Unit 2 Economics Study Guide

In which way do producers try to differentiate themselves in monopolistic competition? price advertising product features image

product features

Producers often work to maximize their __________ and make them as large as possible. debts profits expenses costs

profits

Excess supply is created when price or __________ move away from the equilibrium point. elasticity quality time quantity

quantity

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

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? $300 $350 $400 $450

$450

The graph shows a point of equilibrium. How many goods must be supplied to achieve equilibrium? 15 20 25 30

15

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

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

The graph examines the market for graphic T-shirts. Based on the graph, which event could cause the change shown? A product becomes less popular and fewer customers purchase it. A product becomes more popular and more customers purchase it. A product sells out of stores and customers can no longer purchase it. A product is restocked on store shelves and is ready for customer purchase.

A product becomes less popular and fewer customers purchase it.

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

As price decreases, supply decreases, but demand increases.

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

As prices fall, quantity demanded goes up.

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

Costs of starting a competing business are too high.

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

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

Which aspect of monopolistic competition gives consumers more choice? Producers rely on consumer decisions to succeed. Price is not an important factor. Few barriers to market entry exist. Producers are more concerned about selection than profits.

Few barriers to market entry exist.

The graph shows the price of green tea compared to the amount supplied by producers. What does this graph suggest about green tea? Check all that apply. Green tea is elastic in terms of supply. Green tea is inelastic in terms of supply. Green tea is neither elastic nor inelastic. The supply of green tea changes sharply with the price. The supply of green tea does not change sharply with the price.

Green tea is inelastic in terms of supply. The supply of green tea does not change sharply with the price.

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

Incentives can be positive or negative.

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

It has significant barriers to entry. It depends on brand loyalty and image to generate sales. 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? It needs to be increased. It needs to be decreased. It needs to reach the price ceiling. It needs to remain unchanged.

It needs to be decreased.

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

Monopolistic

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

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

Why is pure competition considered an unsustainable system? Price differentiation is often too minimal to matter. Few barriers exist to entry, meaning that the market inevitably floods. Consumers cannot distinguish between products. Producers cannot make a profit if they keep dropping their prices.

Producers cannot make a profit if they keep dropping their prices.

___________ is the term used to describe the amount of control or influence that consumers have on a market.

Sovereignty

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

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

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

The cost of production restricts competition in the market.

Tasty Treat Tea is a popular iced tea drink. When the manufacturer begins to use imported tea leaves, the price rises by 10%, and the quantity demanded falls by 20%. The fact that quantity demanded changed by more than the price change suggests that The consumer no longer prefers the iced tea drink. The demand for Tasty Treat Tea is elastic. The demand for Tasty Treat Tea is inelastic. The consumer no longer shops at Tasty Treat Tea.

The demand for Tasty Treat Tea is elastic.

How might a drop in price for washing machines affect the demand for dryers? The demand for dryers would have no relation to the changing prices of washing machines. The demand for dryers would most likely increase as the price for washing machines dropped. The demand for dryers would most likely decrease as the price for washing machines dropped. The demand for dryers would only be affected by an increase in the price of washing machines.

The demand for dryers would most likely increase as the price for washing machines dropped.

Which explains the connection between the law of demand and excess demand? The law states that decreases in price leads to greater quantity demanded and limited supply, which occurs during excess demand. The law states that increases in price increases leads to greater quantity demanded and limited supply, which occurs during excess demand. The law states that decreases in price leads to greater supply and equilibrium, which occurs during excess demand. The law states that increases in price leads to greater supply and equilibrium, which occurs during excess demand.

The law states that decreases in price leads to greater quantity demanded and limited supply, which occurs during excess demand.

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

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

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

Which statement best explains the law of supply? The quantity supplied by producers increases as prices rise and decreases as prices fall. The quantity supplied by producers decreases as prices rise and increases as prices fall. The quantity supplied by consumers increases as prices rise and decreases as prices fall. The quantity supplied by consumers decreases as prices rise and increases as prices fall.

The quantity supplied by producers increases as prices rise and decreases as prices fall.

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

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

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

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

Which best describes the availability of substitutes in a monopoly? Price points vary. There are no substitutes. There are different brands. Products have different features.

There are no substitutes.

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

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

How do lower prices tend to affect demand? They tend to increase the availability of a product. They tend to decrease the availability of a product. They tend to increase the interest in a product. They tend to decrease the interest in a product.

They tend to increase the interest in a product.

