Question 1

During the Revolutionary War, the Pennsylvania legislature attempted to help the Continental Army by enacting
A) wage floors for soldiers in the army.
B) bonuses for soldiers who re-enlisted.
C) laws to buy food for the soldiers stationed in Pennsylvania.
D) price controls on essential commodities.
E) All of the above are correct.

Accepted Answer

The answer of During the Revolutionary War, the Pennsylvania legislature...

Question 2

Price ceilings will likely result in the growth of black markets.

Accepted Answer

When price ceilings are implemented, the price of a good or service is legally mandated to be below the market equilibrium price. This leads to excess demand, as the quantity demanded exceeds the quantity supplied at the lower price. As a result, consumers may turn to black markets to purchase the product at a higher price that reflects its true market value. This creates a lucrative opportunity for suppliers to sell at the higher black market price, which can lead to illegal and unregulated activity in the market.

Question 3

Price controls usually enhance efficiency in the allocation of resources.

Accepted Answer

Price controls, such as price ceilings or floors, disrupt the natural market forces of supply and demand that help allocate resources efficiently. They can create shortages, surpluses, and misallocation of resources, ultimately leading to inefficiency.

Question 4

A demand schedule is a table showing how the ____ of some product during a specified period of time changes as ____ changes, holding all other determinants of quantity demanded constant.
A) demand; the price of its complement
B) demand; the quantity supplied
C) quantity demanded; the price of its substitute
D) quantity demanded; the price of that product

Accepted Answer

A demand schedule shows how the quantity demanded of a product changes as the price of that product changes, while holding all other factors that affect demand constant. Therefore, the correct choice is D.

Question 5

When used in a professional or technical sense, the law of supply and demand refers to
A) some vague influences on economic affairs.
B) the fact that prices go up when commodities are scarce.
C) the market forces that show how prices and quantities are determined.
D) the controls that regulate the amount of scarce goods that each consumer can purchase.

Accepted Answer

The law of supply and demand refers to the market forces that determine prices and quantities. It explains how the interaction between buyers and sellers affects the price of a good or service. When demand for a good or service exceeds supply, the price will go up, and when supply exceeds demand, the price will go down. This law is important in understanding how markets work and how changes in supply and demand can affect prices and quantities. Option A is too vague, option B is only partially correct, and option D is incorrect.

Question 6

One motive for "fighting the invisible hand" is
A) unhappiness about the prices that occur in free markets.
B) envy toward those who apparently benefit from certain prices.
C) a desire to have government "correct" some problems.
D) an attempt to produce justice between buyers and sellers.
E) All of the above are correct.

Accepted Answer

All the options listed are motives for opposing the outcomes of free markets, as they reflect dissatisfaction with market prices, envy, a desire for government intervention, and a pursuit of fairness.

Question 7

One effect of market intervention is resource misallocation.

Accepted Answer

When the government intervenes in the market, it can disrupt the natural supply and demand equilibrium, leading to the misallocation of resources. This can result in inefficiencies where resources are not being used in the most productive or efficient manner.

Question 8

The demand curve for a typical good has
A) a negative slope because some consumers switch to other goods as the price of the good rises.
B) a negative slope because the supply of the good rises as demand rises.
C) a negative slope because the good has less "snob appeal" as its price falls.
D) an inverse slope because as the price goes up, the good has more profitability.
E) a positive slope because price is a clear indicator of need.

Accepted Answer

The negative slope of the demand curve reflects the law of demand, which states that as the price of a good rises, consumers will switch to alternatives that are less expensive. In other words, as the price of a good becomes more expensive, consumers will demand less of that good.

Question 9

An individual's demand schedule
A) provides information about what quantity a consumer is willing and able to buy at each price.
B) tells a buyer how many other buyers will try to purchase an item.
C) is a schedule that regulates monthly sales of scarce goods and services.
D) is of no use without its accompanying supply schedule.

Accepted Answer

An individual's demand schedule provides information about what quantity a consumer is willing and able to buy at each price. This schedule reflects the relationship between the quantity demanded and the price.

Question 10

Price controls are usually enacted in response to
A) popular opinion.
B) governmental studies.
C) scholarly research on the effects of high prices.
D) laws enacted in other countries.
E) All of the above are correct.

Accepted Answer

Price controls are often a response to popular opinion, such as outcry over high prices for essential goods or services. Governmental studies or scholarly research may influence the decision to enact price controls, but ultimately the decision is often driven by public pressure. Laws enacted in other countries may also provide a model for price controls, but this is not always the case.

Question 11

The most basic investigative tool of economics is the
A) concept of scarcity.
B) mechanism of supply and demand.
C) coordination and trade syndrome.
D) inflation-unemployment trade-off.
E) regulation of business.

Accepted Answer

The mechanism of supply and demand is the most basic investigative tool of economics because it explains how prices are determined in a market economy through the interaction of supply (how much of a good or service is available) and demand (how much of a good or service people want). This fundamental concept is central to understanding economic behavior and market operations.

Question 12

During the American Revolution, the Pennsylvania legislature enacted price controls on essential commodities.The result of this legislation was
A) a large increase in the availability of those items, ending shortages.
B) a severe shortage of those essential commodities.
C) an increase in the price of those items, thus alleviating shortages.
D) new efforts to increase production of those commodities.
E) a minor inconvenience as persons adjusted to the new law.

