E2

When supply is higher than demand, prices will a. rise until the demand falls. b. rise until the supply falls. c. fall until the demand rises. d. fall until the supply rises.

c. fall until the demand rises.

The amount of goods and services consumers want is called the a. count. b. demand. c. number. d. supply.

b. demand.

When prices drop below the point where supply and demand meet, it results in a. coordination. b. disequilibrium c. equilibrium. d. production.

b. disequilibrium

Both excess supply and excess demand are a result of a. equilibrium. b. disequilibrium. c. overproduction. d. elasticity.

b. disequilibrium.

In an oligopolistic market, consumer choice is a. nonexistent. b. limited. c. extensive. d. infinite.

b. limited.

Equilibrium occurs when supply and demand coordinate to a. set excess demand. b. set prices and production. c. maintain excess supply. d. raise prices and production.

b. set prices and production.

Equilibrium is defined when a. supply is limited and demand decreases. b. supply and demand meet. c. demand is higher than supply. d. supply is higher than demand.

b. supply and demand meet.

The graph shows the price of a good compared to the quantity supplied. This graph demonstrates how a. the amount produced slightly changes with the price. b. the amount produced greatly changes with the price. c. the amount consumed slightly changes with the price. d. the amount consumed greatly changes with the price.

b. the amount produced greatly changes with the price.

Which factor most directly affects a furniture company's supply? a. the growing number of furniture buyers in the market b. the availability of raw materials and natural resources c. a change in the price of rugs and other complementary goods d. an increased interest in antique furniture over modern furniture

b. the availability of raw materials and natural resources

The graph shows a point of equilibrium. What does "P" represent on the graph? a. the point where equilibrium is achieved b. the price at the equilibrium point c. the average price of goods sold d. the point where supply and demand drop

b. the price at the equilibrium point

What is the best definition of marginal cost? a. the possible income from producing an additional item b. the price of producing one additional unit of a good c. the additional income gained from selling an additional good d. the financial gain from business activity minus expenses

b. the price of producing one additional unit of a good

Brenda's Boards manufactures skateboards. Each skateboard sells for $45 and includes the following expenses: $3 for the wheels and mounts, $1 for the plastic board, $1 for the paint, and $10 for the labor. What is the total profit the company earns after selling 100 boards? a. $300 b. $350 c. $3,000 d. $3,500

c. $3,000

Look at the graph examining the market for graphic T-shirts. Which option represents equilibrium as it appears on this graph? a. 5 graphic T-shirts on sale for $6 b. 10 graphic T-shirts on sale for $30 c. 30 graphic T-shirts on sale for $10 d. 55 graphic T-shirts on sale for $6

c. 30 graphic T-shirts on sale for $10

What is the best definition of elasticity in economics? a. Elasticity of supply measures how the amount of a good changes when the producer hires more employees. b. Elasticity of supply measures how the amount of a good changes when the producer uses new materials. c. Elasticity of demand measures how the amount of a good changes when its price goes up or down. d. Elasticity of demand measures how the amount of a good changes when its distribution expands.

c. Elasticity of demand measures how the amount of a good changes when its price goes up or down.

Which statement best describes incentives? a. Incentives are mostly positive. b. Incentives are mostly negative. c. Incentives can be positive or negative. d. Incentives are neither positive nor negative.

c. Incentives can be positive or negative.

Which statements correctly explain price floors and price ceilings? Check all that apply. a. Ineffective price floors tend to be too high. b. Ineffective price ceilings tend to be too low. c. Price floors help producers by raising prices. d. Price ceilings help consumers by lowering prices. e. Effective price floors are set above equilibrium. f. Effective price ceilings are set below equilibrium.

c. Price floors help producers by raising prices. d. Price ceilings help consumers by lowering prices. e. Effective price floors are set above equilibrium. f. Effective price ceilings are set below equilibrium.

