Quiz 519

Related: Economics, Microeconomics

114 Questions

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Quiz 519

True / False

1. Prices allocate a market economy’s scarce resources.

a. True
b. False

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

3. A market is a group of buyers and sellers of a particular good or service.

a. True
b. False

4. Sellers as a group determine the demand for a product, and buyers as a group determine the
supply of a product.
a. True
b. False

5. A yard sale is an example of a market.

a. True
b. False

6. A newspaper’s classified ads are an example of a market.

a. True
b. False
7. Most markets in the economy are highly competitive.
a. True
b. False

8. In a competitive market, the quantity of each good produced and the price at which it is sold
are not determined by any single buyer or seller.
a. True
b. False

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

10. In a perfectly competitive market, the goods offered for sale are all exactly the same.
a. True
b. False

11. In a perfectly competitive market, buyers and sellers are price setters.
a. True
b. False

12. All goods and services are sold in perfectly competitive markets.
a. True
b. False

13. If a good or service has only one seller, then the seller is called a monopoly.
a. True
b. False

14. Monopolists are price takers.

a. True
b. False

15. Local cable television companies frequently are monopolists.

a. True
b. False

16. The quantity demanded of a product is the amount that buyers are willing and able to
purchase at a particular price.
a. True
b. False

17. The law of demand is true for most goods in the economy.
a. True
b. False
18. 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 demanded falls.
a. True
b. False

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

20. Individual demand curves are summed horizontally to obtain the market demand curve.
a. True
b. False

21. Individual demand curves are summed vertically to obtain the market demand curve.
a. True
b. False

22. The market demand curve shows how the total quantity demanded of a good varies as the
income of buyers varies, while all the other factors that affect how much consumers want to buy
are held constant.
a. True
b. False

23. The demand curve is the upward-sloping line relating price and quantity demanded.
a. True
b. False

24. If something happens to alter the quantity demanded at any given price, then the demand
curve shifts.
a. True
b. False

25. A movement upward and to the left along a given demand curve is called a decrease in
demand.
a. True
b. False

26. An increase in demand shifts the demand curve to the left.

a. True
b. False

27. A decrease in demand shifts the demand curve to the left.

a. True
b. False
28. A decrease in the price of a product and an increase in the number of buyers in the market
affect the demand curve in the same general way.
a. True
b. False

29. If a determinant of demand other than price changes, the demand curve shifts.
a. True
b. False

30. Public service announcements, mandatory health warnings on cigarette packages, and the
prohibition of cigarette advertising on television are all policies aimed at shifting the demand
curve for cigarettes to the right.
a. True
b. False

31. An increase in the price of pizza will shift the demand curve for pizza to the left.
a. True
b. False

32. If the demand for a good falls when income falls, then the good is called an inferior good.
a. True
b. False

33. When Mario's income decreases, he buys more pasta. For Mario, pasta is a normal good.
a. True
b. False

34. A decrease in income will shift the demand curve for an inferior good to the right.
a. True
b. False

35. An increase in the price of a substitute good will shift the demand curve for a good to the
right.
a. True
b. False

36. If orange juice and apple juice are substitutes, an increase in the price of orange juice will
shift the demand curve for apple juice to the right.
a. True
b. False

37. If orange juice and apple juice are substitutes, an increase in the price of orange juice will
shift the demand curve for apple juice to the left.
a. True
b. False
38. Baseballs and baseball bats are substitute goods.
a. True
b. False

39. A decrease in the price of a complement will shift the demand curve for a good to the left.
a. True
b. False

40. When an increase in the price of one good lowers the demand for another good, the two
goods are called complements.
a. True
b. False

41. Cocoa and marshmallows are complements, so a decrease in the price of cocoa will cause an
increase in the demand for marshmallows.
a. True
b. False

42. If baked potatoes and sour cream are complements, then an increase in the price of sour
cream decreases the demand for baked potatoes.
a. True
b. False

