Chapter 03 Test Bank Key
1. Who participates in markets?
2. The goal of the consumer in a market economy is to use his or her limited income to buy
3. The goal of the business firms in a market economy is to maximize
4. People benefit by participating in the market because
5. Which of the following is a market transaction?
6. A factor market is any place or process where
7. Which of the following is purchased in a product market?
8. Which of the following is purchased in a factor market?
9. Business firms supply goods and services to ____ and purchase factors of production in ____.
10. Individual consumers supply ____ and purchase ____.
11. International participants
12. A market in which final goods and services are exchanged is a
13. A buyer is said to have a demand for a good only when
14. Jessie’s demand schedule for candy bars indicates
15. The term opportunity cost refers to the
16. The most desired goods or services that are given up when a choice is made are called the
17. Ceteris paribus, if the opportunity cost of purchasing a good rises, then the maximum price a particular
consumer is willing to pay for that good
18. According to the law of demand, during a given period of time, the quantity of a good demanded
19. According to the law of demand, a demand curve
20. A lower quantity demanded of a good reflects, ceteris paribus,
21. Ceteris paribus, if the price of a digital camera rises, then we can expect
22. Ceteris paribus, which of the following is most likely to cause an increase in the quantity demanded of perfume?
23. Which of the following is not held constant along a given demand curve for a good?
24. Ceteris paribus, which of the following would generally cause an increase in the demand curve for new
automobiles?
25. Ceteris paribus, which of the following would you expect to have no effect on the demand curve for new
automobiles?
26. Ceteris paribus, if buyers expect the price of airline tickets to fall in the future, then right now there should
be
27. Which determinant of demand changes in the personal computer market as more individuals become interested
in “surfing the Internet”?
28. Assume that pencils and pens are substitutes. If the price of pencils rises, then we will see
29. If bagels and doughnuts are substitutes, then a decrease in the price of doughnuts will result in
30. If there are only two airlines that fly between Dallas and New Orleans, what will happen in the market for one
airline if the other one goes out of business?
31. Peanut butter and jelly are complements. A decrease in the price of one will result in
32. Assume a series of forest fires reduces the supply of lumber, which is an input in the production of wooden
bats. Baseballs and wooden bats are complements. If the price of wooden bats increases, we can expect
the
33. Ceteris paribus means
34. A change in demand means there has been a shift in the demand curve, and a change in quantity
demanded
35. Market demand is determined by all of the following except
36. To calculate market demand, we
37. Which of the following is a determinant of market supply?
38. Which of the following is a determinant of supply?
39. A change in the price of a good
40. Which of the following is not held constant along a given supply curve for a good?
41. Ceteris paribus, which of the following is most likely to cause an increase in the quantity supplied of perfume?
42. A shift in supply is defined as a change in
43. Ceteris paribus, which of the following is most likely to cause a decrease in the supply of skateboards?
44. The law of supply implies that
45. To calculate market supply, we
46. Ceteris paribus, if the subsidies given to corn syrup producers decrease, then we can expect
47. Which of the following events would cause a rightward shift in the market supply curve for automobiles?
48. If corn and wheat are alternative pursuits for a farmer, a change in the supply of corn will take place when,
ceteris paribus,
49. Which of the following would not cause the market supply of cell phones to change?
50. Assume that steel is used to produce monkey wrenches. Ceteris paribus, if the price of steel rises, then
51.
Which of the following can change without shifting demand, ceteris paribus?
52. Ceteris paribus, which of the following is most likely to shift both the demand and the supply curves?
53. A market is said to be in equilibrium when
54. The equilibrium price in a market is found where
55. At the equilibrium price, there are
56. If there is a shortage at a given price, then
57. If there is a surplus at a given price, then
58. In most markets, the equilibrium price is achieved
59. The term market mechanism refers to
60. When a surplus exists for a product,
61. A ballet performance had many empty seats. This implies that the
62. If the quantity demanded of a good is greater than the quantity supplied of the good at the current price,
then
63. A market shortage is
64. As a result of a shortage,
65.
Tickets to a sporting event go on sale and sell out almost instantly. This suggests that
66. A rightward shift in a demand curve and a rightward shift in a supply curve both result in a
67. A rightward shift in a demand curve and a leftward shift in a supply curve both result in a
68. A leftward shift of the market demand curve for HDTVs, ceteris paribus, causes equilibrium price to
69. Ceteris paribus, an increase in the number of sellers of running shoes causes equilibrium price to
70. Assume peanut butter and jelly are complements. Ceteris paribus, an increase in the price of peanut butter will
cause the equilibrium price of jelly to
71. A rightward shift of the market demand curve for MP3 players, ceteris paribus, causes equilibrium
72. When the demand for coffee increases, ceteris paribus, the equilibrium price will also increase because
73. Assume two goods are substitutes. Ceteris paribus, a decrease in the price of one good will cause the
equilibrium price of the other good to
74. Assume milk is used to produce ice cream. Ceteris paribus, a decrease in the price of milk will cause the
equilibrium price of ice cream to
75. An increase in the supply of gasoline, ceteris paribus, will cause equilibrium price
76. In 2007 a company sold 35,000 MP3 players at $150 each. In 2008 the same company sold 40,000 MP3
players at $170 each. This information suggests that
77. Suppose there are a series of forest fires that affect the lumber industry while, at the same time, consumers
demand more wooden furniture. The wooden furniture market would experience
78. Suppose both the demand for and supply of salsa increase (although not necessarily by the same amount).
What can we conclude about changes in the price and quantity of salsa?
79. An increase in the equilibrium price of electricity can be caused by
80. A decrease in the price of electricity can best be explained by
81. Which of the following is most likely to occur because of an increase in the price of electricity in California?
82. When the market mechanism is allowed to operate freely, prices will determine
83. In a market economy, which of the following determines the answer to the WHAT to produce question?
84. In a market economy, which of the following is an incentive for producers to produce efficiently?
85. In a market economy, the people who receive the goods and services produced are those who
86. When economists talk about “optimal outcomes” in the marketplace, they mean that
87. Price ceilings are intended to address the problem of
88. The federal government placed an upper limit on human organ prices, which is called a
89. The price ceiling that the federal government placed on human organs caused
90.
If the government places a price ceiling on cancer-treating drugs, then
91.
If a price ceiling is to be effective, it should be set
92. Suppose a hurricane hits Florida, causing widespread damage to houses and businesses. The governor of
Florida places price ceilings on all building materials to keep the prices reasonable. Which of the following is the
most likely result?
93.
Choose the letter of the diagram in Figure 3.1 that best describes the type of shift that would occur in each
situation for the market listed on the left, ceteris paribus.
Figure 3.1 Shifts of Supply and Demand Designer clothes: consumer confidence in the economy improves.