Question 1

At the equilibrium price, buyers have bought all they want to buy, but sellers have not sold all they want to sell.

Accepted Answer

At the equilibrium price, the quantity demanded by buyers equals the quantity supplied by sellers, meaning both buyers and sellers have achieved their desired level of exchange.

Question 2

A market's equilibrium is the point at which the supply and demand curves intersect.

Accepted Answer

This is true. At equilibrium, the quantity demanded by consumers is equal to the quantity supplied by producers, resulting in a stable market price.

Question 3

Advances in production technology typically reduce firms' costs, which increases the quantity supplied at each price.

Accepted Answer

Advances in production technology allow firms to produce more goods at a lower cost, which enables them to increase the quantity supplied at each price. This typically results in a rightward shift of the supply curve, indicating that firms are willing to supply a greater quantity at every given price level.

Question 4

The equilibrium price is the same as the market-clearing price.

Accepted Answer

The equilibrium price is defined as the price at which the quantity supplied is equal to the quantity demanded, resulting in a market-clearing condition. Therefore, the equilibrium price and the market-clearing price are the same.

Question 5

Individual supply curves are summed vertically to obtain the market supply curve.

Accepted Answer

Individual supply curves are summed horizontally to obtain the market supply curve, reflecting the total quantity supplied at each price by all suppliers.

Question 6

The actions of buyers and sellers naturally move markets toward equilibrium.

Accepted Answer

This statement is true. As buyers and sellers interact in a market, their decisions and behaviors will influence the price and quantity of goods exchanged. If there is excess demand for a product, sellers may raise their prices and buyers may adjust their quantity demanded, ultimately pushing the market toward an equilibrium where supply matches demand. Similarly, if there is excess supply, sellers may lower their prices and buyers may adjust their quantity demanded, leading to a new equilibrium.

Question 7

A decrease in the price of sugar will shift the supply curve for cookies to the right.

Accepted Answer

A decrease in the price of sugar, which is an input for making cookies, will lower the cost of production for cookie manufacturers. This will encourage them to produce and supply more cookies at every price level, leading to a rightward shift in the supply curve.

Question 8

In a market, the price of any good adjusts until quantity demanded equals quantity supplied.

Accepted Answer

This statement is referring to the law of supply and demand, which states that in a competitive market, the price of a good will adjust until the quantity demanded by consumers is equal to the quantity supplied by producers.

Question 9

When a seller expects the price of its product to decrease in the future, the seller's supply curve shifts left now.

Accepted Answer

If a seller expects the price of its product to decrease in the future, the seller may actually increase supply now to sell as much as they can before the price drops. Therefore, the supply curve would shift to the right rather than the left.

Question 10

The market supply curve shows how the total quantity supplied of a good varies as input prices vary, holding constant all the other factors that influence producers' decisions about how much to sell.

Accepted Answer

The market supply curve shows how the total quantity supplied of a good varies with its price, holding constant all other factors that influence producers' decisions about how much to sell. Input prices are one of the factors held constant, not what the curve illustrates.

Question 11

Sellers respond to a surplus by cutting their prices.

Accepted Answer

When there is a surplus, there is excess supply, and sellers may lower their prices in order to encourage more demand and reduce their inventory levels. This helps to restore equilibrium in the market.

Question 12

When the market price is above the equilibrium price, the quantity of the good demanded exceeds the quantity supplied.

Accepted Answer

When the market price is above the equilibrium price, the quantity supplied exceeds the quantity demanded, leading to a surplus.

Question 13

At the equilibrium price, quantity demanded is equal to quantity supplied.

Accepted Answer

This is because the equilibrium price is determined by the intersection of the demand and supply curves, where the quantity demanded by consumers is equal to the quantity supplied by producers.

Question 14

If a company making frozen orange juice expects the price of its product to be higher next month, it will supply more to the market this month.

Accepted Answer

The company is more likely to hold back supply this month to sell more next month at the higher prices, rather than increase supply in the current month.

Question 15

A reduction in an input price will cause a change in quantity supplied but not a change in supply.

Accepted Answer

A reduction in an input price will cause a shift in the supply curve to the right, indicating an increase in supply at every price level, not just a change in the quantity supplied. The quantity supplied changes in response to price changes of the product itself, while supply changes in response to non-price determinants, such as input costs.

Question 16

A surplus is the same as an excess demand.

Accepted Answer

A surplus refers to a situation where the quantity supplied is greater than the quantity demanded, while excess demand refers to a situation where the quantity demanded is greater than the quantity supplied. They are opposite concepts.

Question 17

If there is an improvement in the technology used to produce a good, then the supply curve for that good will shift to the left.

Accepted Answer

An improvement in technology will lead to a shift in the supply curve to the right, indicating an increase in the quantity supplied at every price level. This is because the improved technology will make it more efficient and cheaper to produce the good.

Question 18

An increase in the price of ink will shift the supply curve for pens to the left.

Accepted Answer

An increase in the price of ink, which is a raw material for making pens, raises the production costs for pens. As a result, manufacturers are willing to supply fewer pens at each price level, leading to a leftward shift in the supply curve.

Question 19

Supply and demand together determine the price and quantity of a good sold in a market.

Accepted Answer

The interaction between supply and demand is the fundamental concept of economics, and together they determine the price and quantity of a good sold in a market. When demand is high and supply is low, the price will be high, and the quantity sold will be low. Conversely, when demand is low and supply is high, the price will be low, and the quantity sold will be high.

Question 20

When the market price is above the equilibrium price, suppliers are unable to sell all they want to sell.

Accepted Answer

When the market price is above the equilibrium price, there is a surplus of goods as buyers are not willing to purchase as much at the higher price, whereas suppliers want to sell their goods at the higher price resulting in an unsold stock.

Quiz 4: The Market Forces of Supply and Demand