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| 1.
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What does the term "ceteris paribus" mean? |
| | A) | Let the buyer beware. |
| | B) | All other things being equal. |
| | C) | There is no such thing as a free lunch. |
| | D) | In the long run we're all dead. |
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| 2.
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The following represent the four groups of participants in the market process: |
| | A) | consumers, business firms, governments, and foreigners. |
| | B) | rich people, conservatives, teenagers, and parents. |
| | C) | rich people, status-seekers, conspicuous consumers, and government. |
| | D) | It is not possible to divide market participants into groups. |
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| 3.
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Factor markets: |
| | A) | consist of markets where one must negotiate a price, and, hence, factor into account all relevant information. |
| | B) | take into account all the factors that influence the purchase of consumer products. |
| | C) | were common earlier in our history but no longer play an important role. |
| | D) | are the markets for the factors of production: namely, land, labor, capital, and entrepreneurship. |
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| 4.
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Product markets: |
| | A) | consist of markets for farm produce. |
| | B) | consist of markets that bring together buyers and sellers of various final goods and services. |
| | C) | consist of markets for machinery used to produce products. |
| | D) | Both (b) and (c) are true. |
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| 5.
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Beth is included in market demand whenever the following is true: |
| | A) | She values the product but is not willing to pay its required price. |
| | B) | She is both willing and able to pay the going price for the product. |
| | C) | She has sufficient money to buy the product but is unwilling to do so. |
| | D) | She insists that the product represents a basic right of all humans and refuses to pay for it. |
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| 6.
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When there is a movement along a stationary demand curve from one point to another resulting from a reduction in price, the following statement is true: |
| | A) | The lower price increases sales; hence, there is an increase in demand. |
| | B) | Since individuals buy whatever they desire, price changes have no effect on the quantity purchased. |
| | C) | A price decrease causes a demand increase but a price increase only causes a change in quantity demanded. |
| | D) | Movements along demand curves are termed changes in quantity demanded rather than changes in demand. |
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| 7.
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The combination of a ______ demand and a ______ supply can explain why a good or service is expensive. |
| | A) | low; low |
| | B) | high; high |
| | C) | low; high |
| | D) | high; low |
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| 8.
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The market demand curve: |
| | A) | is the vertical sum of the individual demands. |
| | B) | is the horizontal sum of the individual demands. |
| | C) | is unrelated to individual demands. |
| | D) | None of the above is true. |
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| 9.
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A decrease in supply: |
| | A) | increases equilibrium price, and because of the higher price, also increases quantity supplied. |
| | B) | reduces quantity supplied, but one cannot determine whether equilibrium price will rise or fall. |
| | C) | increases equilibrium price and reduces equilibrium quantity. |
| | D) | never happens since real GDP has been increasing in the United States for many years. |
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| 10.
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If a rent-control law reduces apartment rental rates below the market equilibrium rate, then the following statement is true: |
| | A) | There will be an increase in the quantity of rental housing supplied and a decrease in the quantity of rental housing demanded. |
| | B) | There will be a decrease in the quantity of rental housing supplied and an increase in the quantity of rental housing demanded. |
| | C) | There will be a surplus of rental housing. |
| | D) | Both (b) and (c) are true. |
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| 11.
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The ______ market is where resources such as land, labor, and capital are bought and sold. |
| | A) | product. |
| | B) | factor. |
| | C) | commodities. |
| | D) | futures. |
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| 12.
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The law of demand states that a(n) ______ in price will lead to a(n) ______ in the quantity demanded of a good. |
| | A) | increase; increase |
| | B) | decrease; decrease |
| | C) | decrease; increase |
| | D) | None of the above is true. |
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| 13.
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A movement along a demand curve is caused by which of the following? |
| | A) | A change in tastes. |
| | B) | A change in consumer income. |
| | C) | A change in the price of the good. |
| | D) | A change in consumer expectations. |
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| 14.
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Which of the following are determinants of demand? |
| | A) | Tastes |
| | B) | Consumer income |
| | C) | Expectations |
| | D) | All of the above are true. |
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| 15.
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A change in supply is represented by a ______ a supply curve. |
| | A) | movement along |
| | B) | shift of |
| | C) | either a movement along or a shift of |
| | D) | None of the above is true. |
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| 16.
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Equilibrium is where: |
| | A) | the quantity demanded of a good equals the quantity supplied. |
| | B) | the market clears or balances. |
| | C) | the demand and supply curves cross. |
| | D) | All of the above are true. |
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| 17.
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A shortage occurs when the market price of a good is ______ the equilibrium price. |
| | A) | above |
| | B) | below |
| | C) | equal to |
| | D) | None of the above is true. |
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| 18.
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A rightward shift of the demand curve will______ the equilibrium price and ______ the equilibrium quantity. |
| | A) | increase; increase |
| | B) | decrease; decrease |
| | C) | increase; decrease |
| | D) | decrease; increase |
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| 19.
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A price floor typically causes a ______ of the good. |
| | A) | surplus |
| | B) | shortage |
| | C) | excess quantity supplied |
| | D) | None of the above is true. |
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| 20.
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Business firms ______ goods and services and ______ factors of production. |
| | A) | demand; demand |
| | B) | supply; supply |
| | C) | demand; supply |
| | D) | supply; demand |
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| 21.
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When the _____ for a good increases while the _____ of the good decreases, the price of the good will rise. |
| | A) | demand; supply |
| | B) | supply; demand |
| | C) | Both of the above are true. |
| | D) | None of the above is true. |
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| 22.
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Which of the following would not shift the demand for a good? |
| | A) | A change in consumer income. |
| | B) | A change in tastes and preferences. |
| | C) | A change in the number of buyers. |
| | D) | A change in the price of the good. |
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| 23.
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A change in _____ is shown as a _____ the demand curve. |
| | A) | quantity demanded; shift of |
| | B) | quantity demanded; movement along |
| | C) | demand; movement along |
| | D) | None of the above is true. |
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| 24.
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Which of the following is not a predictable effect of a price floor on a good? |
| | A) | It increases the quantity supplied of the good. |
| | B) | It decreases the quantity demanded of the good. |
| | C) | It creates a shortage of the good. |
| | D) | None of the above is true. |
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| 25.
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When price is above equilibrium a _____ of the good will result in the market. |
| | A) | surplus |
| | B) | shortage |
| | C) | higher price |
| | D) | None of the above is true. |
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| 26.
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Which of the following is not a determinant of market supply? |
| | A) | A change in technology. |
| | B) | A change in the number of sellers. |
| | C) | A change in tastes and preferences. |
| | D) | A change in taxes and subsidies. |
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| 27.
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As a result of Hurricane Katrina refineries in the affected area experienced a large _____ in oil _____. |
| | A) | increase; supply |
| | B) | decrease; supply |
| | C) | increase; demand |
| | D) | decrease; demand |
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