Please help answer the following questions based on the context from the textbook "McKenzie & Lee. Microeconomics for MBAs, The Economic Way of Thinking for Managers, 3rd.ed. Cambridge University Press."

2Why does the demand curve have a negative slope and the supply curve have a positive slope? 4 What might keep the market from moving all the way to that equilibrium point?

5 Suppose that a price ceiling is imposed on the product. What will be the effects on producers' welfare? On consumers' welfare? How does the ceiling affect overall market efficiency?

6 Suppose that a price floor is imposed on the product. What will be the effects on producers' welfare? On consumers' welfare? How does the price floor affect overall market efficiency?

The following are some notes that the instructor provided

The key takeaways from Chapter 3 are the following:

1 The market is a system that provides producers with incentives to deliver goods and services to others. To respond to those incentives, producers must meet the needs of society. They must compete with other producers to deliver their goods and services in the most cost-effective manner.

2 A market implies that sellers and buyers can freely respond to incentives and that they have options and can choose among them. It does not mean, however, that behavior is totally unconstrained or that producers can choose from unlimited options. What a competitor can do may be severely limited by what rival firms are willing to do.

3 Demand curves for products and labor (or any other input) slope downward (and represent inverse relationships between price and quantity demanded). Supply curves for products and labor slope upward (and represent positive relationships between price and quantity produced). The positions of these curves are determined by a number of market forces.

4 Price and quantity in competitive markets will tend to move toward the intersection of supply and demand, which is the point of maximum efficiency.

5 Market shortages will lead to price increases. Market surpluses will lead to price decreases.

6 Equilibrium price and quantity in competitive markets can be expected to change in predictable ways relative to increases and decreases in supply and demand.

7 Obstructions to price movement upward to equilibrium give rise to market shortages. Obstructions to price movement down toward equilibrium give rise to market surpluses.

8 Wage rates are determined by the interaction of essentially the same market forces that determine the prices of products. The demand for labor is a function of workers' productivity and the prices secured for the products which workers help produce. The supply of labor is determined by workers' opportunity costs and by working conditions.

9 An increase in the price of the product workers produce can lead to an increase in workers' wage rate in competitive labor markets. An increase in worker nonwage benefits can be expected to lead to a reduction in workers' wage rates in competitive labor markets.

10 The market system is not perfect. Producers may have difficulty acquiring enough information to make reliable production decisions. People take time to respond to incentives, and producers can make high profits while others are gathering their resources to respond to an opportunity.

11 An uncontrolled market system also carries with it the possibility that one firm will acquire at least some monopoly power, restricting the ability of others to enter into competition, produce more, and push prices and profits down (a topic to which we shall return in Chapter 11).

12 Under certain conditions, firms would be well advised not to match up worker pay with worker "worth" at every moment in time. Current and prospective pay can be used as a means of increasing worker productivity and rewards over time.

13 Mandatory retirement can also have unheralded benefits for workers as well as their employers. Mandatory retirement can allow for "overpayments" for workers, which can increase workers' incentives to improve their productivity over the course of their careers.

Chapter 3 Key Terms

CompetitionCompetitionis the process by which market participants, in pursuing their own interests, attempt to outdo, outprice, outproduce, and outmaneuver each other. By extension, competition is also the process by which market participants attempt to avoid being outdone, outpriced, outproduced, or outmaneuvered by others.

Perfect competition (in extreme form)Perfect competition (in extreme form)is a market composed of numerous independent sellers and buyers of an identical product, such that no one individual seller or buyer has the ability to affect the market price by changing the production level. Entry into and exit from a perfectly competitive market is unrestricted. Producers can start up or shut down production at will. Anyone can enter the market, duplicate the good, and compete for consumers' dollars. Since each competitor produces only a small share of the total output, the individual competitor cannot significantly influence the degree of competition or the market price by entering or leaving the market.

Demandis the assumed inverse relationship between the price of a good or service and the quantity consumers are willing and able to buy during a given period, all other things are held constant.

Supplyis the assumed relationship between the quantity of a good producer are willing to offer during a given period and the price, everything else is held constant. Generally, because additional costs tend to rise with expanded production, this relationship is presumed to be positive (a point that is developed with care inChapters 7and8).

Marginal costis the additional cost of producing an additional unit of output.

Market equilibriumoccurs when the forces of supply and demand are in balance with no net pressure for the price and output level to change.

Market surplusAmarket surplusis the amount by which the quantity supplied exceeds the quantity demanded at any given price.

Market shortageAmarket shortageis the amount by which the quantity demanded exceeds the quantity supplied at any given price.

EfficiencyEfficiencyis the maximization of output through the careful allocation of resources, given the constraints of supply (producers' costs) and demand (consumers' preferences).

Market inefficiencyis the extent to which potential net gains from trades are not generated.

Short-run equilibriumis the price-quantity combination that will exist as long as producers do not have time to change their production facilities (or some other resource that is fixed in the short run).

Long-run equilibriumis the price-quantity combination that will exist after firms have had time to change their production facilities (or some other resource that is fixed in the short run).

Opportunity costis the most highly valued opportunity that someone does not take when anything is done.