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1. | In a market economy, who decides when to exchange money for goods and services?
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| A) government leaders
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| B) government advisers
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| C) individuals
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| D) time-honored codes
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2. | According to the law of demand, ___________
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| A) quantity demanded and price have a direct relationship.
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| B) quantity demanded and price have an inverse relationship.
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| C) as price goes up, demand goes up.
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| D) as price goes down, demand goes down.
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3. | Being able to buy more clothes because the price of gasoline dropped is an example of ___________
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| A) the substitution effect.
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| B) the law of diminishing marginal utility.
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| C) the law of voluntary exchange.
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| D) the real income effect.
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4. | Which of the following pairs of items would NOT be substitutes for each other if the price of one increased dramatically?
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| A) concert tickets, movie rentals
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| B) home perms, salon hair styling
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| C) broccoli, pizza
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| D) fitness center membership, exercise bicycle
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5. | When you stop riding the roller coaster because its ticket price is no longer worth waiting in line for, you are exemplifying the ___________
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| A) law of diminishing marginal utility.
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| B) law of diminishing returns.
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| C) substitution effect.
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| D) act of voluntary exchange.
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6. | Which of the following statements does NOT describe a single demand curve?
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| A) It slopes downward from left to right.
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| B) It shows an inverse relationship between price and quantity demanded.
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| C) It shows the quantity demanded of a good or service at each possible price.
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| D) It shows how changes in technology affect demand.
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7. | Which of the following causes the demand curve to shift to the left?
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| A) an increase in population
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| B) a decrease in income
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| C) a new fad
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| D) a decrease in the price of a complementary good
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8. | Which of the following describes a product with inelastic demand?
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| A) A small increase in price greatly reduces the quantity demanded.
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| B) A small decrease in price greatly increases the quantity demanded.
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| C) A large increase in price has no effect on quantity demanded.
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| D) A large increase in price has a large effect on quantity demanded.
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9. | According to the law of supply, ___________
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| A) quantity supplied and price have a direct relationship.
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| B) quantity supplied and price have an inverse relationship.
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| C) as price goes up, supply goes down.
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| D) as price goes down, supply goes up.
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10. | Which of the following would NOT encourage a producer to enter a particular industry?
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| A) Profits are high.
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| B) The manufacturing process is efficient.
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| C) Production costs are low.
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| D) The price of the product is low.
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11. | Which of the following would appear upward-sloping from left to right?
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| A) demand schedule
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| B) supply schedule
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| C) demand curve
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| D) supply curve
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12. | Which of the following will cause the supply curve to shift to the left?
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| A) a reduction in the price of inputs
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| B) an increase in the number of firms in the industry
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| C) an increase in taxes
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| D) an improvement in technology
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13. | The level at which the quantity demanded and the quantity supplied are balanced is called the ___________
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| A) black market price.
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| B) equilibrium price.
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| C) rationing quota.
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| D) price floor.
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14. | If new technology lowers the production costs to manufacture CDs,
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| A) the supply curve moves right, and the equilibrium price falls.
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| B) the supply curve moves right, and the equilibrium price rises.
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| C) the demand curve moves right, and the equilibrium price rises.
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| D) the demand curve moves left, and the equilibrium price falls.
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15. | What results when the quantity demanded is greater than the quantity supplied?
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| A) a price floor
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| B) a price ceiling
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| C) a shortage
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| D) a surplus
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16. | Which of the following describes a price ceiling?
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| A) an illegal method of charging maximum prices for goods in short supply
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| B) a nonmarket method of distributing goods and services
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| C) a government-set minimum price that results in a surplus
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| D) a government-set maximum price that results in a shortage
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