True/False
Indicate whether the sentence or statement is true
or false. |
| | 1. | Price and
quantity supplied move in the same direction. |
| | 2. | Lower prices
attract more producers. |
| | 3. | As more
firms enter an industry, the quantity of products supplied increases. |
| | 4. | An increase
in taxes would shift the supply curve to the left. |
| | 5. | Each
additional worker hired increases total output at the same rate. |
| | 6. | As the price
of a good goes up, the quantity demanded falls and the quantity supplied rises. |
| | 7. | Falling
prices signal consumers to buy less. |
| | 8. | A change in
the equilibrium price results from a shift in the supply or demand curves. |
| | 9. | A price
ceiling prevents prices from falling too low. |
| | 10. | A black
market deals in goods that are in short supply. |
Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question. |
| | 11. | In economic
terms, the marketplace a. | exists only at the local level throughout. | b. | is a place where people
buy food. | c. | exists only at the national level. | d. | operates through
voluntary exchange. | | |
|
| | 12. | Which
statement reflects the inverse relationship between quantity demanded and price? a. | As the price goes up,
quantity demanded goes up. | b. | As the price goes down, quantity demanded goes
up. | c. | As the supply goes up,
the price goes up. | d. | As the supply goes up, the demand goes up. | | |
|
| | 13. | Which
economic rule states that the additional satisfaction people get from consuming one more unit of a
product will lessen with each additional unit they consume? a. | real income
effect | c. | law of
demand | b. | law of diminishing marginal utility | d. | substitution effect | | | | |
|
| | 14. | According to
the substitution effect, if two items satisfy the same need and the price of one
rises, a. | people will buy the
higher priced item. | b. | people will buy the lower priced item. | c. | the demand will go
up. | d. | people will buy
something else. | | |
|
| | 15. | The amount
of goods and services people can actually buy with their money is their a. | voluntary
exchange. | c. | utility. | b. | purchasing power. | d. | substitution effect. | | | | |
|
| | 16. | How does an
increase in consumer population affect the demand for most products? a. | demand
decreases | c. | demand
increases | b. | prices go down | d. | prices go up | | | | |
|
| | 17. | A shift to
the left in the demand curve indicates a. | decrease in price. | c. | increase in population. | b. | decrease in
demand. | d. | increase in
demand. | | | | |
|
| | 18. | When a
product becomes a fad, the demand curve for that product a. | slopes
upward. | c. | shifts to the
right. | b. | becomes a straight line. | d. | shifts to the left. | | | | |
|
| | 19. | Which of the
following goods has inelastic demand? a. | sugar | c. | Diet Coke | b. | a particular brand of coffee | d. | T-bone steak | | | | |
|
| | 20. | If two
products are complementary goods, how will a decrease in the price of one affect the
other? a. | Demand will
increase. | c. | Demand will
decrease. | b. | Price will increase. | d. | Price will decrease. | | | | |
|
| | 21. | According to
the law of supply, as the price rises for a good, a. | quantity supplied decreases. | c. | quantity supplied increases. | b. | consumers stop buying
it. | d. | manufacturers stop
producing it. | | | | |
|
| | 22. | Prices on
goods and services are determined a. | only by demand. | c. | both by demand and supply. | b. | only by
supply. | d. | neither by demand nor
supply. | | | | |
|
| | 23. | The
relationship between price and quantity supplied is a. | a direct
one. | c. | an inverse
one. | b. | an indirect
one. | d. | nonexistent. | | | | |
|
| | 24. | The law of
diminishing returns results in a. | lower costs for expanding production. | b. | additional workers
increasing the total output of goods. | c. | higher costs for decreasing production. | d. | higher costs for
increasing production. | | |
|
| | 25. | The use of
technology to produce and distribute goods will a. | not affect supply. | c. | decrease supply. | b. | increase
supply. | d. | move the supply curve
to the left. | | | | |
|
| | 26. | When
quantity supplied and quantity demanded increase due to improved technology, a. | manufacturers will stop
making the product. | b. | prices will increase. | c. | consumers will stop
buying the product. | d. | prices will decrease. | | |
|
| | 27. | A decrease
in the demand for a good together with an increase in supply would cause a. | shortage of the
good. | c. | increase in
production. | b. | surplus of the good. | d. | equilibrium price. | | | | |
|
| | 28. | When a
market economy operates without restriction, it a. | creates shortages. | c. | raises prices. | b. | creates
surpluses. | d. | eliminates shortages
and surpluses. | | | | |
|
| | 29. | A
government-set maximum price that can be charged for goods and services is a. | a price
ceiling. | c. | an equilibrium
price. | b. | a price floor. | d. | rationing. | | | | |
|
| | 30. | In a black
market, goods are traded a. | at the equilibrium price. | c. | at very low prices. | b. | at illegally high
