Question 1

A student graduates from college and gets a high-paying joB.As a result of the increase in income,the student buys more frozen pizzas.For the student,frozen pizzas must be a(n)
A)Substitute
B)Complement
C)Normal good
D)Inferior good
E)Standardized product

Accepted Answer

Frozen pizzas are a normal good for the student, as their consumption increases with the increase in income.

Question 2

Markets that fall between pure competition and monopoly are called:
A)Anti-competitive
B)Imperfectly competitive
C)Command markets
D)Tweener markets
E)Monopsonistic

Accepted Answer

The term used to describe markets that fall between pure competition and monopoly is "imperfectly competitive." In these markets, there are a limited number of firms, and they have some degree of market power. However, they do not have complete control over the price and output of the market, as would be the case in a monopoly. Examples of imperfectly competitive markets include oligopolies and monopolistic competition.

Question 3

Which of the following will cause demand to rise?
A)A decrease in price
B)A decrease in the price of a substitute good
C)A decrease in the price of a complementary good
D)An increase in supply
E)An increase in the cost of production

Accepted Answer

A decrease in the price of a complementary good makes the combined purchase more attractive, leading to an increase in demand for the original good.

Question 4

An increase in the price of a good will cause which of the following?
A)Quantity demanded to demand to rise
B)Demand to fall
C)Quantity supplied to fall
D)Supply to rise
E)None of the above

Accepted Answer

An increase in the price of a good does not cause demand itself to fall or supply to rise; rather, it typically leads to a movement along the demand curve, resulting in a decrease in quantity demanded, and a movement along the supply curve, resulting in an increase in quantity supplied. None of the options accurately describe these economic principles.

Question 5

Which of the following descriptions fits the American economy best?
A)A pure market economy
B)A mixed economy
C)Purely competitive economy
D)A command economy
E)A monopoly economy

Accepted Answer

The American economy is a mixed economy because it combines elements of both pure market and command economies. While there is a significant amount of private enterprise and market competition, there are also government regulations and interventions to address social and economic issues.

Question 6

The Law of Supply states that price and
A)Supply are positively related
B)Quantity supplied are positively related
C)Supply are negatively related
D)Quantity supplied are negatively related
E)Quantity demanded are negatively related

Accepted Answer

The Law of Supply states that there is a direct or positive relationship between the price of a good and the quantity of that good supplied in the market. As the price of a good increases, the quantity of that good supplied by producers also increases. This is because producers are incentivized to supply more of a good at higher prices, as it leads to higher profits. Therefore, price and quantity supplied are positively related.

Question 7

Which of the following is least consistent with the pure market economy?
A)An established legal system that arbitrates contract disputes
B)An individual accepting a job for $1 per hour
C)The institution of private property rights
D)The existence of a minimum wage
E)Private property rights

Accepted Answer

The existence of a minimum wage is least consistent with a pure market economy, which operates on the principle of supply and demand determining the price of goods and services. A minimum wage interferes with this principle by imposing a floor on the price of labor. The other options (A, B, C, and E) are consistent with a pure market economy as they relate to the rule of law, individual choices, and private property rights.

Question 8

You receive a big raise at work.As a result of your now higher income,you stop bringing your lunch from home and start eating lunch at a nearby restaurant.Your homemade lunches must be
A)A substitute
B)A complement
C)Normal goods
D)Inferior goods
E)Standardized products

Accepted Answer

Homemade lunches are generally considered inferior goods as people tend to consume more of them when their income is lower and opt for more expensive options when they have more disposable income. So, when the person receives a raise, they switch from the inferior good (homemade lunch) to the more expensive option (restaurant).

Question 9

In 1978,the Chinese economy
A)Opened ties to the noncommunist world
B)Became a strictly centralized economy under Joseph Stalin
C)Became communist under Mao Zedong
D)Moved to the island of Taiwan
E)Became a purely market-oriented economy

Accepted Answer

In 1978, China began its economic reform under the leadership of Deng Xiaoping, which opened ties to the noncommunist world and began transitioning from a centralized planned economy to a market-oriented one.

Question 10

If an increase in the price of bicycles leads to an increase in the demand for bus transportation,the bicycles and bus rides must be
A)Substitutes
B)Complements
C)Normal goods
D)Inferior goods
E)Standardized products

Accepted Answer

When an increase in the price of bicycles leads to an increase in the demand for bus transportation, it indicates that the two products are substitutes for each other. In other words, when the price of one product increases, consumers switch to the other product as a replacement. This suggests that the demand for bus transportation is affected by the price changes in bicycles, and vice versa, implying that the two products have a substitution effect on each other. Therefore, the best choice is A) Substitutes.

Question 11

In a market economy,
A)Resources are allocated by the private parties who own the resources
B)Resources are allocated by the various local,state,and federal planning committees and zoning commissions
C)Shortages never exist
D)Surpluses never exist
E)Both c and d

Accepted Answer

In a market economy, resources are allocated based on the decisions made by private parties who own them, such as individuals, households, and firms. These decisions are largely guided by the prices and signals of supply and demand in the market. Therefore, the allocation of resources in a market economy is primarily driven by market forces rather than central planning, which is characteristic of a command economy. Shortages and surpluses can and do exist in market economies due to changes in supply and demand.

Question 12

A market with only one seller of a product that has no good substitutes is called
A)A pure monopoly
B)A pure command economy
C)Purely competitive
D)Imperfectly competitive
E)An oligopoly

Accepted Answer

A market with only one seller of a product that has no good substitutes is known as a pure monopoly. In a pure monopoly, the single seller has complete control over supply and price, and there is no competition.

