ABE Chapter 2

Buyers and sellers who have no influence on market price are referred to as: a. market pawns b. monopolists c. price takers d. price makers

C. Price takers

If a decrease in income increases the demand for a good, then the good is a. a substitute good. b. a complementary good. c. a normal good. d. an inferior good.

D. an inferior good.

At the equilibrium price, buyers have bought all they want to buy, but sellers have not sold all they want to sell.

False

If there is an improvement in the technology used to produce a good, then the supply curve for that good will shift to the left.

False

In a competitive market, there are so few buyers and so few sellers that each has a significant impact on the market.

False

A decrease in supply will cause an increase in price, which will cause a decrease in quantity demanded.

True

A markets equilibrium is the point at which the supply and demand curves intersect.

True

A yard sale is an example of a market

True

If a higher price means a greater quantity supplied, then the supply curve slopes upward.

True

In a market, economy, supply and demand determine both the quantity of each good produced and the price at which it is sold,

True

In a market,, the price of any good adjusts until quantity demanded equals quantity supplied.

True

Individual demand curves are summed horizontally to obtain the market demand curve.

True

Prices allocate a market economy's scarce resrouces.

True

Supply and demand together determine the price and quantity of a good sold in a market.

True

The actions off buyers and sellers naturally move markets toward equilibrium.

True

The quantity supplied of a good or service is the amount that sellers are willing and able to sell at a particular price.

True

n quantity demanded decreases at every possible price, we know that the demand curve has a. shifted to the left. b. shifted to the right. c. not shifted; rather, we have moved along the demand curve to a new point on the same curve. d. not shifted; rather, the demand curve has become flatter.

A. Shifted to the left

If the demand for a good falls when income falls, then the good is called a. a normal good. b. a regular good. c. a luxury good. d. an inferior good.

A. a normal good.

Two goods are substitutes when a decrease in the price of one good a. decreases the demand for the other good. b. decreases the quantity demanded of the other good. c. increases the demand for the other good. d. increases the quantity demanded of the other good.

A. decreases the demand for the other good

Pizza is a normal good if a. the demand for pizza rises when income rises. b. the demand for pizza rises when the price of pizza falls. c. the demand curve for pizza slopes downward. d. the demand curve for pizza shifts to the right when the price of burritos rises, assuming pizza and burritos are substitutes.

A. the demand for pizza rises when income rises.

The following table contains a demand schedule for a good. Price Quantity Demanded $10 100 $20 ? If the law of demand applies to this good, then "?" could be a. 0. b. 100. c. 200. d. 400.

A: 0

Ford Motor Company announces that next month it will offer $3,000 rebates on new Mustangs. As a result of this information, today's demand curve for Mustangs a. shifts to the right. b. shifts to the left. c. shifts either to the right or to the left, but we cannot determine the direction of the shift from the given information. d. will not shift; rather, the demand curve for Mustangs will shift to the right next month.

B. Shifts to the left

Which of the following changes would not shift the demand curve for a good or service? a. a change in income b. a change in the price of the good or service c. a change in expectations about the future price of the good or service d. a change in the price of a related good or service

B. a change in the price of the good or service

The law of demand states that, other things equal, a. an increase in price causes quantity demanded to increase. b. an increase in price causes quantity demanded to decrease. c. an increase in quantity demanded causes price to increase. d. an increase in quantity demanded causes price to decrease.

B. an increase in price causes quantity demanded to decrease.

The quantity demanded of a good is the amount that buyers: a. are willing to purchase b. are willing and able to purchase c. are willing and able and need to purchase d. are able to purchase

B. are willing and able to purchase

If the number of buyers in a market decreases, then a. demand will increase. b. demand will decrease. c. supply will increase. d. supply will decrease.

B. demand will decrease

A market demand curve shows how the total quantity demanded of a good varies as a. income varies. b. price varies. c. the number of buyers varies. d. supply varies.

