Unit 2 Test Review

Question 1

To be included in demand a person must have the desire to own something and what else?

Answer 1

Ability to pay for it

Question 2

What is a good that can be used in place of another good is called?

Answer 2

Substitute

Question 3

What shift in demand would cause a consumer to purchase hamburgers rather than steak?

Answer 3

Income

Question 4

What shift in demand would occur if a new promotional firm creates a successful new TV commercial?

Answer 4

Consumer Tastes & Advertising

Question 5

What is it called when one good must be used with another good?

Answer 5

Compliment

Question 6

What is it called when demand is very responsive to price changes?

Answer 6

Elastic

Question 7

What is it called when demand is not very responsive to price changes?

Answer 7

Inelastic

Question 8

Firms will produce _____ at high prices, because they want more _____.

Answer 8

More & Profits

Question 9

New Firms will _____ the market to earn profits.

Answer 9

Enter

Question 10

Prices are _____ to producers to produce more or less.

Answer 10

Signals

Question 11

Low prices are signals to firms who will ____production or ____the market.

Answer 11

Decrease & Exit

Question 12

Elasticity of Supply is determined by what variable?

Answer 12

Time

Question 13

What cost is determined by the combination of fixed and variable costs?

Answer 13

Total Costs

Question 14

What type of costs change like raw materials & hourly wages?

Answer 14

Variable Costs

Question 15

What is the cost of producing one more unit of goods called?

Answer 15

Marginal Costs

Question 16

Government uses these to discourage the sale of things like tobacco or gas.

Answer 16

Taxes

Question 17

What will happen when the number of firms in an industry increases?

Answer 17

Supply will increase

Question 18

What is it called when the government sets the maximum price that can be charged for a G or S?

Answer 18

Price Ceiling

Question 19

What is it called when the government sets the minimum price that can be charged for a G or S?

Answer 19

Price Floor

Question 20

Rent Controls is an example of what?

Answer 20

Price Ceiling

Question 21

Without government interference, S & D will always move toward what?

Answer 21

Equilibrium

Question 22

With government interference, S & D will always be in what?

Answer 22

Disequilibrium

Question 23

What happens when there are too many goods and not enough demand?

Answer 23

Excess Supply (surplus)

Question 24

What happens when there are not enough goods and too much demand?

Answer 24

Excess Demand (shortage)

Question 25

Illegal drug sales and untaxed cigarettes are examples of this.

Answer 25

Black Market Activity

Question 26

A ______ exits when barriers to entry prevent new firms from entering the market.

Answer 26

Monopoly

Question 27

What is it called when monopolists charge different prices to different people

Answer 27

Price Discrimination

Question 28

What type of market would price wars, collusion, and price fixing be associated with?

Answer 28

Oligopolies

Question 29

How has the government attempted to regulate the market and especially monopolies?

Answer 29

Antitrust laws

Question 30

Selling products below the cost of production is called ______.

Answer 30

Predatory Pricing