Economics Unit 2 test
When two goods are complements, a decrease in the price of one shifts the demand for the other leftward. True or false
False
Allocative efficiency occurs when a. firms produce the output that is most valued by customers. b. no raw materials are wasted. c. management is well-organized. d. labor works faster.
A
If a price floor is set above the equilibrium price, a. the market forces of supply and demand determine prices. b. there is no effect on quantity supplied. c. a permanent shortage results. d. a permanent surplus results.
A
If soybean farmers expect the price of soybeans to decrease soon, which of the following actions would these farmers most likely take? a. They would decrease production immediately. b. They would probably do nothing. c. They would increase production immediately. d. They would store most of the soybeans they produce.
A
If suddenly a large population increase occurred, what impact would it have on the housing market? a. It would shift the demand curve to the right. b. Prices would remain constant. c. There would be a surplus of homes on the market. d. It would shift the demand curve to the left.
A
If the demand for a product is low and the supply is high, the price will soon be a. lower. b. higher. c. double the amount. d. unaffected.
A
Real income refers to a. how many goods and services you can buy. b. your income minus taxes and benefits. c. your income minus taxes. d. how much money you actually earn.
A
The market demand curve shows a. the total quantity demanded per period by all consumers at various prices. b. the total number of markets. c. the demand of an individual consumer. d. the number of markets in a specific area.
A
What is the best example of government interference in markets? a. establishing the minimum wage b. easing immigration laws c. the federal drug policy d. establishing product safety features
A
Which of the following is NOT a determinant of supply? a. consumer expectations b. the number of sellers in the market c. technology used to make the good d. producer expectations
A
The more broadly a good is defined, the more substitutes there are and the more elastic the demand. True or False
False
As long as the demand curve slopes downward, a leftward shift of the supply curve a. decreases demand. b. increases price but reduces the quantity. c. increases supply. d. increases price and increases the quantity.
B
As money income increases what happens to the demand for inferior goods? a. it increases b. it decreases c. it is eliminated d. it stays the same
B
In order to have an effect, a price floor must be set a. early. b. above the equilibrium price. c. below the equilibrium price. d. late.
B
One of the aims of productive efficiency is to a. have good labor relations. b. produce a good or service at the lowest possible cost. c. have a good reputation. d. use resources wisely.
B
Supply indicates how much of a good producers a. produce. b. are willing and able to offer. c. have sold. d. have yet to sell.
B
What causes prices to move to reach equilibrium in competitive markets? a. the stock market b. individual buyers and sellers c. the Federal Reserve Board d. the government
B
Which situation shows the law of diminishing marginal utility at work? a. You are willing to pay more for every succeeding slice of pizza you purchase. b. You will only purchase succeeding slices if they cost less. c. You are willing to pay the same price for every succeeding slice of pizza you purchase. d. Each piece of pizza you buy gets smaller.
B
Elasticity of supply indicates a. how much the product costs. b. how many products are in stock. c. how responsive producers are to a change in price. d. how adaptable the supply is.
C
How does a decrease in price affect a producer? a. The producer becomes more willing and more able to supply goods. b. The producer becomes more willing but less able to supply goods. c. The producer becomes less willing and less able to supply goods. d. The producer becomes less willing but more able to supply goods.
C
Imagine that an additional worker is hired by a business, but total production fails to increase. This would illustrate a. long-run losses. b. short-run losses. c. the law of diminishing returns. d. the law of demand.
C
The demand for products or services for which there are no substitutes tends to be a. perfectly elastic. b. somewhat elastic. c. quite inelastic. d. unit elastic.
C
What is the biggest cost of finding a substitute for a product to a consumer? a. opportunity b. price c. time d. scarcity
C
All of the following reduce demand EXCEPT a. a decrease in price of a substitute. b. a decrease in consumer income. c. the number of consumers declines. d. an increase in consumer income.
D
Checking the want ads for a job instead of going door to door a. increases job competition. b. reduces the number of jobs available. c. increases newspaper circulation. d. reduces your transaction costs.
D
Elasticity, in economic terms, is another word for a. adaptability. b. adjustment. c. reconciliation. d. responsiveness.
D
One of the reasons consumers choose substitutes is that a. they are made in Japan. b. no one can tell the difference. c. they are the same price and there are more of them. d. they are relatively cheaper.
D
The law of supply states that the quantity supplied is usually related to its a. cost to produce. b. labor costs. c. color. d. price.
D
The term quantity supplied refers to a. the entire supply schedule or supply curve. b. the number of individual producers. c. the supply of all producers in the market. d. a particular amount offered for sale at a particular price.
D
What generally leads entrepreneurs to accept the risk of business failure? a. the supply curve b. They are an adventurous group c. They enjoy taking a risk d. the profit incentive
D
What might cause a shift in the supply curve to the right in the grain business? a. discovery of a substitute for grain b. a decrease in the number of farms c. an increase in the cost of harvesting grain d. a technological breakthrough to increase yields
D
Which factor might best influence supply? a. government expectations b. worker's expectations c. consumer expectations d. producer expectations
D
A leftward shift of the demand curve indicates that consumers are more willing and able to buy a good at each price. True or False
False
All producers use only two categories of resources: labor and raw materials.
False
As their price falls, producers increase their quantity supplied and consumers increase their quantity demanded. True or False
False
Consumer demand and consumer wants are one and the same. True or false
False
If a demand curve shifts further to the right than the supply curve, equilibrium price will decrease. True or False
False
If a supply curve shifts to the right, the equilibrium price will increase while the quantity demanded will fall. True or False
False
In trying to earn a profit, firms try to transform resources into poor-quality products that will require consumers to continue to replace them. True or False
False
Opportunity cost of time is constant among all consumers. True or False
False
Producers offer more for sale when the price decreases because they need to sell more to make a profit. True or False
False
Producing at the lowest possible cost per unit guarantees that firms are producing what consumers most prefer. True or False
False
Suppliers' desire to eliminate a surplus puts upward pressure on the price. True or False
False
The elasticity of supply indicates how responsive consumers are to a change in price. True or False
False
A change in the cost of a resource used to make a good will affect the supply of the good. True or False
True
A higher price makes producers more willing and better able to increase quantity supplied. True Or false
True
A shortage puts upward pressure on price. True or false
True
Demand is elastic if it is greater than 1.0. True or False
True
Firms try to avoid diseconomies of scale. True or False
True
Generally speaking, the lower the price, the greater the quantity demanded. True or false
True
If a demand curve shifts to the right, the equilibrium price and quantity demanded will increase. True or False
True
If demand increases and supply decreases, equilibrium price will increase. True or False
True
In general, producers sell additional units as long as the marginal revenue they receive exceeds the marginal cost. True or False
True
Market competition promotes both productive efficiency and allocative efficiency. True or False
True
Shortages and surpluses are always measured at a particular price. True or False
True
The change in the relative price—the price of one good relative to the prices of other goods—causes the substitution effect. True or false
True
The cost of consumption has two components: the money price of the good and the time price of the good. True or false
True
When a firm breaks even, total revenue just covers total cost. True or False
True