True / False
1. Prices allocate a market economy’s scarce resources.
a.
True
b.
False
2. In a market economy, supply and demand determine both the quantity of each good produced and the price at which it
is sold.
a.
True
b.
False
3. A market is a group of buyers and sellers of a particular good or service.
a.
True
b.
False
4. Sellers as a group determine the demand for a product, and buyers as a group determine the supply of a product.
a.
True
b.
False
5. A yard sale is an example of a market.
a.
True
b.
False
6. A newspaper’s classified ads are an example of a market.
a.
True
b.
False
7. Most markets in the economy are highly competitive.
a.
True
b.
False
8. In a competitive market, the quantity of each good produced and the price at which it is sold are not determined by any
single buyer or seller.
a.
True
b.
False
9. In a competitive market, there are so few buyers and so few sellers that each has a significant impact on the market
price.
a.
True
b.
False
10. In a perfectly competitive market, the goods offered for sale are all exactly the same.
a.
True
b.
False
11. In a perfectly competitive market, buyers and sellers are price setters.
a.
True
b.
False
12. All goods and services are sold in perfectly competitive markets.
a.
True
b.
False
13. If a good or service has only one seller, then the seller is called a monopoly.
a.
True
b.
False
14. Monopolists are price takers.
a.
True
b.
False
15. Local cable television companies frequently are monopolists.
a.
True
b.
False
16. The quantity demanded of a product is the amount that buyers are willing and able to purchase at a particular price.
a.
True
b.
False
17. The law of demand is true for most goods in the economy.
a.
True
b.
False
18. The law of demand states that, other things equal, when the price of a good rises, the quantity demanded of the good
rises, and when the price falls, the quantity demanded falls.
a.
True
b.
False
19. The law of demand states that, other things equal, when the price of a good rises, the quantity demanded of the good
falls, and when the price falls, the quantity demanded rises.
a.
True
b.
False
20. Individual demand curves are summed horizontally to obtain the market demand curve.
a.
True
b.
False
21. Individual demand curves are summed vertically to obtain the market demand curve.
a.
True
b.
False
22. The market demand curve shows how the total quantity demanded of a good varies as the income of buyers varies,
while all the other factors that affect how much consumers want to buy are held constant.
a.
True
b.
False
23. The demand curve is the upward-sloping line relating price and quantity demanded.
a.
True
b.
False
24. If something happens to alter the quantity demanded at any given price, then the demand curve shifts.
a.
True
b.
False
25. A movement upward and to the left along a given demand curve is called a decrease in demand.
a.
True
b.
False
26. An increase in demand shifts the demand curve to the left.
a.
True
b.
False
27. A decrease in demand shifts the demand curve to the left.
a.
True
b.
False
28. A decrease in the price of a product and an increase in the number of buyers in the market affect the demand curve in
the same general way.
a.
True
b.
False
29. If a determinant of demand other than price changes, the demand curve shifts.
a.
True
b.
False
30. Public service announcements, mandatory health warnings on cigarette packages, and the prohibition of cigarette
advertising on television are all policies aimed at shifting the demand curve for cigarettes to the right.
a.
True
b.
False
31. An increase in the price of pizza will shift the demand curve for pizza to the left.
a.
True
b.
False
32. If the demand for a good falls when income falls, then the good is called an inferior good.
a.
True
b.
False
33. When Mario’s income decreases, he buys more pasta. For Mario, pasta is a normal good.
a.
True
b.
False
34. A decrease in income will shift the demand curve for an inferior good to the right.
a.
True
b.
False
35. An increase in the price of a substitute good will shift the demand curve for a good to the right.
a.
True
b.
False
36. If orange juice and apple juice are substitutes, an increase in the price of orange juice will shift the demand curve for
apple juice to the right.
a.
True
b.
False
37. If orange juice and apple juice are substitutes, an increase in the price of orange juice will shift the demand curve for
apple juice to the left.
a.
True
b.
False
38. Baseballs and baseball bats are substitute goods.
a.
True
b.
False
39. A decrease in the price of a complement will shift the demand curve for a good to the left.
a.
True
b.
False
40. When an increase in the price of one good lowers the demand for another good, the two goods are called
complements.
a.
True
b.
False
41. Cocoa and marshmallows are complements, so a decrease in the price of cocoa will cause an increase in the demand
for marshmallows.
a.
True
b.
False
42. If baked potatoes and sour cream are complements, then an increase in the price of sour cream decreases the demand
for baked potatoes.
a.
True
b.
False
43. A decrease in the price of baseball bats will decrease the demand for baseballs.
a.
True
b.
False
44. Most studies have found that tobacco and marijuana are complements rather than substitutes.
a.
True
b.
False
45. Most studies have found that tobacco and marijuana are substitutes rather than complements.
a.
True
b.
False
46. If a person expects the price of pumpkins to increase next month, then that person’s current demand for pumpkins will
increase.
a.
True
b.
False
47. The quantity supplied of a good or service is the amount that sellers are willing and able to sell at a particular price.
a.
True
b.
False
48. Price cannot fall so low that some sellers choose to supply a quantity of zero.
a.
True
b.
False
49. When the price of a good is high, selling the good is profitable, and so the quantity supplied is large.
a.
True
b.
False
50. When the price of a good is low, selling the good is profitable, and so the quantity supplied is large.
a.
True
b.
False
51. The law of supply states that, other things equal, when the price of a good rises, the quantity supplied of the good falls.
a.
True
b.
False
52. The law of supply states that, other things equal, when the price of a good falls, the quantity supplied falls as well.
a.
True
b.
False
53. A movement along a supply curve is called a change in supply while a shift of the supply curve is called a change in
quantity supplied.
a.
True
b.
False
54. An increase in the price of a product and an increase in the number of sellers in the market affect the supply curve in
the same general way.
a.
True
b.
False
55. If a higher price means a greater quantity supplied, then the supply curve slopes upward.
a.
True
b.
False
56. If something happens to alter the quantity supplied at any given price, then we move along the fixed supply curve to a
new quantity supplied.
a.
True
b.
False
57. A decrease in supply shifts the supply curve to the left.
a.
True