Which is an example of a positive incentive for consumers? a sales tax imposed by a state a steady rise in profits over a year a coupon clipped from a newspaper an increase in price for a popular product

a coupon clipped from a newspaper

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

a few

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

a price ceiling.

The graph shows the price of a good compared to the quantity demanded and the quantity supplied. On this graph, the top horizontal line represents a price floor set above equilibrium. a price floor set below equilibrium. a price ceiling set above equilibrium. a price ceiling set below equilibrium.

a price floor set above equilibrium.

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

a price floor.

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

a sharp increase in production costs

A monopoly is a market that has few competing businesses. many sellers of the same item. many sellers of a variety of products. a single supplier of a good or service.

a single supplier of a good or service.

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

a supply curve and a demand curve meet.

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

along a track in opposite directions.

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

along a track in the same direction.

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? an ineffective price floor set above equilibrium causing a surplus. an effective price floor set below equilibrium causing a shortage. an ineffective price ceiling set above equilibrium causing a surplus. an effective price ceiling set below equilibrium causing a shortage.

an effective price ceiling set below equilibrium causing a shortage.

Which is an example of a product that is considered a need? breakfast food music player sports equipment video game

breakfast food

Which best describes how the government enables government monopolies to exist? by issuing a patent by allowing natural monopolies to exist by creating and running a monopoly by owning the means of production

by creating and running a monopoly

Which best describes how the government sanctions technological monopolies? by creating the technology itself by prohibiting others from entering the market by issuing a patent for the technology by authorizing one producer

by issuing a patent for the technology

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

can meet the market's entire demand.

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

cell phone carriers

Clark's Cleaners is a housekeeping service. The company's expenses include the money the company earns after paying all of its production costs. cleaning supplies and any equipment the company purchases. total amount of money the company receives from its customers. amount of money the company earns from an individual cleaning.

cleaning supplies and any equipment the company purchases.

In the market, actions known as incentives affect producers only. consumers only. consumers or producers. neither consumers nor producers.

consumers or producers.

The market for which item generally involves pure competition? cola corn jeans ice cream

corn

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

decrease their production costs.

To generate higher profits, producers must work to increase their total supply. increase their total expenses. decrease their customer base. decrease their production costs.

decrease their production costs.

On a graph, a(n) __________ shows the demand portion of equilibrium. demand curve supply curve equilibrium point excess supply

demand curve

A car dealer who does not have enough customers for a supply of new cars faces equilibrium. disequilibrium. coordination. excess demand.

disequilibrium.

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

disequilibrium.

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

disequilibrium.

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

equilibrium.

A possible result of disequilibrium is excess demand. lower demand. fixed prices. stable availability.

excess demand.

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

excess supply

Profit equals the total amount of money made minus expenses. prices. revenue. supply.

expenses.

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

fall until the demand rises.

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

incentive

Goods that are considered to be needs tend to be elastic when the price changes. inelastic when the price changes. elastic when the supply changes. inelastic when the supply changes.

inelastic when the price changes.

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

its supply or demand is not sensitive to price changes.

The point of maximum profit is the point at which the marginal cost equals the marginal revenue. market price. total revenue. production cost.

marginal revenue.

South Avenue Publishing produces self-help books. The company's profit is the money the company earns after paying all of its production costs. paper, binding, and other supplies the company purchases. total amount the company receives from the sale of its books. amount of money the company earns from selling a single book.

money the company earns after paying all of its production costs.

The lack of competition within a monopoly means that offered goods and services are lackluster. the product's market is small. consumers must look elsewhere to find options. monopolists set their own price.

monopolists set their own price.

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

possible gain.

Who sets the price in a monopolistic competition? producers and consumers consumers only government producers only

producers and consumers

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

producing the next unit.

The chart shows the marginal revenue of producing apple pies. According to the chart, the marginal revenue decreases by ten dollars as production increases. increases by ten dollars as production increases. falls to zero dollars as production increases. remains the same as production increases.

remains the same as production increases.

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

selling identical items.

Equilibrium occurs when supply and demand coordinate to set excess demand. set prices and production. maintain excess supply. raise prices and production.

set prices and production.

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

supply schedule.

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

supply.

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

technological monopoly

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

the US Postal Service

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

the amount produced greatly changes with the price.

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

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

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

the individual tastes and preferences of buyers.

The vertical axis of a demand curve shows the price of a product. the supply of a product. the interest in a product. the production cost of a product.

the price of a product.

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

the price of producing one additional unit of a good

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

together.

To calculate profit, producers subtract their total production cost from their __________. total revenue marginal revenue marginal cost total units produced.

total revenue