B. price varies

Suppose the American Medical Association announces that men who shave their heads are less likely to die of heart failure. We could expect the current demand for a. hair gel to increase. b. razors to increase. c. combs to increase. d. shampoo to increase.

B. razors to increase.

Each of the following is a determinant of demand except a. tastes. b. technology. c. expectations. d. the prices of related goods.

B. technology

A monopoly is a market: a. with one seller, and that seller is a price taker b. with one seller, and that seller sets the price. c. with one buyer, and that buyer is a price taker. d. with one buyer, and that buyer sets the price

B. with one seller, and that seller sets the price

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

C. Market

An increase in demand is represented by a. a movement downward and to the right along a demand curve. b. a movement upward and to the left along a demand curve. c. a rightward shift of a demand curve. d. a leftward shift of a demand curve.

C. a rightward shift of a demand curve

The highest form of competition is called: a. absolute competition b. cutthroat competition c. perfect competition d. market competition

C. perfect competition

A demand schedule is a table that shows the relationship between a. quantity demanded and quantity supplied. b. income and quantity demanded. c. price and quantity demanded. d. price and income.

C. price and quantity demanded

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

C. those who sell the good or service

A decrease in demand is represented by a. a movement downward and to the right along a demand curve. b. a movement upward and to the left along a demand curve. c. a rightward shift of a demand curve. d. a leftward shift of a demand curve.

D. a leftward shift of a demand curve.

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

D. all buyers and sellers.

A decrease in supply shifts the supply curve to the left.

True

Two goods are complements when a decrease in the price of one good a. decreases the quantity demanded of the other good. b. decreases the demand for the other good. c. increases the quantity demanded of the other good. d. increases the demand for the other good.

D. increases the demand for the other good

When drawing a demand curve, a. demand is on the vertical axis and price is on the horizontal axis. b. quantity demanded is on the vertical axis and price is on the horizontal axis. c. price is on the vertical axis and demand is on the horizontal axis. d. price is on the vertical axis and quantity demanded is on the horizontal axis.

D. price is on the vertical axis and quantity demanded is on the horizontal axis.

The market demand curve a. is found by vertically adding the individual demand curves. b. slopes upward. c. represents the sum of the prices that all the buyers are willing to pay for a given quantity of the good. d. represents the sum of the quantities demanded by all the buyers at each price of the good.

D. represents the sum of quantities demanded by all the buyers at each price of the good

Which of the following is not a determinant of the demand for a particular good? a. the prices of related goods b. income c. tastes d. the prices of the inputs used to produce the good

D. the prices of the inputs used to produce the good

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

D. there are many sellers and they compete with one another in such a way that some seller s are always being forced out of the market. d. there are so many buyers and so many sellers that each has a negligible impact on the price of the product.

A movement along a supply curve is called a change in supply while a shift of the supply curve is called a change in quantity supplied.

False

A reduction in an input price will cause a change in quantity supplied, but not a change in supply.

False

A surplus is the same as an excess demand.

False

All goods and services are sold in perfectly competitive markets.

False

An increase in demand shift the demand curve to the left.

False

An increase in the price of a product and an increase in the number of sellers in the market affect the supply curve in the same general way.

False

The demand curve is the upward-sloping line relating price and quantity demanded.

False

The law of demand states that, other things equal, when the price of a good rises, the quantity demanded of the good rises, and when the price falls, the quantity demand falls.

False

The law of supply states that, other things equal, when the price of a good rises, the quantity supplied of the good falls.

False

When the market price is below the equilibrium price, suppliers are unable to sell all they want to sell.

False

When a supply curve or a demand curve shift, the equilibrium price and equilibrium quantity change.

True

When quantity demanded exceeds quantity supplied at the current market price, the market has a shortage and market price will likely rise in the future to eliminate the shortage.

True

Whenever a determinant of demand other than price changes, the demand curve shifts.

True

Whenever a determinant of supply other than price changes, the supply curve shifts.

True