Test 1 Review - Ch. 4 Practice Questions

If a surplus exists in a market, then we know that the actual price is a. above the equilibrium price, and quantity supplied is greater than quantity demanded. b. above the equilibrium price, and quantity demanded is greater than quantity supplied. c. below the equilibrium price, and quantity demanded is greater than quantity supplied. d. below the equilibrium price, and quantity supplied is greater than quantity demanded.

a. above the equilibrium price, and quantity supplied is greater than quantity demanded.

If a firm is a price taker, it operates in a a. competitive market. b. monopoly market. c. oligopoly market. d. monopolistically competitive market.

a. competitive market.

Suppose buyers of computers and printers regard the two goods as complements. Then an increase in the price of computers will cause a(n) a. decrease in the demand for printers and a decrease in the quantity supplied of printers. b. decrease in the supply of printers and a decrease in the quantity demanded of printers. c. decrease in the equilibrium price of printers and an increase in the equilibrium quantity of printers. d. increase in the equilibrium price of printers and a decrease in the equilibrium quantity of printers.

a. decrease in the demand for printers and a decrease in the quantity supplied of printers.

Suppose buyers of coffee and sugar regard the two goods as complements. Then an increase in the price of coffee will cause a(n) a. decrease in the demand for sugar and a decrease in the quantity supplied of sugar. b. decrease in the supply of sugar and a decrease in the quantity demanded of sugar. c. decrease in the equilibrium price of sugar and an increase in the equilibrium quantity of sugar. d. increase in the equilibrium price of sugar and a decrease in the equilibrium quantity of sugar.

a. decrease in the demand for sugar and a decrease in the quantity supplied of sugar.

Which of the following events must cause equilibrium price to rise? a. demand increases and supply decreases b. demand and supply both decrease c. demand decreases and supply increases d. demand and supply both increase

a. demand increases and supply decreases

In competitive markets, a. firms produce identical products. b. buyers can influence the market price more easily than sellers. c. markets are more likely to be in equilibrium. d. sellers are price setters.

a. firms produce identical products

For a market for a good or service to exist, there must be a a. group of buyers and sellers. b. specific time and place at which the good or service is traded. c. high degree of organization present. d. All of the above are correct

a. group of buyers and sellers.

In a competitive market, each seller has limited control over the price of his product because a. other sellers are offering similar products. b. buyers exert more control over the price than do sellers. c. these markets are highly regulated by the government. d. sellers usually agree to set a common price that will allow each seller to earn a comfortable profit.

a. other sellers are offering similar products.

The term price takers refers to buyers and sellers in a. perfectly competitive markets. b. monopolistic markets. c. markets that are regulated by the government. d. markets in which buyers cannot buy all they want and/or sellers cannot sell all they want.

a. perfectly competitive markets.

If, at the current price, there is a surplus of a good, then a. sellers are producing more than buyers wish to buy. b. the market must be in equilibrium. c. the price is below the equilibrium price. d. quantity demanded equals quantity supplied.

a. sellers are producing more than buyers wish to buy.

In markets, prices move toward equilibrium because of a. the actions of buyers and sellers. b. government regulations placed on market participants. c. increased competition among sellers. d. buyers' ability to affect market outcomes.

a. the actions of buyers and sellers.

A university's football stadium is never more than half-full during football games. This indicates a. the ticket price is above the equilibrium price. b. the ticket price is below the equilibrium price. c. the ticket price is at the equilibrium price. d. nothing about the equilibrium price.

a. the ticket price is above the equilibrium price.

If there is a shortage of farm laborers, we would expect a. the wage of farm laborers to increase. b. the wage of farm laborers to decrease. c. the price of farm commodities to decrease. d. a decrease in the demand for substitutes for farm labor.

a. the wage of farm laborers to increase.

The demand for a good or service is determined by a. those who buy the good or service. b. the government. c. those who sell the good or service. d. both those who buy and those who sell the good or service.

a. those who buy the good or service.

In a given market, how are the equilibrium price and the market-clearing price related? a. There is no relationship. b. They are the same price. c. The market-clearing price exceeds the equilibrium price. d. The equilibrium price exceeds the market-clearing price.

b. They are the same price.

When the price of a good is lower than the equilibrium price, a. a surplus will exist. b. buyers desire to purchase more than is produced. c. sellers desire to produce and sell more than buyers wish to purchase. d. quantity supplied exceeds quantity demanded.

b. buyers desire to purchase more than is produced.

