Deck 2: Demand and Supply: The Basics of the Market Economy

Question 1

The demand curve is the graphical counterpart to the

A) demand schedule.
B) supply curve.
C) supply schedule.
D) general demand.

Answer 1

A
Explanation: The demand curve shows the graphical representation of quantity demanded at different prices.

Question 2

Buyers and sellers who are geographically close are part of a national market.

Answer 2

False
Explanation: Buyers and sellers who are geographically close are part of a local market.

Question 3

A supply schedule illustrates the quantity supplied at

A) various demand levels.
B) a single selling price.
C) different selling prices.
D) market equilibrium.

Answer 3

C
Explanation: The supply schedule for a good or service reports the quantity supplied at different selling prices.

Question 4

Zero-price products and services exist only in the technology sector.

Question 5

The law of demand says that in most cases,the lower the price,the lower the quantity demanded.

Question 6

Individuals in a market economy can be both buyers and sellers.

Question 7

Crude oil is sold on a local market.

Question 8

Ceteris paribus,when used by economists,means

A) for every action, there is a reaction.
B) things never change.
C) all other things equal.
D) buyer beware.

Question 9

Supply curves are generally

A) upward-sloping.
B) downward-sloping.
C) a straight line in real life.
D) responsive to demand curves.

Question 10

If you wished to sell glasses of lemonade,but were uncertain at what price to sell each glass,you would use a __________,if one were available,to assist in the decision.

A) calculator
B) demand schedule
C) opportunity schedule
D) negotiated price

Question 11

The market price is the typical price at which a good or service sells.

Question 12

A market supply schedule

A) is all the products or services demanded in a market.
B) combines the quantities supplied by all businesses in a market.
C) has an upward-sloping demand curve.
D) is determined by adding demand and supply.

Question 13

The law of supply says that higher prices tend to _____ the quantity supplied of a good or service,assuming no other changes.

A) increase
B) decrease
C) have no effect on
D) first increase, then decrease

Question 14

A demand schedule illustrates the quantities demanded for a particular product or service at different prices.

Question 15

The demand schedule is a description of the behavior of _____ in a market.

A) sellers
B) buyers
C) a supply schedule
D) a demand schedule

Question 16

The law of demand suggests that most demand curves will be

A) upward-sloping.
B) a straight line.
C) downward-sloping.
D) variable.

Question 17

The rate at which buyers exchange money for a good or service is known as the price.

Question 18

Opportunity cost is defined as the value or benefit of the

A) most expensive item.
B) least expensive item.
C) supply curve.
D) next best alternative.

Question 19

The Internet has allowed an increasing number of goods and services to be traded on the national market.

Question 20

The individual quantity demanded is the amount the buyer is allowed to purchase at a given price.

Question 21

In contrast to the law of supply,sometimes ______ can reduce the quantity supplied.

A) an increased price
B) a market supply curve
C) a market demand curve
D) price negotiations

Question 22

Markets can be

A) global.
B) national.
C) local.
D) global, national, and local.

Question 23

In economics,satiation means

A) eventually the marginal value of the good consumed increases.
B) that you are full.
C) eventually the marginal value of the good consumed decreases.
D) that the market price has been attained.

Question 24

A vertical supply curve would mean that

A) as price decreases, quantity supplied decreases.
B) as price decreases, quantity supplied increases.
C) the price does not affect the quantity supplied.
D) market equilibrium has been reached.

Question 25

A market demand schedule for hamburgers would NOT include which of the following?

A) Vegetarians, who buy no hamburgers.
B) People who eat a cheeseburger every day for lunch.
C) The concept of ceteris paribus.
D) The labor market.

Question 26

Global markets consist of buyers and sellers

A) anywhere in the world.
B) only within their community.
C) within a nation.
D) within a state.

Question 27

Generally speaking,in the law of demand,the lower the price,the ________ the quantity demanded.

A) lower
B) greater
C) supply schedule shows
D) market will adjust

Question 28

The market price can sometimes be difficult to identify due to which of the following?

A) The laws of supply and demand.
B) Equilibriums.
C) Satiation.
D) Sale prices, negotiated prices, and volume discounts.

