Question 1

Newly formed trade unions raise wages for workers in CountryX where cars are manufactured. The higher wages increasecosts for the car manufacturers who relocate to Country Ywhere labor costs are lower. Car manufacturing begins tothrive in Country Y relative to Country X. Which answer bestdescribes the concept highlighted by this scenario?
A)Changes in one market can affect markets and people in other regions of the world.
B)Trade unions always cause industries to collapse.
C)The links between markets are weakening over time.
D)Manufacturing industries are the only industries where markets are linked well.

Accepted Answer

The scenario highlights the concept of how changes in one market (increase in wages due to new trade unions) can affect markets (car manufacturers relocating to Country Y) and people in other regions of the world. This illustrates the interconnectedness of the global economy and how actions in one country can have ripple effects in others. The other answer choices are too narrow or inaccurate to fully capture the concept presented in the scenario.

Question 2

Higher oil prices represent higher energy costs in generalacross the economy leading to increased use of bicycles andpublic transportation. Which answer best describes the ideathat changes in one market can cause effects in previouslyunseen markets?
A)The rise in the demand for bicycles causes a rise in the price of bicycles.
B)Increased bicycle demand increases the demand for rubber to make bicycle tires.Farmers in South East Asia switch from
Rice to rubber production and the price of rice increases.(True
Answer )Correct
C)The greater demand for public transportation offsets the demand for heating oil.
D)The rise in the demand for oil causes a rise in the demand for bicycles.

Accepted Answer

This answer states that an increase in demand for bicycles leads to an increase in demand for rubber to make bicycle tires, causing farmers in South East Asia to switch from producing rice to producing rubber. This illustrates the concept that changes in one market, such as the oil market, can have unforeseen effects on other markets, such as the rubber and agricultural markets.

Question 3

With large natural diamond deposits, South Africa is famousfor its diamond exports. The international demand fordiamonds for industrial and other purposes such as jewelry hasled to the production of synthetic diamonds by other countriessuch as the United States. Which answer best describes theconcept highlighted in this scenario?
A)International cooperation has reduced over the years.
B)Consumers prefer synthetic diamonds to natural ones.
C)Prices provide incentives for sellers.
D)Markets are no longer linked together.

Accepted Answer

The scenario highlights that the international demand for diamonds has led to the production of synthetic diamonds by other countries. This indicates that there is a market for diamonds, and the prices of diamonds provide incentives for sellers to produce both natural and synthetic diamonds to meet the demand. Therefore, the best choice is C - Prices provide incentives for sellers. The scenario does not mention anything about reduced international cooperation, consumer preferences for synthetic diamonds or the linkage of markets.

Question 4

When oil prices increased in the 1970s, sellers began to growroses in ________ countries and sell them in ________countries.
A)Middle Eastern; European
B)wealthy; poor
C)cold; warm
D)warm; cold

Accepted Answer

Roses grow best in warm climates, so sellers began growing them in warm countries such as Kenya and selling them in colder countries such as Europe where they were in high demand.

Question 5

If the production of two goods uses a common input, increasesin production of one good will cause:
A)decreases in the supply and increases in the price of the other good.
B)decreases in the supply and price of the other good.
C)increases in the supply and price of the other good.
D)increases in the supply and decreases in the price of the other good.

Accepted Answer

When two goods share a common input, increasing the production of one good can lead to a decrease in the available input for the other good, thereby reducing its supply. This reduction in supply, assuming demand remains constant, typically leads to an increase in the price of the other good.

Question 6

Markets coordinate in a way that links buyers and sellers whorely primarily on:
A)voluntary cooperation and undirected actions.(True Answer )Correct
B)management direction of economic actions.
C)governmental policies to direct the economic actions.
D)the benevolence and good will of the market participants.

Accepted Answer

Markets rely on voluntary cooperation and undirected actions, as individuals and businesses make their own choices to buy and sell goods and services without government intervention or management direction.

Question 7

It is Valentine's Day in the United States, and you give yourlover one dozen roses that were freshly picked 72 hours agofrom the fields of Kenya. What made this gift possible?
A)the United Nations Director of Horticultural Operations, who oversees the planting and transportation of flowers around the
World
B)the Jennifer Flowers Act that helps coordinate the logistics of agricultural trade flows between the United States and
Kenya
C)economic markets
D)All of the answers are correct.

Accepted Answer

Economic markets have made it possible for fresh flowers to be transported quickly and efficiently from Kenya to the United States. The demand for flowers on Valentine's Day drives up prices and creates opportunities for Kenyan farmers to export their products.

Question 8

Ethanol and sugar are both made from sugar cane, and ethanolcan be used as substitute fuel for oil. Increasing oil prices causethe demand for ethanol to increase. This will cause the ______sugar to ______ and its price to ______.
A)demand for; decrease; decrease
B)supply of; increase; increase
C)supply of; decrease; increase
D)demand for; increase; increase

Accepted Answer

The answer of Ethanol and sugar are both made from...