Which of the following events will cause equilibrium quantity to fall? a. demand increases and supply decreases b. either demand and/or supply decreases c. demand decreases and supply increases d. demand and supply both increase

b. either demand and/or supply decreases

At the equilibrium price, the quantity of the good that buyers are willing and able to buy a. is greater than the quantity that sellers are willing and able to sell. b. exactly equals the quantity that sellers are willing and able to sell. c. is less than the quantity that sellers are willing and able to sell. d. Either a. or c. could be correct.

b. exactly equals the quantity that sellers are willing and able to sell.

Another term for equilibrium price is a. dynamic price. b. market-clearing price. c. quantity-defining price. d. balance price.

b. market-clearing price.

When a shortage exists in a market, sellers a. raise price, which increases quantity demanded and decreases quantity supplied until the shortage is eliminated. b. raise price, which decreases quantity demanded and increases quantity supplied until the shortage is eliminated. c. lower price, which increases quantity demanded and decreases quantity supplied until the shortage is eliminated. d. lower price, which decreases quantity demanded and increases quantity supplied until the shortage is eliminated.

b. raise price, which decreases quantity demanded and increases quantity supplied until the shortage is eliminated.

In any economic system, scarce resources have to be allocated among competing uses. Market economies harness the forces of a. government to allocate scarce resources. b. supply and demand to allocate scarce resources. c. credit cards to allocate scarce resources. d. nature to allocate scarce resources.

b. supply and demand to allocate scarce resources.

The law of supply and demand asserts that a. demand curves and supply curves tend to shift to the right as time goes by. b. the price of a good will eventually rise in response to an excess demand for that good. c. when the supply curve for a good shifts, the demand curve for that good shifts in response. d. the equilibrium price of a good will be rising more often than it will be falling.

b. the price of a good will eventually rise in response to an excess demand for that good.

Assume Leo buys coffee beans in a competitive market. It follows that a. Leo has a limited number of sellers from which to buy coffee beans. b. Leo will negotiate with sellers whenever he buys coffee beans. c. Leo cannot influence the price of coffee beans even if he buys a large quantity of them. d. None of the above is correct.

c. Leo cannot influence the price of coffee beans even if he buys a large quantity of them.

Which of the following would cause price to decrease? a. a decrease in supply b. an increase in demand c. a surplus of the good d. a shortage of the good

c. a surplus of the good

In competitive markets, buyers a. are price takers, but sellers are price setters. b. are price setters, but sellers are price takers. c. and sellers are price takers. d. and sellers are price setters.

c. and sellers are price takers.

If a shortage exists in a market, then we know that the actual price is a. above the equilibrium price, and quantity supplied is greater than quantity demanded. b. above the equilibrium price, and quantity demanded is greater than quantity supplied. c. below the equilibrium price, and quantity demanded is greater than quantity supplied. d. below the equilibrium price, and quantity supplied is greater than quantity demanded.

c. below the equilibrium price, and quantity demanded is greater than quantity supplied.

A market includes a. buyers only. b. sellers only. c. both buyers and sellers. d. the place where transactions occur but not the people involved.

c. both buyers and sellers.

In a competitive market, the quantity of a product produced and the price of the product are determined by a. buyers. b. sellers. c. both buyers and sellers. d. None of the above is correct.

c. both buyers and sellers.

When a surplus exists in a market, sellers a. raise price, which increases quantity demanded and decreases quantity supplied, until the surplus is eliminated. b.raise price, which decreases quantity demanded and increases quantity supplied, until the surplus is eliminated. c. lower price, which increases quantity demanded and decreases quantity supplied, until the surplus is eliminated. d. lower price, which decreases quantity demanded and increases quantity supplied, until the surplus is eliminated.

c. lower price, which increases quantity demanded and decreases quantity supplied, until the surplus is eliminated.

A group of buyers and sellers of a particular good or service is called a(n) a. coalition. b. economy. c. market. d. competition.

c. market.

Assume a market is perfectly competitive. When a new producer enters the market, the a. price in the market increases. b. price in the market decreases. c. price in the market does not change. d. market is no longer a competitive market.

c. price in the market does not change.

There is no shortage of scarce resources in a market economy because a. the government makes shortages illegal. b. resources are abundant in market economies. c. prices adjust to eliminate shortages. d. quantity supplied is always greater than quantity demanded in market economies.

c. prices adjust to eliminate shortages.