Question 13

Given a downward-sloping demand curve and an upward-sloping supply curve,an increase in supply together with an increase in demand will cause the
A)Equilibrium quantity purchased to increase,but the effect on price will be indeterminate
B)Equilibrium quantity purchased to decrease,but the effect on price will be indeterminate
C)Price to rise,but the effect on the equilibrium quantity purchased will be indeterminate
D)Price to fall,but the effect on the quantity bought and sold will be indeterminate
E)Equilibrium price to rise and the equilibrium quantity purchased will rise

Accepted Answer

When both supply and demand increase, the equilibrium quantity will definitely increase because both shifts support a higher quantity being bought and sold. However, the effect on price is indeterminate without knowing the relative magnitudes of the shifts in supply and demand.

Question 14

In the market economy,markets serve the function of
A)Coordinating resource use decisions made by individual owners of resources
B)Bringing about resource allocation changes desired by resource owners
C)Determining prices
D)All of the above
E)Both (a)and (b)

Accepted Answer

In a market economy, markets serve to coordinate resource use decisions made by individual owners of resources, bring about resource allocation changes desired by resource owners, and determine prices. Therefore, all of the given options are correct.

Question 15

If a consumer always eats cheese with macaroni,then for that consumer macaroni and cheese are examples of:
A)Substitutes
B)Complements
C)Normal goods
D)Inferior goods
E)Standardized products

Accepted Answer

Macaroni and cheese are examples of complementary goods because they are often consumed together, therefore the change in the price of one good will affect the demand for the other good.

Question 16

Which of the following is true of monopoly firms? They
A)Can manipulate the price of their product
B)Beat their competitors' prices
C)Must constantly deal with the entry of new firms
D)Never receive government help blocking entry into the market
E)Do all of the above

Accepted Answer

Monopoly firms have the ability to manipulate the price of their product because they are the only supplier in the market. They do not have to worry about beating their competitors' prices or dealing with new firms entering the market. They may receive government help blocking entry into the market, although this is not always the case.

Question 17

If an increase in the price of cookies leads to a decrease in the demand for ice cream,then ice cream and cookies must be
A)Substitutes
B)Complements
C)Normal goods
D)Inferior goods
E)Standardized products

Accepted Answer

Complements are goods that are often used together, so if the price of one increases, the demand for the other decreases because consumers are less likely to buy or use them together. In this case, if the price of cookies increases and the demand for ice cream decreases, it indicates that cookies and ice cream are complements.

Question 18

The Law of Demand states that price and
A)Demand are positively related
B)Quantity demanded are positively related
C)Demand are negatively related
D)Quantity demanded are negatively related
E)None of the above

Accepted Answer

The Law of Demand states that as the price of a good or service increases, the quantity demanded for that good or service decreases. Therefore, there is a negative relationship between price and quantity demanded.

Question 19

Which of the following is not a characteristic of a purely competitive market?
A)Enough sellers and buyers so that no one of them acting alone can influence the price of this product
B)The ability of a single seller to block potential competitors out of the market
C)Freedom of the price to move up or down,that is,no price fixing
D)Mobility of buyers and sellers
E)A standardized product

Accepted Answer

The ability of a single seller to block potential competitors out of the market is a characteristic of a monopoly, not a purely competitive market. In a competitive market, there are many sellers and buyers, and no single seller can control the market or prevent others from entering it.

Question 20

In both the U.S.and Canada,most,but not all,of economic resources are owned and controlled by private parties who make decisions as to how to use those resources with somewhat limited interference from government.As such,these economies are examples of
A)The pure command economy
B)Mixed economies,though closer to the market end of the spectrum
C)Mixed economies,though closer to the command end of the spectrum
D)The pure market economy
E)The communist economy

Accepted Answer

Both the U.S. and Canada have mixed economies, with elements of both market and command economies. However, they are closer to the market end of the spectrum, as private parties largely control economic resources with limited government interference.

Quiz 2: Economic Systems, Resource Allocation, and Social Well-Being: Lessons From Chinas Transition

A student graduates from college and gets a high-paying joB.As a result of the increase in income,the student buys more frozen pizzas.For the student,frozen pizzas must be a(n)

Markets that fall between pure competition and monopoly are called:

Which of the following will cause demand to rise?

An increase in the price of a good will cause which of the following?

Which of the following descriptions fits the American economy best?

The Law of Supply states that price and

Which of the following is least consistent with the pure market economy?

You receive a big raise at work.As a result of your now higher income,you stop bringing your lunch from home and start eating lunch at a nearby restaurant.Your homemade lunches must be

In 1978,the Chinese economy

If an increase in the price of bicycles leads to an increase in the demand for bus transportation,the bicycles and bus rides must be

In a market economy,

A market with only one seller of a product that has no good substitutes is called

Given a downward-sloping demand curve and an upward-sloping supply curve,an increase in supply together with an increase in demand will cause the

In the market economy,markets serve the function of

If a consumer always eats cheese with macaroni,then for that consumer macaroni and cheese are examples of:

Which of the following is true of monopoly firms? They

If an increase in the price of cookies leads to a decrease in the demand for ice cream,then ice cream and cookies must be

The Law of Demand states that price and

Which of the following is not a characteristic of a purely competitive market?

In both the U.S.and Canada,most,but not all,of economic resources are owned and controlled by private parties who make decisions as to how to use those resources with somewhat limited interference from government.As such,these economies are examples of