Chapter 5 Daily Work True/False _True_1. If the market for Rolex watches is in equilibrium, the quantity of Rolex watches demanded will equal the quantity of Rolex watches supplied. _True_2. Price reductions will usually result whenever the quantity supplied exceeds the quantity demanded at the current price. _False_3. If the soccer ball market is in equilibrium at a price of $22 per ball, an increase in the supply of soccer balls will cause a shortage at that price. _False_4. If the demand for apples increases at the same time the supply of apples falls, the price of apples will tend to fall. ____5. With knowledge about the direction, but not the magnitude, of simultaneous shifts in supply and demand, one can always tell the direction of changes in the equilibrium price, but not the direction of changes in the equilibrium quantity traded. ____6. When both supply and demand shift in the same direction, the change in the equilibrium quantity traded will be in the same as the shifting curves. ____7. The main purpose of government price controls is to keep prices from rising above their equilibrium levels. ____8. Price floors get their name from the fact that they represent a minimum price below which the legal price cannot fall. ____9. Price ceilings cause surpluses. ___10. Either a price floor or a price ceiling will result in a smaller quantity exchanged than if the price was at its equilibrium level. ___11. An increase in the expected future price of a good may act to increase the present price of the good. ___12. If there is a ceiling price below the equilibrium level, a decrease in demand will worsen the shortage. ___13. When a demand curve shifts, both the equilibrium price and quantity traded will change in the same direction as a result. ___14. When a supply curve shifts, the equilibrium price will change in the opposite direction from the shift in supply and the quantity traded will change in the same direction as the shift in supply. ___15. If one observed that both the price and equilibrium quantity of a good traded increased, it could not have been caused by a shift in supply. ___16. Either a price floor or price ceiling above the equilibrium price would cause a surplus. ___17. For the price in a market to remain the same, while the quantity traded fell, both supply and demand would have to shift to the left. ___18. When supply shifts to the left, it would make the surplus from a price floor smaller, other things equal. ___19. For a normal good, if incomes rise and the price of a complements rose, without more information, we would not know which direction either the equilibrium price or quantity traded will change. ___20. If both buyers and sellers of a good expect its price to fall in the near future, we would expect that to cause the current price and the quantity traded to increase as a result.
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