanded.
  • All things being equal, when producers sell goods for a lower price, do they make more or less profit?
    They make less profit, since selling at a lower price reduces the revenue per unit.
  • A surplus results when the market price is set above the equilibrium price, causing the quantity supplied to be greater than the quantity demanded.
    True. A surplus occurs when the price is above equilibrium, leading to excess supply.
  • What does the term 'excess supply' refer to in the context of a surplus?
    Excess supply refers to the situation where the quantity supplied exceeds the quantity demanded at a given price, resulting in unsold goods.
  • On a supply and demand graph, how is a surplus visually represented?
    A surplus is shown as the area between the quantity supplied and the quantity demanded at a price above equilibrium.
  • At a market price of 8, what are the approximate quantities demanded and supplied according to the video example?
    At a price of 8, the quantity demanded is about 5 units and the quantity supplied is about 14 units.
  • What happens to the quantity demanded when the market price is set above equilibrium?
    The quantity demanded decreases because fewer consumers are willing to buy at the higher price.
  • How do you determine the surplus on a supply and demand graph?
    You find the surplus by calculating the difference between the quantity supplied and the quantity demanded at the set price.
  • What does the intersection of the supply and demand curves represent on the graph?
    The intersection represents the equilibrium price and quantity, where quantity supplied equals quantity demanded.
  • Why might the market price not always be at equilibrium?
    Market prices may not always be at equilibrium due to imperfect information, external interventions, or temporary market conditions.
  • What market condition does a car dealer face when there are not enough customers to buy the available supply of new cars?
    The car dealer faces a surplus, which occurs when the quantity supplied of new cars is greater than the quantity demanded by customers.
  • What typically happens to prices when supply is higher than demand in a market?
    When supply is higher than demand, prices tend to decrease as sellers compete to attract buyers and reduce excess inventory.
  • Define what occurs in a market when supply exceeds demand.
    When supply exceeds demand, a surplus occurs, meaning there is excess supply and the quantity supplied is greater than the quantity demanded.
  • What are the effects on the market when the price is set above the equilibrium price?
    When the price is set above the equilibrium price, the quantity supplied exceeds the quantity demanded, resulting in a surplus.
  • Explain the concept of surplus in microeconomics.
    A surplus in microeconomics refers to a situation where the quantity supplied of a good is greater than the quantity demanded, usually because the market price is set above the equilibrium price.