43. A decrease in the price of baseball bats will decrease the demand for baseballs.
a. True
b. False

44. Most studies have found that tobacco and marijuana are complements rather than substitutes.
a. True
b. False

45. Most studies have found that tobacco and marijuana are substitutes rather than complements.
a. True
b. False

46. If a person expects the price of pumpkins to increase next month, then that person’s current
demand for pumpkins will increase.
a. True
b. False

47. The quantity supplied of a good or service is the amount that sellers are willing and able to
sell at a particular price.
a. True
b. False
48. Price cannot fall so low that some sellers choose to supply a quantity of zero.
a. True
b. False

49. When the price of a good is high, selling the good is profitable, and so the quantity supplied
is large.
a. True
b. False

50. When the price of a good is low, selling the good is profitable, and so the quantity supplied is
large.
a. True
b. False

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

52. The law of supply states that, other things equal, when the price of a good falls, the quantity
supplied falls as well.
a. True
b. False

53. 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.
a. True
b. False

54. 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.
a. True
b. False

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

56. If something happens to alter the quantity supplied at any given price, then we move along
the fixed supply curve to a new quantity supplied.
a. True
b. False

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

a. True
b. False
58. Whenever a determinant of supply other than price changes, the supply curve shifts.
a. True
b. False

59. A decrease in the price of pizza will shift the supply curve for pizza to the left.
a. True
b. False

60. If the producers of canned green beans expect the price of canned green beans to increase in
the future due to an increase in demand, they may put some of their current production into
storage and supply less in the market today.
a. True
b. False

61. A decrease in the price of sugar will shift the supply curve for cookies to the right.
a. True
b. False

62. Individual supply curves are summed vertically to obtain the market supply curve.
a. True
b. False

63. The market supply curve shows how the total quantity supplied of a good varies as input
prices vary, holding constant all the other factors that influence producers’ decisions about how
much to sell.
a. True
b. False

64. A reduction in an input price will cause a change in quantity supplied but not a change in
supply.
a. True
b. False

65. An increase in the price of ink will shift the supply curve for pens to the left.
a. True
b. False

66. 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.
a. True
b. False

67. Advances in production technology typically reduce firms’ costs, which increases the
quantity supplied at each price.
a. True
b. False
68. If a company making frozen orange juice expects the price of its product to be higher next
month, it will supply more to the market this month.
a. True
b. False

69. When a seller expects the price of its product to decrease in the future, the seller's supply
curve shifts left now.
a. True
b. False

70. Supply and demand together determine the price and quantity of a good sold in a market.
a. True
b. False

71. A market’s equilibrium is the point at which the supply and demand curves intersect.
a. True
b. False

72. At the equilibrium price, quantity demanded is equal to quantity supplied.

a. True
b. False

73. The equilibrium price is the same as the market-clearing price.

a. True
b. False

74. At the equilibrium price, buyers have bought all they want to buy, but sellers have not sold
all they want to sell.
a. True
b. False

75. The actions of buyers and sellers naturally move markets toward equilibrium.
a. True
b. False

76. When the market price is above the equilibrium price, the quantity of the good demanded
exceeds the quantity supplied.
a. True
b. False

77. When the market price is above the equilibrium price, suppliers are unable to sell all they
want to sell.
a. True
b. False
78. In a market, the price of any good adjusts until quantity demanded equals quantity supplied.
a. True
b. False

79. A surplus is the same as an excess demand.

a. True
b. False

80. Sellers respond to a surplus by cutting their prices.

a. True
b. False

81. Price will rise to eliminate a surplus.

a. True
b. False

82. When quantity supplied exceeds quantity demanded at the current market price, the market
has a surplus, and market price will likely rise in the future to eliminate the surplus.
a. True
b. False

83. When the market price is below the equilibrium price, the quantity of the good demanded
exceeds the quantity supplied.
a. True
b. False

84. When the market price is below the equilibrium price, suppliers are unable to sell all they
want to sell.
a. True
b. False

