AREC Test 1

The combined willingness and ability of all consumers in the market to pay for a particular good is called_______ demand.

Market

What would be the effect of banning certain inputs, such as the dangerous pesticide DDT or certain ozone- depleting fluorocarbons, on the supply of products using these inputs?

They would drop as producers are forced to use more costly inputs.

Market supply is the quantities that

all sellers combined are willing and able to sell at various prices over a specific time period.

A market comprised of a downward-sloping demand curve that intersects an upward-sloping supply curve is said to be stable because:

at any price other than equilibrium, forces in the market move price towards the equilibrium.

Judith is a developer who is considering building residential houses on some property she owns.She reads that the prices of new houses are expected to fall over the foreseeable future. Judith is most likely to

build houses to sell now rather than build later.

Complements are goods or services that

consumers use together in some way.

When the price of a good is below its equilibrium value:

consumers will bid the price up.

In the simplest case, a key characteristic of the free market is that it

does not require government intervention to work properly, reaches equilibrium by itself, surpluses and shortages provide the incentives for suppliers and demands to work toward equilibrium.

The price at which the quantity demanded is equal to the quantity supplied is known as ________ price.

equilibrium

Petroleum is an input into making plastics. Therefore, if the price of petroleum rises, we would expect the supply of goods made of plastic to

fall

An unexpected freeze that wipes out the Florida orange crop would

lower the supply of oranges on the market.

As the price of a good rises:

more firms can cover their opportunity costs of producing the good.

Sellers tend to offer ________ for sale as price increases, and so the supply curve is________ sloping.

more; upward

Supply is defined as the

quantity of a good or service that producers are willing and able to produce or offer at a given price over a given time period.

A change in the amount of a good or service that sellers are willing and able to sell as a result of a price change is called change in________.

quantity supplied

Jessica's marginal cost for producing a pitcher of lemonade is $0.25. Therefore,$0.25 can also be called her:

reservation price.

Which chain of events is correct? A decrease in supply causes a

shortage to occur at the original price, which leads to an increase in equilibrium price and a decrease in equilibrium quantity.

Which chain of events is correct? An increase in demand causes a

shortage to occur at the original price, which leads to increases in equilibrium price and equilibrium quantity.

In a free market, if the price of a good is above the equilibrium price, then;

suppliers, dissatisfied with growing inventories, will lower the price.

What is the effect on the supply of agricultural products of farmers using better fertilizers and pesticides?

supply rises

Which chain of events is correct?An increase in supply causes a

surplus to occur at the original price, which leads to a decrease in equilibrium price and increase in equilibrium quantity.

Which chain of events is correct? A decrease in demand causes a

surplus to occur at the original price, which leads to decreases in equilibrium price and equilibrium quantity.

When the price of a substitute rises,

the demand for the other good rises.

In general, when the demand curve shifts to the right and supply remains constant then:

the equilibrium quantity will rise.

A shortage exists when

the quantity demanded is greater than the quantity supplied at the current price.

A surplus exists when

the quantity demanded is greater than the quantity supplied at the current price.

Whenever the quantity demanded is not equal to the quantity supplied, the quantity that is actually sold in the market is:

the smaller of the quantity demanded and the quantity supplied.

Last summer, real estate prices in your town soared. You started noticing more "ForSale" signs in your neighbors' yards. You conclude that:

when housing prices rose, they started to exceed some of your neighbors' reservation prices.

Which of the following is NOT a characteristic of a market in equilibrium?

All consumers are able to purchase an amount equal to their quantity demanded.

Which pair is an example of substitute goods?

Coke and Pepsi

Which of following is NOT true of an equilibrium price?

It is always a fair and just price.

Demand is defined as the

willingness and ability to pay for a certain quantity of a good or service at a given set of prices over a given period of time.

In Cuba, a bureaucratic committee makes the production decisions for the country's firms and factories. Therefore, Cuba is an example of a:

centralized economy.

Substitutes are

goods or services that are similar to one another from the consumerʹs perspective.

In order to understand how the price of a good is determined in the free market, one must account for the desires of:

purchasers and sellers.

If the number of Chinese restaurants in a town increases, then economists would say that

the supply of Chinese restaurants has increased.

The Exploding Firecracker Company has facilities to produce a maximum of 500 firecrackers per day.At the current market price the manager is willing to produce only 300 firecrackers. An economist would conclude that the quantity supplied at the current price is

300 because quantity supplied is the amount sellers are both able and willing to sell.

Suppose that the equilibrium price of rice falls and the equilibrium quantity falls.Which of the following best fits the observed data?

A decrease in demand with supply constant.

Which pair is an example of complements?

Golf clubs and golf balls