Economics Unit 2 Test

2. The equilibrium price and quantity are:

$2 and 200

Most airports charge airplanes a landing fee for using the airport runways. What would happen if airports charged all airplanes the same fee and did not change the fee for several years? *

Airports would get very crowded, with many airplanes using the facilities

4. The equilibrium price is one at which:

All of the above occur.

We observe a market in which the price has risen and the quantity sold has risen as well. This could be caused only by: *

An increase in demand

Who sets the price of a good or service in a market economy? *

Buyers and Sellers

Which of the following is not a characteristic of a command economy?

Competition

If marijuana is legalized and the risk previously associated with buying and selling it is thereby eliminated, there is likely to be an effect on its demand and supply. This will most likely affect equilibrium price and equilibrium quantity in which of the following ways? *

Effect on equilibrium price uncertain; quantity will definitely increase.

An important function of price is to: *

Provide the common denominator that allows consumers to calculate the relative costs and benefits.

When a price change influences quantity a great deal we can say that the good or service is *

Elastic

5. The function of the market-price is to:

Equate quantity demanded with quantity supplied.

Which graph illustrates the effects of high gasoline prices on the auto market? *

Graph B

Which graph illustrates the effects of an auto manufacturer's use of new robots to produce autos more efficiently? *

Graph C

A tariff is a tax on imports. Which graph illustrates the effects of a government tariff on foreign automobiles imported into the United States? *

Graph D

During dry years, many cities experience water shortages and encourage citizens to conserve on water, reducing water usage for lawns, showers, and washing clothes and cars. What might be an alternative way to help reduce the water shortage problem during a drought? *

Raise the price of water to the market-clearing price.

6. The discovery of oil in Mexico would:

Increase the oil supply.

1. The NFL "blocks out" local T.V. of football games when the game in question is not sold out in advance. The NFL supports this action because it

Increases the demand for football tickets

Which of the following is NOT a characteristic of a market economy?

Selfishness

When the price of an item changes people will usually: *

Look at how the price change influences the relative value of their alternatives.

When the price of an item changes, producers will usually:

Look at how the price change influences the relative value of their alternatives.

The law of demand states: *

People usually buy less goods and services when their prices rise.

Which item will not change the supply for a good or service?

Price

Which of the following will not cause people to demand more of a good or service? *

Price

Which incentives do command economies lack?

Private Ownership, Profit

The equilibrium price is the price where: *

The amount of the good offered for sale is bought.

What is a consumer surplus? *

The difference between what the consumer is willing to pay for the good and the price of the good.

People make choices based upon: *

The economizing principle.

According to the law of demand *

The lower the price, the more of the good people want to buy.

People often substitute lower-priced items for higher-priced items because: *

The opportunity cost of a higher-priced item is too high.

A shortage f DVD players has occurred in the stores during the Christmas shopping season. All companies set their prices before the Christmas season begins. What explains this shortage? *

The price of DVD players was set lower than the market-clearing price.

3. If the price were temporarily at $3.00:

The price would decrease.

The law of supply states:

There is a positive relationship between price and the quantity supplied.

A price elasticity of demand of .45 for certain goods suggests: *

They are necessary items with few substitutes

The most important factor determining price elasticity for supply is *

Time