prices. | d. | for ration
coupons. | | | | |
|
Completion
Complete each sentence or
statement. |
| 31. | In a market
economy, buyers and sellers exercise their economic freedom through
____________________.
|
| 32. | The
____________________ states that the quantity demanded and the price move in opposite
directions.
|
| 33. | According to
the _________________________, people will buy an item to the point at which the satisfaction from
the last unit bought is equal to the price.
|
| 34. | If the price
of an item rises and your income does not, the ____________________ will force you to make a
trade-off.
|
| 35. | The
____________________ explains how price affects the demand for two items that satisfy the same
need.
|
| 36. | A
____________________ would show that as the price goes up, the quantity demanded goes
down.
|
| 37. | Demand is
determined by population, income, and _________________________.
|
| 38. | One factor
that determines the elasticity of demand is the existence and similarity of
____________________.
|
| 39. | If two
products are ____________________, a decrease in the price of one will result in an increase in
demand for the other.
|
| 40. | The measure
of the _________________________ is how much consumers respond to a given change in
price.
|
Matching |
| | Match
each item with the correct statement below. a. | demand | b. | supply | c. | market | d. | utility | e. | real income effect | | |
|
| | 41. | ability of
any good or service to satisfy consumer wants |
| | 42. | process of
freely exchanging goods and services between buyers and sellers |
| | 43. | amount of a
good or service that consumers are able and willing to buy |
| | 44. | amount of a
good or service that producers are able and willing to sell |
| | 45. | inability to
buy the same quantity of a good if prices rise while income does not |
| | Match
each item with the correct statement below. a. | demand schedule | b. | demand
curve | c. | elasticity | d. | elastic demand | e. | inelastic
demand | | |
|
| | 46. | situation in
which the rise or fall of a product's price greatly affects the amount people will pay |
| | 47. | line that
graphically shows the quantities demanded at each possible price |
| | 48. | economic
concept dealing with consumers' responsiveness to an increase or decrease in price |
| | 49. | situation in
which a product's price change has little impact on the quantity demanded by consumers |
| | 50. | table
showing quantities demanded at different prices |
| | Match
each item with the correct statement below. a. | law of supply | b. | quantity
supplied | c. | supply schedule | d. | supply
curve | e. | technology | | |
|
| | 51. | line that
graphically shows the quantities supplied at each possible price |
| | 52. | any use of
land, labor, and capital that produces goods and services more efficiently |
| | 53. | economic
rule stating that price and quantity supplied move in the same direction |
| | 54. | amount of a
good or service that a producer is willing and able to supply at a specified price |
| | 55. | table
showing quantities supplied at different prices |
| | Match
each item with the correct statement below. a. | equilibrium price | b. | shortage | c. | surplus | d. | rationing | e. | black market | | |
|
| | 56. | situation in
which the quantity supplied is greater than the quantity demanded |
| | 57. | distribution
of goods and services based on something other than price |
| | 58. | price at
which the amount producers are willing to supply is equal to the amount consumers are willing to
buy |
| | 59. | illegal
market in which goods are traded at prices above their legal maximum prices |
| | 60. | situation in
which the quantity demanded is greater than the quantity supplied |