Question

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Answer 1

1.
The law of demand says (1 point)

the higher the price, the more consumers will buy.
the lower the price, the less consumers will buy.
the lower the price, the more consumers will buy.
the lower the price, the more consumers will substitute.

2.
Which of the following describes the substitution effect? (1 point)

As the price of a good falls, people will substitute other products.
As the price of a good rises, people will substitute other products.
As demand rises, people will substitute other products.
As demand falls, people will substitute other products.

3.
Which of the following is NOT an example of complements? (1 point)

skis and ski boots
row boat and oars
electric shaver and charging cord
calculator and cell phone

4.
If you keep buying despite a price increase, your demand is (1 point)

elastic.
strong.
normal.
inelastic.

5.
According to the law of supply, (1 point)

the lower the price, the larger the quantity consumed.
the higher the price, the larger the quantity produced.
if the price of a good rises, some firms will produce less.
if the price of a good falls, new firms may enter the market.

6.
The change in output from adding one more worker is the (1 point)

marginal product of labor.
increasing marginal returns.
diminishing marginal returns.
negative marginal returns.

7.
Marginal cost is (1 point)

total revenue minus total cost.
total revenue plus total cost.
the cost of producing one more unit of a good.
the difference between fixed and variable costs.

8.

A subsidy is
(1 point)

a tax on the production or sale of a good.
a government payment to support a business or market.
a form of government regulation.
illustrated by the market supply curve.

9.
A market is in equilibrium when (1 point)

quantity demanded is greater than quantity supplied.
quantity supplied is greater than quantity demanded.
quantity supplied and quantity demanded are equal.
the government takes action to bring it into equilibrium.

10.
Disequilibrium occurs when (1 point)

quantity supplied and quantity demanded are not equal.
quantity supplied and quantity demanded are equal.
prices are higher than quantity supplied.
there is neither excess supply nor excess demand.

11.
When does a surplus exist? (1 point)

when new products are brought to the market for sale
whenever prices drop
when there are too few items for the people who want to buy them
when there is a greater supply of a good than people want to buy

12.
Rationing is a common form of distribution in (1 point)

a centrally planned economy.
a free market economy.
a price-based system.
a market based on competition.

13.
A market structure with many sellers and many buyers is (1 point)

an oligopoly.
monopolistic.
perfect competition.
nonprice competition.

14.
A market that is a monopoly has (1 point)

many buyers and sellers.
many firms selling slightly different products.
three or four firms dominating the market.
one seller and many buyers.

15.
Compared to a market with perfect competition, a monopoly has (1 point)

lower prices and fewer goods.
higher prices and fewer goods.
lower prices and more goods.
higher prices and more goods.

16.
One role of the federal government's Justice Department is to (1 point)

encourage price fixing.
break up monopolies.
provide businesses with loans for start-up costs.
eliminate barriers to entry.

17.
What category would include subsidies, excise taxes, and regulation? (1 point)

the effects of rising costs
limits on imports
government influences on supply
benefits of marginal costs

18.
What is the most common result of rent control laws? (1 point)

High-income families are denied rental housing.
Few low-income, high-need renters benefit from the program.
Landlords can no longer discriminate against tenants.
The supply of apartments rises.

19.
What is an oligopoly? (1 point)

an agreement by an organization of producers to set prices and production
a market structure in which a few large firms dominate the market
a market structure in which five firms have a price war
a market structure in which a single firm dominates the market

Use the following graph to answer questions 20–21.

econ_unit2_test


20.
According to the graph of marginal product of labor for a company that makes beanbags, which of the following situations is created when the fourth through seventh workers are hired? (1 point)

increasing marginal returns
marginal product of labor specialization
negative marginal returns
diminishing marginal returns

21.
According to the graph, which of the following happens when an eighth person is hired at the beanbag company? (1 point)

A positive marginal product of labor is created.
A negative marginal return is created.
The output of beanbags is 28 per hour.
The output of beanbags stays the same.

22.
Which of the following is NOT a factor affecting elasticity? (1 point)

availability of substitutes
the good's relative importance
whether the good is a necessity or a luxury
GDP

23.
Explain two barriers to entry for a new business. (4 points)
24.
What impact would a sudden increase in the price of wood have on producers and consumers? How might each group respond to the change in price? (4 points)
25.

What are the trade-offs between free enterprise and government intervention associated with the United States' antitrust policies? Give one example of a U.S. government action to regulate or break-up a monopoly.
(4 points)
Use the graph below to answer number 26.

econ_unit2_test_1
26.
Study the graph showing the equilibrium point for a pizzeria. Which of the following can be said about the equilibrium price and the equilibrium quantity? (1 point)

The quantity supplied and the quantity demanded are equal at 200 slices per day.
The quantity demanded and the quantity supplied are equal at $2.00 per slice.
The quantity supplied is not equal to the quantity demanded in this market, which should be at 200 per day.
The maximum quantity demanded, 350 per day, is more than the quantity supplied.