The graph shows a point of equilibrium. If quantity demanded exceeds quantity supplied, what most likely needs to happen to achieve equilibrium? a. The supply needs to increase b. The price needs to decrease c. The price needs to increase d. The demand needs to increase

c. The price needs to increase

When an oligopoly exists, how many producers dominate the market? a. none b. one c. a few d. many

c. a few

The highest amount a landlord can charge for rent is an example of a. an incentive. b. a price floor. c. a price ceiling. d. an elastic service.

c. a price ceiling.

A(n)_____ is a reward or punishment that encourages people to behave in certain ways.

incentive

Brenda's Boards manufactures skateboards. Each skateboard sells for $45 and includes the following expenses: $3 for the wheels and mounts, $1 for the plastic board, $1 for the paint, and $10 for the labor. What is the total profit the company earns after selling 100 boards? $300 $350 $3,000 $3,500

$3,000

What is the difference between a price floor and a price ceiling? a. A price floor is the minimum price allowed for a good. A price ceiling is the maximum price allowed for a good. b. A price floor is the maximum price allowed for a good. A price ceiling is the minimum price allowed for a good. c. A price ceiling below the equilibrium price has no effect. d. A price floor above the equilibrium price has no effect.

a. A price floor is the minimum price allowed for a good. A price ceiling is the maximum price allowed for a good.

The graph shows excess demand. Which explains why the price indicated by p2 on the graph is lower than the equilibrium price? a. As prices fall, quantity demanded goes up. b. As prices fall, quantity demanded goes down. c. As prices fall, quantity demanded stays the same. d. As prices fall, quantity demanded disappears.

a. As prices fall, quantity demanded goes up.

Which helps enable an oligopoly to form within a market? a. Costs of starting a competing business are too high. b. The government restricts market entry. c. The number of options in a market confuses consumers. d. No competition exists between producers.

a. Costs of starting a competing business are too high.

Why is competition limited in an oligopoly? a. High entry costs prevent new producers from entering the market. b. Producers completely refuse to engage in price wars. c. No major distinctions exist between producers. d. Producers actively segment the market to avoid competition.

a. High entry costs prevent new producers from entering the market.

_____ is the type of competition that occurs in a competitive market without identical producers. a. Monopolistic b. Pure competition c. An oligopoly

a. Monopolistic

Which statement best explains the role of producers in economics? a. Producers supply goods and services. b. Producers purchase goods and services. c. Producers create theories about the market. d. Producers sell shares for companies in the market.

a. Producers supply goods and services.

What is the difference between profit and revenue? a. Revenue is the total amount producers receive after selling a good. Profit is the total amount producers earn after subtracting the production costs. b. Revenue is the total amount producers earn after subtracting the production costs. Profit is the total amount producers receive after selling a good. c. Revenue is the total amount producers pay to manufacture a good. Profit is the total amount producers earn after subtracting the production costs. d. Revenue is the total amount producers pay to manufacture a good. Profit is the total amount producers receive after selling a good.

a. Revenue is the total amount producers receive after selling a good. Profit is the total amount producers earn after subtracting the production costs.

______ is the term used to describe the amount of control or influence that consumers have on a market. a. Sovereignty b. Competition c. Oligopoly

a. Sovereignty

Which occurs during market equilibrium? Check all that apply. a. Supply and demand meet at a specific price. b. Supply is slightly greater than demand. c. Supply and demand meet at a specific quantity. d. Supply and demand meet at a demand point. e. Supply and demand meet at a supply point.

a. Supply and demand meet at a specific price. c. Supply and demand meet at a specific quantity.

Why are utilities, such as electricity and water, examples of natural monopolies? a. The cost of production restricts competition in the market. b. There are limited natural resources to meet demand. c. Consumers only trust known companies to provide these essentials. d. There is no need for alternative options.

a. The cost of production restricts competition in the market.

