Econ Test 2

Question 1

The quantity of a good that producers will make available at different prices is the ________________.

Answer 1

Supply

Question 2

A non-durable good has a life expectancy of less than ____________.

Answer 2

3 Years

Question 3

In a free market, who ultimately determines what goods are produced and in what quantities?

Answer 3

The Consumer

Question 4

If Miss Johnson quit a job where she annually made $40,000 to start a business whose expense was $20,000 and total revenue was $15,000 during the first year, her opportunity cost for year equaled __________.

Answer 4

$45,000

Question 5

A nation with a totalitarian government has a __________ economy

Answer 5

Command

Question 5

___________ Is the amount of satisfaction that results from a one-unit increase of a good.

Answer 5

Marginal Utility

Question 6

The excess of total revenue over total expense is a producer’s ___________.

Answer 6

Profit

Question 7

The ___________ effect says that when the price of a certain good rises, people tend to find alternatives that are less expensive

Answer 7

Substitution

Question 8

A government established minimum wage is an example of a price ___________.

Answer 8

Floor

Question 9

_________ is the point at which quantity demanded and quantity supplied are equal.

Answer 9

Equilibrium

Question 10

If you already owned 3 pairs of black shoes and someone gave you another, this fourth pair would have __________ marginal utility.

Answer 10

Diminishing

Question 11

The __________ motive gives people the incentive to work in order to acquire money and goods.

Answer 11

Profit

Question 12

___________ and __________ and are two of the 6 factors that can cause a shift in a good’s supply.

Answer 12

(1) technology (2) prices of related goods (3) resource prices (4) number of sellers (5) producer expectations (6) gov’t taxes, subsidies, and regulations.

Question 13

__________ and __________ are two of the 5 factors that can change the demand for a good.

Answer 13

(1) income, (2) taxes and preferences (3) population (4) consumer expectations (5) prices of related goods.

Question 14

What term refers to incentives given by the government to businesses to try to encourage production?

Answer 14

Subsidies

Question 14

(T or F) Tend to cause a surplus of goods.

Answer 14

Price Floors

Question 15

The amount of money a buyer gives a seller.

Answer 15

Price

Question 15

Developed to avoid governmental regulation.

Answer 15

Black Market

Question 16

Tend to cause shortage of goods.

Answer 16

Price Ceilings

Question 17

The value of a particular good in trade for some other good.

Answer 17

Value in Exchange

Question 18

The value of the direct benefit the owner of a good receives.

Answer 18

Value in Use

Question 19

The value of something minus liabilities.

Answer 19

Equity

Question 20

(T or F) Economists use the ___ axis of a graph to represent supply.

Answer 20

Horizontal

Question 21

__________ is the relationship between a good’s price and the amount the consumer buys.

Answer 21

Demand

Question 22

If a producer suddenly triples the price he charges for a product but consumers continue to buy the same amount, the demand for the good is __________.

Answer 22

Inelastic

Question 23

(T or F) The purchase of _________ goods, such as tires, decreases as the average income rises.

Answer 23

Inferior

Question 24

(T or F) A demand ________ is a graphic representation of the amount of goods purchased at different prices.

Answer 24

Curve

Question 25

__________ cost is the value of the best alternative that is foregone when a different alternative is taken.

Answer 25

Opportunity

Question 26

(T or F) The PUBLIC sector is the part of an economy controlled by national, state, and local governments.

Answer 26

True

Question 27

If a grocery store were to introduce a brand of frozen peas at a price significantly below the equilibrium price of similar products, the result would likely be a __________ of the new brand.

Answer 27

Shortage

Question 28

If the supply of stereos fell while consumer demand remained steady, the average price of a stereo would _________.

Answer 28

Rise

Question 29

If a hardware store owner wished to know what kinds of hammers to make available, he would pay attention to the ___________ consumer sent

Answer 29

Market Signals

Question 30

When the price of a good falls, the quantity demanded tends to __________.