When the price of a good is higher than the equilibrium price, a. a shortage will exist. b. buyers desire to purchase more than is produced. c. sellers desire to produce and sell more than buyers wish to purchase. d. quantity demanded exceeds quantity supplied.

c. sellers desire to produce and sell more than buyers wish to purchase.

A surplus exists in a market if a. there is an excess demand for the good. b. quantity demanded exceeds quantity supplied. c. the current price is above its equilibrium price. d. All of the above are correct.

c. the current price is above its equilibrium price.

A shortage exists in a market if a. there is an excess supply of the good. b. quantity supplied exceeds quantity demanded. c. the current price is below its equilibrium price. d. All of the above are correct.

c. the current price is below its equilibrium price.

If, at the current price, there is a shortage of a good, then a. sellers are producing more than buyers wish to buy. b. the market must be in equilibrium. c. the price is below the equilibrium price. d. quantity demanded equals quantity supplied.

c. the price is below the equilibrium price.

The supply of a good or service is determined by a. those who buy the good or service. b. the government. c. those who sell the good or service. d. both those who buy and those who sell the good or service.

c. those who sell the good or service.

The current price of blue jeans is $30 per pair, but the equilibrium price of blue jeans is $25 per pair. As a result, a. the quantity supplied of blue jeans exceeds the quantity demanded of blue jeans at the $30 price. b. the equilibrium quantity of blue jeans exceeds the quantity demanded at the $30 price. c. there is a surplus of blue jeans at the $30 price. d. All of the above are correct.

d. All of the above are correct.

In a competitive market, the price of a product a. is determined by buyers, and the quantity of the product produced is determined by sellers. b. is determined by sellers, and the quantity of the product produced is determined by buyers. c. and the quantity of the product produced are both determined by sellers. d. None of the above is correct.

d. None of the above is correct.

Which of the following would cause price to increase? a. an increase in supply b. a decrease in demand c. a surplus of the good d. a shortage of the good

d. a shortage of the good

In a competitive market, the quantity of a product produced and the price of the product are determined by a. a single buyer. b. a single seller. c. one buyer and one seller working together. d. all buyers and all sellers.

d. all buyers and all sellers.

A competitive market is one in which there a. is only one seller, but there are many buyers. b. are many sellers, and each seller has the ability to set the price of his product. c. are many sellers, and they compete with one another in such a way that some sellers are always being forced out of the market. d. are so many buyers and so many sellers that each has a negligible impact on the price of the product.

d. are so many buyers and so many sellers that each has a negligible impact on the price of the product.

If a seller in a competitive market chooses to charge more than the going price, then a. the sellers' profits must increase. b. the owners of the raw materials used in production would raise the prices for the raw materials. c. other sellers would also raise their prices. d. buyers will make purchases from other sellers.

d. buyers will make purchases from other sellers.

Which of the following events must cause equilibrium quantity to rise? a. demand increases and supply decreases b. demand and supply both decrease c. demand decreases and supply increases d. demand and supply both increase

d. demand and supply both increase

The unique point at which the supply and demand curves intersect is called a. market harmony. b. coincidence. c. equivalence. d. equilibrium.

d. equilibrium.

Most markets in the economy are a. markets in which sellers, rather than buyers, control the price of the product. b. markets in which buyers, rather than sellers, control the price of the product. c. perfectly competitive. d. highly competitive.

d. highly competitive.

A competitive market is a market in which a. an auctioneer helps set prices and arrange sales. b. there are only a few sellers. c. the forces of supply and demand do not apply. d. no individual buyer or seller has any significant impact on the market price.

d. no individual buyer or seller has any significant impact on the market price.

In a market economy, who or what determines who produces each good and how much is produced? a. the government b. lawyers c. lotteries d. prices

d. prices

Suppose roses are currently selling for $40 per dozen, but the equilibrium price of roses is $30 per dozen. We would expect a a. shortage to exist and the market price of roses to increase. b. shortage to exist and the market price of roses to decrease. c. surplus to exist and the market price of roses to increase. d. surplus to exist and the market price of roses to decrease.

d. surplus to exist and the market price of roses to decrease.

Buyers are able to buy all they want to buy and sellers are able to sell all they want to sell at a. prices at and above the equilibrium price. b. prices at and below the equilibrium price. c. prices above and below the equilibrium price, but not at the equilibrium price. d. the equilibrium price but not above or below the equilibrium price.

d. the equilibrium price but not above or below the equilibrium price.