Microeconomics LSM Chapter 3

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Competition among corn producers forces them to use the best technology and right mix of productive resources; otherwise their costs will be too high relative to the market price and they will be unprofitable. This is best described as:
Productive efficiency
True or False: Allocative efficiency is the particular mix of goods and services least valued by society.
False
A shortage results from an excess of quantity _______
Demanded
Production of a good or service in the least costly way is known as ____ efficiency.
Productive
which of the following refers to a particular apportionment or mix of goods and services most highly valued by society?
Allocative efficiency
Buyers and sellers are brought together in a ____
Market
Which of the following are determinants of demand?
Consumer tastes, consumer expectations, prices of related goods, number of buyers, changes in income
_____ resource prices raise production costs and, assuming a fixed product price, ____ profits
Higher; reduce
A shortage results from an excess of quantity ____
demanded
Which of the following are determinants of supply?
Taxes, subsidies
Technology
Resource prices
Quantity demanded is illustrated on the ____ axis, while price is illustrated on the ____ axis.
horizontal (x); vertical (y)
An increase in ____ while holding supply constant results in an increase in both equilibrium price and quantity
demand
Which of the following describes the law of demand?
1. All other things being equal, as price increases, quantity demanded decreases.
2. All other things being equal, as price decreases, quantity demanded increases.
The supply curve measures quantity ____ on the horizontal axis and _____ on the vertical axis.
supplied; price
The law of demand describes an ____ relationship between the price of a good or service and the quantity demanded of that good or service.
inverse
A price ____ is a legally mandated price imposed above equilibrium price or the price that a free market would establish.
Floor
A price ceiling is the maximum legal price a seller may charge for a product or service where a price at or below the ceiling is ____ and a price above the price ceiling is ____.
legal; illegal
Government may place legal limits on prices when it is determined that prices that are unfairly ____ for buyers or unfairly ____ for sellers.
high; low
A surplus is known as an excess of _____.
Supply
____ in supply while holding demand constant results in an increase in equilibrium price, but a decrease in equilibrium quantity.
1. A shift leftward
2. A decrease
An increase in supply while holding demand constant results in an _____ in equilibrium price, but an _____ in equilibrium quantity.
Decrease; increase
The interaction of buyers and sellers determines equilibrium price and equilibrium _____
quantity.
Equilibrium price is otherwise known as market-____ price.
Clearing
A decrease in demand while holding supply constant results in:
A decrease in both equilibrium price and quantity.
1. Supply increase and demand stays constant.
2. Supply increases and demand increases.
3. Demand decreases and supply stays constant.
4. Demand decreases and supply increases.

Math each change in supply and demand with the appropriate effect on equilibrium price and quantity.
1. Equilibrium price falls and equilibrium quantity rises.
2. The change in equilibrium price in indeterminate and equilibrium quantity rises.
3. Equilibrium price falls and equilibrium quantity falls.
4. Equilibrium price falls and the change in quantity is indeterminate.
Products whose demand varies directly with changes in money or income are called normal or ____
Luxury goods
The number of sellers or competitors in a market is a determinant or shifter of the ____ curve
Supply