Question 9

Markets are linked in unpredictable and creative ways by:
A)treaties that govern trade.
B)entrepreneurs who look for methods of cutting costs.(True Answer )Correct
C)careful planning of bureaucrats.
D)treaties, entrepreneurs, and bureaucratic planning.

Accepted Answer

While treaties and bureaucratic planning may influence markets to an extent, it is ultimately the entrepreneurs who are able to find innovative ways to cut costs and increase efficiency that truly link markets in unexpected ways.

Question 10

From the chapter discussion, why did increased ethanolproduction and consumption in Brazil result in higher sugarprices?
A)Sugar is the primary ingredient in ethanol production and thus when the demand for ethanol increased the demand for
Sugar also increased.
B)Farmers reallocated sugar cane to ethanol production, decreasing the production of sugar, and leading to higher sugar
Prices.
C)Brazil's demand for sugar increased.
D)A disease attacked the sugar crop and caused a decrease in sugar production.

Accepted Answer

When there is an increase in ethanol production, farmers begin to allocate more of their sugar cane to ethanol production. This causes a decrease in sugar production and thus results in higher sugar prices.

Question 11

Both ethanol and sugar are made from sugar cane and ethanolcan be used as a substitute for oil. As the price of oil increases,Brazilians shift sugar cane from sugar production to ethanolproduction, thereby:
A)increasing the price of ethanol.
B)increasing the price of sugar.
C)increasing the price of both ethanol and sugar.
D)decreasing the price of both ethanol and sugar.

Accepted Answer

If Brazilians shift sugar cane from sugar production to ethanol production, there will be a decrease in the supply of sugar, resulting in an increase in the price of sugar. However, since there will be an increase in the supply of ethanol, the price of ethanol may remain stable or decrease. Therefore, the price of sugar will increase, but the price of ethanol may not necessarily increase.

Question 12

Hundreds of thousands of producers working across the worldcooperate to ensure that millions of consumers can have thegoods and services they desire. These producers do not knoweach other and are not coordinated by a central agency. Theiractions are directed simply by:
A)self interest.
B)robotic technology.
C)their governments.
D)computer technology.

Accepted Answer

The actions of the producers are directed by their own self-interest, as they seek to make profits by providing goods and services that consumers want. There is no central agency coordinating their efforts or directing them through technology or government involvement.

Question 13

Collected by workers in Peru, cochineal bugs are used to dyecertain U.S. food items red. Market activities, such as this one,can best be described as:
A)cooperative, voluntary, and undirected.(True Answer )Correct
B)chaotic and primitive.
C)directed and uncooperative.
D)orderly, involuntary, and centrally directed.

Accepted Answer

The market activity of collecting cochineal bugs in Peru is cooperative because it involves workers working together, voluntary because the workers choose to participate, and undirected because there is no central authority directing the activity.

Question 14

When gasoline prices are high, oil refiners have an incentive topull every last drop of gasoline out of a barrel of crude. Thisimplies that an increase in the demand for gasoline will causea(n) ______ quantity supplied of gasoline and ______ the supplyof the remaining crude oil products.
A)increased; increase
B)increased; reduce
C)reduced; increase
D)reduced; decrease

Accepted Answer

An increase in the demand for gasoline incentivizes oil refiners to maximize gasoline production from crude oil, which increases the quantity of gasoline supplied. However, this process reduces the supply of the remaining crude oil products because more of the crude oil is being used to produce gasoline.

Question 15

Which of the following factors contribute to the increased speedof trade across countries?
I. profit opportunities for sellers
II. better transportation networks
III. increased cooperation among countries
A)I only
B)II and III only
C)I and III only
D)I, II, and III

Accepted Answer

All three factors listed contribute to the increased speed of trade across countries. Profit opportunities for sellers drive the desire to trade, better transportation networks enable goods to be transported more quickly, and increased cooperation among countries can lead to the creation of trade agreements and streamlined customs procedures.

Question 16

A barrel of oil can be used to produce both gasoline andasphalt. If the price of gasoline falls, the supply of asphalt________ and asphalt prices ________.
A)increases; decrease
B)increases; increase
C)decreases; decrease
D)decreases; increase

Accepted Answer

When the price of gasoline falls, producers may allocate more of the barrel of oil towards asphalt production, increasing its supply. As supply increases, the price of asphalt tends to decrease due to the law of supply and demand.

Question 17

Brazil is the largest producer and consumer of ________ in theworld.
A)sugar and fuel ethanol
B)candy bars
C)oil
D)asphalt and bricks

Accepted Answer

Brazil is known for its production of sugarcane, which is used to produce sugar and fuel ethanol. As such, it is the largest producer and consumer of both these substances in the world.