Question 29

One of the biggest benefits of a market-based economy is

A) centralized planning.
B) the ability to adapt quickly to change.
C) government regulation.
D) consumer protection policies.

Question 30

If the market price of $10 per lawn leads to the quantity supplied of 15 mowed lawns,and the market price of $15 per lawn leads to 25 lawns mowed,which way does the supply curve slope?

A) Downward.
B) Upward.
C) Horizontally.
D) Vertically.

Question 31

Which of the following is not an example of a good provided by a market?

A) Online video games.
B) Airline tickets between New York and Los Angeles.
C) Pizza in Toledo, Ohio.
D) The air we breathe.

Question 32

What would it mean if a demand curve sloped upward?

A) Quantity demanded drops as the price increases.
B) Quantity demanded increases as the price increases.
C) There is no relationship between price and quantity demanded.
D) Quantity demanded increases as the price drops.

Question 33

Using the law of demand,what would generally happen if the price of gasoline were to rise to $7.00 per gallon?

A) The quantity demanded would increase.
B) There would be no effect on demand.
C) The quantity demanded would decrease.
D) Automakers would increase production.

Question 34

Buying a used textbook from a fellow student is an example of what type of market?

A) Local.
B) National.
C) Global.
D) Labor.

Question 35

Which of the following is an example of a product that is sold primarily in a local market?

A) Cheese.
B) Butter.
C) Milk.
D) Oil.

Question 36

If the quantity demanded increases sharply when the price drops,this illustrates what principle?

A) The law of supply.
B) The law of demand.
C) The law of the curve.
D) Ceteris paribus.

Question 37

The typical worker is a(n)________ in a labor market.

A) buyer
B) seller
C) opportunity cost
D) market demand

Question 38

Sale prices mean that the price is lowered for a _________ period of time.

A) limited
B) long
C) extended
D) prolonged

Question 39

Which of the following is not an example of zero price?

A) Most cable television plans.
B) Unlimited cell-to-cell calling plans.
C) Unlimited refills of coffee.
D) A hot dog at a stand.

Question 40

Which of the following is NOT an example of an advance purchase discount?

A) Prepaid tuition plans.
B) Airline tickets.
C) Movie tickets purchased online at a lower price than at the box office.
D) Buying a soda at the local fast-food outlet.

Question 41

The average sale price of a home in the United States increased from $207,000 to $297,000 from 2000 to 2005.All else equal,we would expect that during the same time

A) The quantity of new homes supplied also increased.
B) The quantity of new homes supplied decreased.
C) The quantity of new homes supplied did not change.
D) The quantity of new homes supplied changed in proportion to changes in the population.

Question 42

The individual quantity demanded is the amount the _____ is willing to _____ at a given price.

A) seller, purchase
B) buyer, purchase
C) buyer, sell
D) seller, sell

Question 43

Natural resources,such as crude oil and fish,are often sold in __________ markets.

A) local
B) national
C) global
D) labor

Question 44

The supply schedule is a description of

A) the quantity demanded at a single price.
B) the supply offered according to demand.
C) the basis of calculating market price.
D) the relationship between quantities supplied and market prices.

Question 45

$$\begin{array} { | l | l | } \hline \text { Price } & \begin{array} { l } \text { Quantity } \\\text { Demanded }\end{array} \\\hline \$ 0 & 1,000 \\\hline \$ 1 & 400 \\\hline \$ 2 & 200 \\\hline \$ 3 & 100 \\\hline \$ 4 & 25 \\\hline\end{array}$$ Refer to the table,which shows the number of MP3 downloads demanded per month for the students at a certain university.What would happen to the quantity of MP3s demanded at a price of $2 if the university's enrollment were to increase significantly?

A) The quantity demanded would fall below 200 because there would be more students competing for MP3s.
B) The quantity demanded would remain at 200 because the number of buyers in a market does not impact the market demand schedule.
C) The quantity demanded would increase above 200 because the market demand schedule is the sum of individual demand schedules, and more students mean more individual demand schedules for MP3s.
D) The quantity demanded would rise to exactly 400 because every number in the table would simply shift down one row.

Question 46

The demand schedule reports the quantity demanded at

A) different prices.
B) one price.
C) the average of all prices.
D) the supply price.