The chart shows the marginal cost and marginal revenue of producing apple pies. What most likely will happen if the pie maker continues to make additional pies? a. The marginal costs will continue to rise, increasing the total cost, while the marginal revenue remains the same, decreasing the profit. b. The marginal costs will continue to fall, decreasing the total cost, while the marginal revenue remains the same, increasing the profit. c. The marginal costs will continue to rise, increasing the total cost, while the marginal revenue remains the same, increasing the profit. d. The marginal costs will continue to fall, decreasing the total cost, while the marginal revenue remains the same, decreasing the profit.

a. The marginal costs will continue to rise, increasing the total cost, while the marginal revenue remains the same, decreasing the profit.

The government has set a price floor on bread. Manufacturers cannot sell loaves for less than $5.00, which is a dollar above the market price.What will most likely result from this price control? a. The quantity demanded for bread will decrease, and the quantity supplied will increase. b. The quantity demanded and quantity supplied for bread will increase. c. The quantity demanded for bread will increase,and the quantity supplied will decrease. d. The quantity demanded and quantity supplied for bread will decrease.

a. The quantity demanded for bread will decrease, and the quantity supplied will increase.

On a graph, an equilibrium point is where a. a supply curve and a demand curve meet. b. a supply curve is higher than a demand curve. c. the supply and demand curves head up. d. the supply and demand curves head down.

a. a supply curve and a demand curve meet.

According to the law of supply, price and quantity move a. along a track in the same direction. b. along a track in opposite directions. c. from different points toward one another. d. from the same point away from one another.

a. along a track in the same direction.

Natural monopolies occur when one producer a. can meet the market's entire demand. b. controls the method of production. c. is the only one authorized to produce a given product. d. creates unique products.

a. can meet the market's entire demand.

On a graph, a(n) _____shows the demand portion of equilibrium. a. demand curve b. supply curve c. equilibrium point d. excess supply

a. demand curve

What happens when the quantity of a good supplied at a given price is greater than the quantity demanded? a. excess supply b. stable prices c. exact equilibrium d. increased production

a. excess supply

Profit equals the total amount of money made minus a. expenses. b. prices. c. revenue. d. supply.

a. expenses.

The chart compares the price of graphic T-shirts to the quantity demanded. This chart shows the link between a. interest in a product and the price a consumer pays. b. interest in a product and the price a producer pays. c. amount of a product and the price a consumer pays. d. amount of a product and the price a producer pays.

a. interest in a product and the price a consumer pays.

The chart compares the price of graphic T-shirts to the quantity demanded. $5.00 for 50 demand $7.50 for 40 demand $10.00 for 30 demand $12.50 for 20 demand $15.00 for 10 demand This chart shows the link between a. interest in a product and the price a consumer pays. b. interest in a product and the price a producer pays. c. amount of a product and the price a consumer pays. d. amount of a product and the price a producer pays.

a. interest in a product and the price a consumer pays.

In pure competition, producers compete exclusively on the basis of a. selling identical items. b. advertising heavily to promote their good. c. producing the unique features of their good. d. focusing on maintaining a positive image.

a. selling identical items.

Which is an example of a government monopoly in the United States? a. the US Postal Service b. the Internal Revenue Service (IRS) c. the US Environmental Protection Agency (EPA) d. the National Park Service

a. the US Postal Service

A factor that most directly affects the demand for automobiles is a. the individual tastes and preferences of buyers. b. the cost of raw materials and natural resources. c. the availability of workers in automobile factories. d. a company's ability to respond to buyers' interest.

a. the individual tastes and preferences of buyers.

What is the best definition of marginal benefit? a. the possible income from producing an additional item b. the price of producing one additional unit of a good c. the additional income gained from selling an additional good d. the financial gain from business activity minus expenses

a. the possible income from producing an additional item

On a supply and demand graph, equilibrium is the point where a. the two curves meet. b. the supply curve begins. c. the supply curve ends. d. the demand curve ends.

a. the two curves meet.

