Question 1

Economists refer to a market in which a few sellers dominate the supply side as monopolistic competition.

Accepted Answer

The answer of Economists refer to a market in which...

Question 2

A monopoly occurs when there is a single seller for a product or service.

Accepted Answer

A monopoly occurs when there is only one seller for a particular product or service, giving them complete control over the market and the ability to set prices as they wish.

Question 3

If a shortage exists in a market for a good, the price of that good will tend to fall.

Accepted Answer

If there is a shortage in the market, the demand for the good is higher than the supply, which puts upward pressure on prices. The price will tend to rise, not fall.

Question 4

In perfect competition, each firm produces a product that is clearly differentiated from the products of other firms in the same market.

Accepted Answer

In perfect competition, each firm produces a standardized product that is identical to the products of other firms in the same market. There is no differentiation.

Question 5

One of the drawbacks of free markets is the fact that competition in such markets undermines the ability of price to adjust to its equilibrium value in the long run.

Accepted Answer

The answer of One of the drawbacks of free markets...

Question 6

In a free market economic system, the lack of government control and regulation means that businesses find it easy to take advantage of customers by offering poor-quality products at high prices.

Accepted Answer

In a free market economic system, businesses can only succeed if they offer quality products at competitive prices because consumers have the freedom to choose from multiple options. This competition between businesses helps to drive prices down and quality up, as businesses must continually improve their products and prices to remain competitive. However, some governments may still put regulations in place to protect consumers from fraud or other harmful practices.

Question 7

Countries that rely on a free market system are plagued by persistent shortages or surpluses of goods and services.

Accepted Answer

This statement is false. While free market systems can experience temporary shortages or surpluses due to changes in supply and demand, they are not necessarily plagued by persistent imbalances in the long term. Adequate competition and market efficiency can help prevent such imbalances from becoming persistent issues.

Question 8

Shimmer Sisters, a popular nail polish and cosmetics company, is gaining popularity among teens and young professionals. Differentiating itself from the sea of companies that compete for the same business, it focuses on creating products using trending color palettes and the finest ingredients. Shimmer Sisters clearly operates in an oligopolistic environment.

Accepted Answer

An oligopolistic environment is characterized by a few dominant firms. The description does not provide enough information to conclude that Shimmer Sisters operates in such a market structure.

Question 9

In the long run, the market price tends to adjust toward the equilibrium point.

Accepted Answer

This is one of the fundamental principles of market economics, known as the law of supply and demand. When there is excess supply, prices will fall until the market clears and equilibrium is reached. Conversely, when there is excess demand, prices will rise until the market clears and equilibrium is reached. Therefore, in the long run, the market price tends to adjust toward the equilibrium point.

Question 10

History shows that free-market capitalism leads to a fair and equitable distribution of wealth.

Accepted Answer

History has shown that free-market capitalism often leads to a concentration of wealth among a small percentage of individuals or corporations, while leaving a large portion of the population struggling to make ends meet. This has been observed in multiple countries throughout history.

Question 11

One strength of a free-market economic system is that it emphasizes the fair and humane treatment of the less fortunate in society.

Accepted Answer

This statement is false. While a free-market economic system may lead to overall economic growth and increase in wealth, it does not necessarily prioritize fair and humane treatment of the less fortunate in society. In fact, it can often lead to income inequality and lack of access to basic necessities for certain individuals and communities. Social safety nets and government interventions may be necessary to ensure fair treatment of all members of society.

Question 12

Fatima resides in a country where the economic system is primarily based on free-market capitalism. Fatima is likely to have the freedom to buy and sell property.

Accepted Answer

Free-market capitalism is characterized by the freedom to own and exchange property, so Fatima is likely to have the freedom to buy and sell property in this type of economic system.

Question 13

Sarah owns a candle shop. She had been charging $5 for each scented jar candle. At this price her customers bought an average of 421 jars each week. For the last few weeks, she has reduced her price to $3.95 per candle, and her customers have purchased an average of 695 jar candles each week. These results are consistent with the economic concept of demand.

Accepted Answer

The decrease in price has led to an increase in the quantity demanded, which is consistent with the law of demand. Therefore, the results are consistent with the economic concept of demand.

Question 14

Glittering Gems is a popular fashion jewelery company. Although it is gaining in popularity among younger women, its promotional strategy continues to focus on the tarnish-free finish that is applied to every earring, necklace, and ring. Due to the fact that its industry faces monopolistic competition, the company knows that it must continue to differentiate itself from the competition.

Accepted Answer

The statement is true as the company is facing monopolistic competition and needs to differentiate itself in order to stand out from its competitors.

Question 15

Meredith notices that just a few big companies produce most of the flavored teas she sees in the grocery store. She would be correct in describing the flavored tea industry as an oligopoly.

Accepted Answer

An oligopoly is a market structure in which a few large firms dominate the industry, typically characterized by high barriers to entry and interdependent decision-making. The fact that just a few big companies produce most of the flavored teas in the grocery store suggests that the flavored tea industry is indeed an oligopoly.

Question 16

A surplus currently exists for fidget spinners. In a free-market economic system, the government must step in and buy any spinners that consumers do not buy in order to eliminate the surplus and establish equilibrium.

Accepted Answer

In a free-market economic system, the government does not typically intervene in order to eliminate surpluses or establish equilibrium. Instead, prices will adjust and producers may reduce production in response to the surplus.

Question 17

In the United States, laws prohibit the creation of most types of monopolies.

Accepted Answer

It is true that laws in the United States prohibit the creation of most types of monopolies. The Sherman Antitrust Act of 1890 and the Clayton Antitrust Act of 1914 are examples of laws designed to promote competition and prevent the abuse of market power.

Question 18

Product differentiation is a key to success in monopolistic competition.

Accepted Answer

Monopolistic competition refers to a market situation where there are a large number of firms competing against each other with differentiated products. In such a scenario, product differentiation plays a crucial role in creating brand loyalty, increasing market share, and maintaining a competitive edge. Therefore, product differentiation is considered a key to success in monopolistic competition.

Question 19

The greed of businesspeople represents one of the greatest dangers to the operation of a free market system.

Accepted Answer

The answer of The greed of businesspeople represents one of...

Question 20

The point of intersection between the supply and demand curves is called the stress point.

Accepted Answer

The point of intersection between the supply and demand curves is called the equilibrium point or market clearing point.

Quiz 2: Understanding Economics and How It Affects Business