85. A shortage is the same as an excess demand.

a. True
b. False

86. Sellers respond to a shortage by cutting their prices.

a. True
b. False

87. Price will rise to eliminate a shortage.

a. True
b. False

88. 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.
a. True
b. False

89. Surpluses drive price up, while shortages drive price down.
a. True
b. False

90. A shortage will occur at any price below equilibrium price and a surplus will occur at any
price above equilibrium price.
a. True
b. False

91. When a supply curve or a demand curve shifts, the equilibrium price and equilibrium
quantity change.
a. True
b. False

92. Demand refers to the amount buyers wish to buy, whereas the quantity demanded refers to
the position of the demand curve.
a. True
b. False

93. Supply refers to the position of the supply curve, whereas the quantity supplied refers to the
amount suppliers wish to sell.
a. True
b. False

94. It is not possible for demand and supply to shift at the same time.
a. True
b. False

95. A decrease in demand will cause a decrease in price, which will cause a decrease in supply.
a. True
b. False

96. An increase in demand will cause an increase in price, which will cause an increase in
quantity supplied.
a. True
b. False

97. An increase in supply will cause a decrease in price, which will cause an increase in demand.
a. True
b. False

98. A decrease in supply will cause an increase in price, which will cause a decrease in quantity
demanded.
a. True
b. False

99. If the demand for movies increases at the same time as the movie industry adopts labor-
saving technology for producing movies, the equilibrium price for movies will increase, but the
effect on the equilibrium quantity of movies is ambiguous.
a. True
b. False

100. Suppose the demand for calendars increases in November. At the same time, the price of the
ink used in the production of calendars increases. In the market for calendars, the equilibrium
price rises, but the effect on the equilibrium quantity is ambiguous.
a. True
b. False

101. Suppose the demand for calendars increases in November. At the same time, the price of the
ink used in the production of calendars increases. In the market for calendars, if the size of the
shift of the demand curve is larger than the size of the shift of the supply curve, then the
equilibrium quantity rises.
a. True
b. False

102. A decrease in the price of blueberries will decrease both the equilibrium price and quantity
in the market for blueberry muffins.
a. True
b. False

103. A decrease in the price of peanut butter will increase both the equilibrium price and quantity
in the market for jelly.
a. True
b. False

104. An increase in the price of blue pens will increase both the equilibrium price and quantity in
the market for black pens.
a. True
b. False

105. An increase in the price of cotton will increase the equilibrium price and decrease the
equilibrium quantity in the market for cotton t-shirts.
a. True
b. False

106. A decrease in the price of creamer will increase the equilibrium price and decrease the
equilibrium quantity in the market for coffee.
a. True
b. False
107. An increase in the price of maple syrup will decrease both the equilibrium price and
quantity in the market for pancakes.
a. True
b. False

108. In a market economy, prices are the signals that guide the allocation of scarce resources.
a. True
b. False

109. In order to maintain stable prices, a central bank must

a. maintain low interest rates.
b. keep unemployment low.
c. tightly control the money supply.
d. sell indexed bonds.

110. Which of the following is accurate?

a. Monetary policy is neutral in both the short run and the long run.
b. Though monetary policy is neutral in the long run, it may have effects on real variables in the
short run.
c. Monetary policy has profound effects on real variables in both the short run and the long run.
d. Monetary policy has profound effects on real variables in the long run, but is neutral in the
short run.

111. The primary cause of inflation is

a. growth in the quantity of money.
b. variability in relative prices.
c. inter-bank lending.
d. reduced velocity of money.

112. The costs of inflation are

a. shoeleather costs and menu costs.
b. arbitrary redistributions of wealth.
c. increased variability of relative prices.
d. All of the above.

113. Inflation costs are minimized during periods of

a. hyperinflation.
b. large, unexpected deflation.
c. moderate inflation.
d. rapid money growth.

114. Inflation costs are minimized under which inflation rate?

a. -20 percent
b. 5 percent
c. 15 percent
d. 575 percent