Question 18

Which of the following is a reasonable analogy of theinterconnectedness and coordination of markets?
A)a large corporation
B)the World Wide Web
C)a college dorm
D)Nothing can approximate the market.

Accepted Answer

The World Wide Web is a network of interconnected websites linking to each other, much like how different markets are connected and coordinated through trade and exchange. Each website has its own unique purpose, but they all contribute to the larger network. Similarly, each market has its own niche and function, but they all affect and are affected by the larger economy. Choices (A) and (C) are not good analogies because they are too limited in scope and do not capture the complexity of interconnected markets. Choice (D) is incorrect because it is not true - there are many analogies that can help us understand the market, and the World Wide Web is one of them.

Question 19

Brazil is the world's largest sugar cane producer and sugarcane can be used for producing sugar and fuel ethanol forautomobiles. Which of the following sequence of events iscorrect?
A)Rising oil prices cause Brazilian producers to shift sugar cane production from sugar to fuel ethanol.The decrease in sugar
Supply raises the price of candy bars.
B)Rising oil prices cause Brazilian producers to shift sugar cane production from fuel ethanol to sugar.The increase in sugar
Supply decreases the price of candy bars.
C)Falling oil prices cause Brazilian producers to shift sugar cane production from sugar to fuel ethanol.The increase in
Sugar supply raises the price of candy bars.
D)Falling oil prices cause Brazilian producers to shift sugar cane production from fuel ethanol to sugar.The increase in
Sugar supply raises the price of candy bars.

Accepted Answer

Rising oil prices lead Brazilian producers to shift sugar cane production from sugar to fuel ethanol in order to meet the demand for alternative sources of fuel. This decrease in sugar supply could lead to a rise in the price of candy bars.

Question 20

Rising oil prices during the 1970s shifted flower productionfrom California to Kenya. Which of the following answersexplains this shift?
A)Markets are linked to one another.
B)Rising oil prices increased greenhouse heating costs in California making it cheaper to grow flowers in warmer
Climates.
C)The Kenyan flower industry is partially a result of rising oil prices.
D)All of the answers are correct.

Accepted Answer

All the provided statements explain aspects of how rising oil prices during the 1970s influenced the shift in flower production from California to Kenya, highlighting the interconnectedness of markets, the impact of increased heating costs, and the role of oil prices in the development of Kenya's flower industry.

Quiz 7: Production, Costs, and Industry Structure

Higher oil prices represent higher energy costs in generalacross the economy leading to increased use of bicycles andpublic transportation. Which answer best describes the ideathat changes in one market can cause effects in previouslyunseen markets?

When oil prices increased in the 1970s, sellers began to growroses in countries and sell them in countries.

If the production of two goods uses a common input, increasesin production of one good will cause:

Markets coordinate in a way that links buyers and sellers whorely primarily on:

It is Valentine's Day in the United States, and you give yourlover one dozen roses that were freshly picked 72 hours agofrom the fields of Kenya. What made this gift possible?

Ethanol and sugar are both made from sugar cane, and ethanolcan be used as substitute fuel for oil. Increasing oil prices causethe demand for ethanol to increase. This will cause the sugar to and its price to __.

Markets are linked in unpredictable and creative ways by:

From the chapter discussion, why did increased ethanolproduction and consumption in Brazil result in higher sugarprices?

Both ethanol and sugar are made from sugar cane and ethanolcan be used as a substitute for oil. As the price of oil increases,Brazilians shift sugar cane from sugar production to ethanolproduction, thereby:

Hundreds of thousands of producers working across the worldcooperate to ensure that millions of consumers can have thegoods and services they desire. These producers do not knoweach other and are not coordinated by a central agency. Theiractions are directed simply by:

Collected by workers in Peru, cochineal bugs are used to dyecertain U.S. food items red. Market activities, such as this one,can best be described as:

When gasoline prices are high, oil refiners have an incentive topull every last drop of gasoline out of a barrel of crude. Thisimplies that an increase in the demand for gasoline will causea(n) quantity supplied of gasoline and the supplyof the remaining crude oil products.

Which of the following factors contribute to the increased speedof trade across countries? I. profit opportunities for sellers II. better transportation networks III. increased cooperation among countries

A barrel of oil can be used to produce both gasoline andasphalt. If the price of gasoline falls, the supply of asphalt and asphalt prices .

Brazil is the largest producer and consumer of ________ in theworld.

Which of the following is a reasonable analogy of theinterconnectedness and coordination of markets?

Brazil is the world's largest sugar cane producer and sugarcane can be used for producing sugar and fuel ethanol forautomobiles. Which of the following sequence of events iscorrect?

Rising oil prices during the 1970s shifted flower productionfrom California to Kenya. Which of the following answersexplains this shift?