Supply and demand coordinate to determine prices by working a. together. b. competitively. c. with other factors. d. separately.

a. together.

The chart shows the marginal cost of producing apple pies. According to the chart, the marginal cost of producing the second pie is a. 1.00 b. .50 c. .25 d. 1.25.

b. .50

The chart shows the marginal cost of producing apple pies. According to the chart, the marginal cost of producing the second pie is ____ a. 1.00 b. .50 c. 2.50 d. 1.25.

b. .50

Why is the automobile industry considered an oligopoly? a. It offers little differentiation within the market. b. It has significant barriers to entry. c. It is controlled by companies that patent key technology. d. It relies on price variation to attract customers. e. It depends on brand loyalty and image to generate sales. f. It is dominated by a few key players.

b. It has significant barriers to entry. e. It depends on brand loyalty and image to generate sales. f. It is dominated by a few key players.

The graph shows excess supply. Which needs to happen to the price indicated by p2 on the graph in order to achieve equilibrium? a. It needs to be increased. b. It needs to be decreased. c. It needs to reach the price ceiling. d. It needs to remain unchanged.

b. It needs to be decreased.

The graph shows a point of equilibrium. If the quantity supplied is greater than the quantity demanded, what must happen to the price in order to reach equilibrium? a. The price of the product will increase to meet equilibrium. b. The price of the product will decrease to meet equilibrium. c. Supply and demand must be raised. d. Supply and demand must be lowered.

b. The price of the product will decrease to meet equilibrium.

Which statement best explains the law of demand? a. The quantity demanded by consumers increases as prices rise, then decreases as prices fall. b. The quantity demanded by consumers decreases as prices rise, then increases as prices fall. c. The quantity demanded by producers increases as prices rise, then decreases as prices fall. d. The quantity demanded by producers decreases as prices rise, then increases as prices fall.

b. The quantity demanded by consumers decreases as prices rise, then increases as prices fall.

Which statement best compares the laws of supply and demand? a. The two economic laws exist in theory. They have no relation to economics in the real world. b. The two economic laws exist in theory. They work in practice, but real-world factors can have an effect. c. The two economic laws work in practice. They apply to real-world economics eighty percent of the time. d. The two economic laws work in practice. They prove to be true in the real world one hundred percent of the time.

b. The two economic laws exist in theory. They work in practice, but real-world factors can have an effect.

How can producers maximize their profit? Check all that apply. a. They can work to increase their marginal cost. b. They can work to decrease their marginal cost. c. They can raise prices to increase marginal revenue. d. The can lower prices to decrease marginal revenue. e. They can keep marginal costs below marginal revenues. f. They can keep marginal revenues below marginal costs.

b. They can work to decrease their marginal cost. c. They can raise prices to increase marginal revenue. e. They can keep marginal costs below marginal revenues.

The lowest amount a manufacturer can pay factory workers is an example of a. an incentive. b. a price floor. c. a price ceiling. d. an elastic service.

b. a price floor.

In the United States, which type of industry is often considered part of an oligopoly? a. electric companies b. cell phone carriers c. mail delivery services d. denim companies

b. cell phone carriers

The market for which item generally involves pure competition? a. cola b. corn c. jeans d. ice cream

b. corn

The graph is a marginal cost curve that compares expenses for producing apple pies. A graph titled Marginal Cost of Producing Pies has quantity supplied on the x-axis, from 0 to 6 pies, and marginal cost on the y-axis, from 0 to 1 dollar and 60 cents in increments of 20 cents. The cost increases from 0 pies to 1 pie and then decreases to 3 pies. The cost again begins to increase at 4 pies. According to the graph, the marginal cost begins to increase when the producer makes a. two pies. b. three pies. c. four pies. d. five pies.

c. four pies.

Price controls on goods can be set by a. consumers. b. economists. c. governments. d. producers.

c. governments.