Accepted Answer

Enacting price controls on essential commodities during a time of war led to a severe shortage of those items because the price no longer reflected the true cost of production and distribution, discouraging suppliers from making them available.

Question 13

The demand curve for a good connects points describing how much consumers
A) actually bought at different prices during a particular period.
B) actually bought at different prices in different periods.
C) would have been willing and able to buy at different prices during a particular period.
D) would have been willing and able to buy at different prices in different periods.

Accepted Answer

The demand curve represents the quantity of a good that consumers are willing and able to buy at different prices during a particular period. The curve shows the relationship between price and quantity demanded, indicating that as price increases, quantity demanded decreases, ceteris paribus. Therefore, the demand curve reflects what consumers would have been willing and able to buy at different prices during a specific time period.

Question 14

The mechanism of supply and demand is
A) a fundamental tool in both microeconomics and macroeconomics.
B) the only real "law" of economics.
C) a fundamental tool only in microeconomics.
D) a fundamental tool only in macroeconomics.

Accepted Answer

The mechanism of supply and demand is a fundamental tool used in both microeconomics and macroeconomics to explain the behavior of consumers and producers in the market. It is not the only law of economics, but it is a crucial concept for understanding how prices are determined and how markets operate.

Question 15

When a demand schedule is drawn as a graph,
A) price is measured on the vertical axis.
B) quantity is measured on the horizontal axis.
C) the resulting curve has a negative slope.
D) the other variables (besides price and quantity) are held constant.
E) All of the above are correct.

Accepted Answer

All of the choices listed are correct. Price is measured on the vertical axis, quantity is measured on the horizontal axis, the resulting curve has a negative slope, and other variables besides price and quantity are held constant in a demand schedule in order to isolate the relationship between price and quantity demanded.

Question 16

Shortages normally accompany an effective price floor.

Accepted Answer

The answer of Shortages normally accompany an effective price floor....

Question 17

Assume the demand schedule for cookies is downward sloping.If the price of cookies falls from $1.50 to $1.25 per dozen,
A) the demand for cookies will fall.
B) the demand for cookies will rise.
C) a larger quantity of cookies will be demanded.
D) a smaller quantity of cookies will be demanded.

Accepted Answer

According to the law of demand, as the price of a good falls, the quantity demanded of that good will increase. Therefore, if the price of cookies falls from $1.50 to $1.25 per dozen, a larger quantity of cookies will be demanded.

Question 18

Sugar price supports ensure an abundance of sugar, and hence reasonable prices for consumers.

Accepted Answer

Sugar price supports artificially inflate the price of sugar by placing tariffs or quotas on imported sugar. This leads to a decrease in supply and an increase in price for consumers. Without price supports, the market forces of supply and demand would determine the price of sugar, potentially leading to lower prices for consumers.

Question 19

During the American Revolution, Washington's army nearly starved to death after price controls were enacted to "help" buy food for the army at affordable prices.The Continental Congress later passed a law which
A) exhorted the public to obey the law and help supply food to the army.
B) passed tax increases to punish those who refused to sell the food.
C) revised the American Law of Supply and Demand.
D) overrode local ordinances and essentially repealed the price controls.
E) called for the repeal of other price control measures.

Accepted Answer

The answer of During the American Revolution, Washington's army nearly...

Question 20

The slope of a demand curve is almost always
A) positive, because when people buy more of a good the cost of producing it will rise.
B) positive, because the more money a person has, the more of a particular good will be bought.
C) negative, because when people buy more of a good the cost of producing it will fall.
D) negative, because with everything else equal, the same people will buy more of a good when its price is lower.
E) positive, because as the price rises, people want to sell more of the good.

Accepted Answer

The slope of a demand curve is almost always negative, because with everything else equal, the same people will buy more of a good when its price is lower. As the price of a good decreases, consumers are willing to buy more of it. Conversely, as the price of a good increases, consumers are less willing to buy it. This leads to a negative slope on the demand curve.

Quiz 4: Supply and Demand: An Initial Look

During the Revolutionary War, the Pennsylvania legislature attempted to help the Continental Army by enacting

Price ceilings will likely result in the growth of black markets.

Price controls usually enhance efficiency in the allocation of resources.

A demand schedule is a table showing how the of some product during a specified period of time changes as changes, holding all other determinants of quantity demanded constant.

When used in a professional or technical sense, the law of supply and demand refers to

One motive for "fighting the invisible hand" is

One effect of market intervention is resource misallocation.

The demand curve for a typical good has

An individual's demand schedule

Price controls are usually enacted in response to

The most basic investigative tool of economics is the

During the American Revolution, the Pennsylvania legislature enacted price controls on essential commodities.The result of this legislation was

The demand curve for a good connects points describing how much consumers

The mechanism of supply and demand is

When a demand schedule is drawn as a graph,

Shortages normally accompany an effective price floor.

Assume the demand schedule for cookies is downward sloping.If the price of cookies falls from $1.50 to $1.25 per dozen,

Sugar price supports ensure an abundance of sugar, and hence reasonable prices for consumers.

During the American Revolution, Washington's army nearly starved to death after price controls were enacted to "help" buy food for the army at affordable prices.The Continental Congress later passed a law which

The slope of a demand curve is almost always