Question 47

When you give up the opportunity to do something else,the value to you of that activity is called

A) opportunity demand.
B) opportunity cost.
C) market price.
D) equilibrium.

Question 48

The law of demand

A) always holds true.
B) is the opposite of the law of supply.
C) works only in large markets.
D) is a general tendency.

Question 49

Households are generally buyers in the markets for products and sellers in ________ markets.

A) goods
B) service
C) natural resource
D) labor

Question 50

What might happen if the market price of haircuts went up?

A) Haircutting would be less profitable.
B) Some stylists would work fewer hours.
C) Some salons might close.
D) A hair salon might hire more stylists.

Question 51

$$\begin{array} { | l | l | } \hline \text { Price } & \begin{array} { l } \text { Quantity } \\\text { Demanded }\end{array} \\\hline \$ 0 & 1,000 \\\hline \$ 1 & 400 \\\hline \$ 2 & 200 \\\hline \$ 3 & 100 \\\hline \$ 4 & 25 \\\hline\end{array}$$ Refer to the table,which shows the number of MP3 downloads demanded per month for the students at a certain university.Which of the following statements does not explain why the quantity demanded was not higher for a price of $0?

A) There are only so many songs that people want to listen to.
B) Downloading an MP3 takes time.
C) MP3s take up space on a computer's hard drive.
D) People would rather pay for their downloads.

Question 52

If the average market price for haircuts increases,all else equal,which of the following is LEAST likely to occur as a result?

A) More new salons will open.
B) Existing salons and barber shops will hire more stylists and barbers.
C) Some workers will leave other jobs in order to become hair stylists.
D) Many salons will go out of business.

Question 53

What phrase do economists use to describe the assumption that everything else about a situation stays the same,while one variable,such as price,changes?

A) E pluribus unum.
B) Caveat emptor.
C) Vini, vidi, vici.
D) Ceteris paribus.

Question 54

What is the price of labor in a market?

A) The supply rate.
B) The demand rate.
C) The net profit.
D) The wage rate.

Question 55

The number of markets is

A) Fixed.
B) Always changing.
C) Closed.
D) Variable on a local basis, and fixed on a national basis.

Question 56

$$\begin{array} { | l | l | } \hline \text { Price } & \begin{array} { l } \text { Quantity } \\\text { Demanded }\end{array} \\\hline \$ 0 & 1,000 \\\hline \$ 1 & 400 \\\hline \$ 2 & 200 \\\hline \$ 3 & 100 \\\hline \$ 4 & 25 \\\hline\end{array}$$ Refer to the table,which shows the number of MP3 downloads demanded per month for the students at a certain university.Does this demand schedule conform to the law of demand?

A) Yes, because as the price falls, the quantity demanded rises.
B) Yes, because as the price falls, the quantity demanded also falls.
C) No, because there appears to be no relationship between price and quantity demanded.
D) No, because the demand for most goods does not follow the law of demand.

Question 57

The market price is

A) the exact price a product sells for at a specific time.
B) the typical price at which a good or service sells.
C) always easy to determine.
D) usually higher than the equilibrium price.

Question 58

The market for iPads did not exist 30 years ago because

A) consumers did not need or want iPads.
B) portable electronic devices were illegal.
C) the technology did not exist to produce iPads.
D) iPads were too expensive for most consumers.

Question 59

Does the law of supply apply to labor markets?

A) Yes, because all workers will increase the number of hours they work if their wages increase.
B) Yes, because some workers who are less committed to the labor force, like teenagers, will decide to work if wages increase.
C) No, because the laws of supply and demand both apply only to product markets.
D) No, because workers have no control over the number of hours they work.

Question 60

The market for automobiles in China has experienced tremendous growth primarily because of

A) relaxed emissions standards in China.
B) rising incomes in China.
C) higher wages of American workers.
D) the invention of new products.

Question 61

Give three examples of why new markets are created every day.

Question 62

What do economists mean when they say ceteris paribus?

Question 63

What determines a market supply schedule?

Question 64

What does an upward-sloping supply curve mean?

Question 65

Explain why a demand curve slopes downward.