Producers must understand the marginal benefit of making an additional unit, which shows the a.actual gain. b. eventual gain. c. possible gain. d. unlikely gain.

c. possible gain.

In order to calculate marginal cost, producers must compare the difference in the cost of producing one unit to the cost of a. purchasing a unit. b. distributing that unit. c. producing the next unit. d. producing a different unit.

c. producing the next unit.

In which way do producers try to differentiate themselves in monopolistic competition? a. price b. advertising c. product features d. image

c. product features

What is the best definition of marginal revenue? a. the possible income from producing an additional item b. the price of producing one additional unit of a good c. the additional income gained from selling an additional good d. the financial gain from business activity minus expenses

c. the additional income gained from selling an additional good

Brenda's Boards manufactures skateboards. Each skateboard sells for $45 and includes the following expenses: $3 for the wheels and mounts, $1 for the plastic board, $1 for the paint, and $10 for the labor. What is the total revenue the company makes after selling 10 boards? a. $300 b. $350 c. $400 d. $450

d. $450

How do changing prices affect supply and demand? a. As price increases, both supply and demand increase. b. As price decreases, both supply and demand decrease. c. As price increases, supply decreases, but demand increases. d. As price decreases, supply decreases, but demand increases.

d. As price decreases, supply decreases, but demand increases.

A clothing store has ordered a new supply of jeans for the fall season and wants to sell off the remaining items from the previous spring. What action would the store owner most likely take? a. The store owner would most likely raise the price of the spring jeans to encourage producers. b. The store owner would most likely lower the price of the spring jeans to encourage producers. c. The store owner would most likely raise the price of the spring jeans to encourage consumers. d. The store owner would most likely lower the price of the spring jeans to encourage consumers.

d. The store owner would most likely lower the price of the spring jeans to encourage consumers.

Which is an example of a negative incentive for producers? a. a chance to make more money b. a special sale at a department store c. a coupon clipped from a newspaper d. a sharp increase in production costs

d. a sharp increase in production costs

The graph shows the price of a good compared to the quantity demanded and the quantity supplied. On this graph, what does the green arrow represent? a. an ineffective price floor set above equilibrium causing a surplus. b. an effective price floor set below equilibrium causing a shortage. c. an ineffective price ceiling set above equilibrium causing a surplus. d. an effective price ceiling set below equilibrium causing a shortage

d. an effective price ceiling set below equilibrium causing a shortage

To generate higher profit margins, producers must work to a. increase their total supply. b. increase their total expenses. c. decrease their customer base. d. decrease their production costs.

d. decrease their production costs.

The point where supply and demand meet and prices are set is called a. coordination. b. correspondence. c. equality. d. equilibrium.

d. equilibrium.

In economics, if a good is inelastic, a. consumers have lost an interest in purchasing it. b. producers have lost an interest in manufacturing it. c. its supply or demand is too sensitive to price changes. d. its supply or demand is not sensitive to price changes.

d. its supply or demand is not sensitive to price changes.

Look at the chart comparing the price of graphic T-shirts to the quantity supplied. This chart is an example of a a. demand curve. b. demand schedule. c. supply curve. d. supply schedule.

d. supply schedule.

The total amount of a product available in a market at a given price is called the a. count. b. demand. c. number. d. supply.

d. supply.

Wellness Pharmaceuticals has released a new antidepressant, Lexabuzac. Which type of monopoly does the company most likely have on this medication? a. natural monopoly b. de facto monopoly c. government monopoly d. technological monopoly

d. technological monopoly

Motherboards, Inc., manufactures computer parts. The company's total revenue is a. the money the company earns after paying all of its production costs. b. the total wages the company pays workers in its factories and stores. c. the amount of money the company earns from selling an individual part. d. the amount the company receives from the sale of all of its computer parts.

d. the amount the company receives from the sale of all of its computer parts.

A limited amount of goods available means that excess______is occurring.

demand

A pair of stylish sneakers could be considered a ____because it is not a necessity.

want