Answer 30

Increase

Question 31

If the demand for snowmobiles remained steady while the supply grew larger, producers would be able to __________ prices.

Answer 31

Decrease

Question 32

When the price of a good rises, the quantity demanded tends to ______________.

Answer 32

Decrease

Question 33

Since bread is a complement of peanut butter, the demand for peanut butter will decrease if the price of bread ____________.

Answer 33

Rises

Question 34

If the demand for a car dealer's new convertibles fell but he still wanted to sell the same amount of cars, he would have to __________ his prices.

Answer 34

Decrease

Question 35

When a government fixes a good's price above the point where it would naturally fall, the result is usually a __________ of that good.

Answer 35

Surplus

Question 36

Be able to read a quantity / price chart ( graph )

Answer 36

Okay 😒

Question 37

Be able to explain the laws of supply and demand.

Answer 37

The law of supply and demand is the theory that prices are determined by the relationship between supply and demand. If the supply of a good or service outstrips the demand for it, prices will fall. If demand exceeds supply, prices will rise. (Copied)

Question 38

When the price of a good rises, the quantity supplied tends to __________.

Answer 38

Increase

Question 39

Why are businesses that are able to make tremendous profits relatively rare in a free market?

Answer 39

When other companies see that one company is doing well, they often copy it and their strategies, doing this, the market becomes saturated. There is also a lot of risk and uncertainty in a free market, one minute they may be doing well, the next, they could be on a downfall.

Question 43

What refers to the total amount of satisfaction received from possessing a particular amount of a good?

Answer 43

Total Utility

Question 44

What type of good is capable of being used in conjunction with another?

Answer 44

Complementary Good

Question 45

In a free market, who ultimately determines the distribution of goods?

Answer 45

Consumers

Question 46

(T or F) PROFIT MOTIVE gives a person the willingness to trade certain goods for other goods that have greater personal value to him.

Answer 46

True

Question 47

(T or F) If the demand for snowmobiles remained steady while the supply grew larger, producers would be able to INCREASE prices.

Answer 47

Decrease

Question 48

(T or F) If the demand for a car dealer's new convertibles decreases but he still wanted to sell the same amount of cars, he would have to DECREASE his prices.

Answer 48

True

Question 49

(T or F) The amount of money that a buyer pays the seller for a particular item is the item's PRICE.

Answer 49

True

Question 50

(T or F) The availability of substitutes is a major reason why the demand for most goods is INELASTIC.

Answer 50

Elastic

Question 51

(T or F) The income effect says that when the price of a good falls, consumers tend to buy LESS of that good or of other items because they can do so without giving up anything.

Answer 51

More

Question 52

The price at which a good could be sold in an open market.

Answer 52

Market Price

Question 53

(T or F) The price paid for a good is HIGHER at point D than it is at point C. (see graph at right on test)

Answer 53

Lower

Question 54

(T or F) A shift from curve 2 to curve 3 would represent an increase in QUANITITY DEMANDED. (see graph at right on test)

Answer 54

Demand

Question 55

(T or F) the quantity demanded is HIGHER at point C than it is at point B. (refer to graph at right on test)

Answer 55

True

Question 56

(T or F) the quantity demanded is HIGHER at point C than it is at point B. (refer to graph at right on test)

Answer 56

True

Question 57

Assuming that point E is equilibrium and that supply remains constant, a shift from curve 3 to curve 2 would most likely set the new equilibrium at point B. (refer to graph at right on test)

Answer 57

D

Question 58

ESSAY: Explain the differences in how prices are determined in market economics and in command economies. What are the results of each?

Answer 58

Discuss in some detail the differences between free market capitalism and communism.

Question 59

ESSAY: How do the laws of supply and demand restrict many companies from making large profits in a competitive free enterprise system?

Answer 59

When the laws of supply and demand are allowed to work without interference by government or some other entity, a business cannot raise the prices it charges for its products above that which its competitors are charging. If it does, people will buy their goods elsewhere and the overcharging business will soon collapse. Consequently, businesses try to keep their prices as low and competitive as possible.