1. Scarcity and choice are the basic problems of economics; the supply and demand mechanism is the basic investigative
tool of economics.
a.
True
b.
False
2. Governments of market-oriented economies never tamper with the price mechanism.
a.
True
b.
False
3. George Washington’s troops at Valley Forge were almost destroyed by price controls.
a.
True
b.
False
4. Very few societies have used price controls.
a.
True
b.
False
5. The laws of supply and demand did not apply to elephant tusks.
a.
True
b.
False
6. “Demand” is a series of quantities demanded, one for each person in the market.
a.
True
b.
False
7. A demand schedule shows the time over which different quantities will be demanded.
a.
True
b.
False
8. A demand schedule relates prices of a particular good to quantities demanded.
a.
True
b.
False
9. A demand schedule’s position is determined partly by the supply of a good.
a.
True
b.
False
10. A demand curve shows the relationship between price and quantity demanded only so long as all other things are held
constant.
a.
True
b.
False
11. Change in the price of a good causes the demand schedule for that good to shift.
a.
True
b.
False
12. Demand and quantity demanded are the same thing.
a.
True
b.
False
13. A change in the price of hamburgers will change the supply of hot dogs.
a.
True
b.
False
14. A change in the income of buyers will normally change demand.
a.
True
b.
False
15. A report on the dangers of cholesterol would likely shift the demand curve for beef downward and to the left.
a.
True
b.
False
16. A shift of the demand curve for a good occurs whenever new technologies make inputs used in producing that good
available at lower prices.
a.
True
b.
False
17. An increase in price will decrease demand.
a.
True
b.
False
18. A cold winter will increase the quantity of heating fuel demanded at every price.
a.
True
b.
False
19. If the demand curve shifts outward and the supply curve remains the same, price will fall.
a.
True
b.
False
20. A decrease in the price of VCRs will increase demand for video cassettes.
a.
True
b.
False
21. Demand curves can be affected by the prices of related goods.
a.
True
b.
False
22. Demand shifts due to changes in price.
a.
True
b.
False
23. The position of a demand curve is unaffected by changes in the price of the good.
a.
True
b.
False
24. Consumer income changes can shift market demand.
a.
True
b.
False
25. If the price of hamburger rises, we would expect the demand for steak to shift to the right.
a.
True
b.
False
26. Advertising has no effect on the demand schedule for a good.
a.
True
b.
False
27. A supply schedule can be plotted on a graph to yield a supply curve.
a.
True
b.
False
28. As price increases, additional suppliers are willing to produce a commodity.
a.
True
b.
False
29. A supply curve slopes upward because quantity supplied is higher when price is higher.
a.
True
b.
False
30. Both demand and supply curves usually have positive slopes.
a.
True
b.
False
31. An increase in price will increase supply.
a.
True
b.
False
32. When people suddenly want to buy something, supply increases.
a.
True
b.
False
33. Supply can shift due to changes in price.
a.
True
b.
False
34. A change in the price of important inputs will change the quantity supplied but will not shift the supply curve.
a.
True
b.
False
35. The more firms that are attracted to an industry, the greater will be the quantity of product supplied at any given price.
a.
True
b.
False
36. As more firms are attracted to an industry, the supply curve can be expected to shift to the right.
a.
True
b.
False
37. Cost-reducing technological advancements allow suppliers to earn more profits but have no noticeable effect on the
supply curve.
a.
True
b.
False
38. A change in the price of a good has no effect on the supply schedule.
a.
True
b.
False
39. Changes in the size of an industry may cause supply to shift.
a.
True
b.
False
40. An increase in consumer income will shift both the supply and demand curves.
a.
True
b.
False
41. Technological advances that allow a good to be produced at a lower cost will shift the demand curve rightward.
a.
True
b.
False
42. Technological advances shift the supply curve rightward.
a.
True
b.
False
43. At equilibrium, quantity demanded equals quantity supplied.
a.
True
b.
False
44. Equilibrium price and quantity are determined by the intersection of the demand and supply curves.
a.
True
b.
False
45. When price is above the equilibrium level, competitive price cutting will continue as long as quantity supplied exceeds
quantity demanded.
a.
True
b.
False
46. Even though prices may change frequently, they can be expected to gravitate toward equilibrium.
a.
True
b.
False
47. Drawing the supply curve and the demand curve on the same graph helps show how price is determined.
a.
True
b.
False
48. “Equilibrium” is a situation in which there are no inherent forces to produce change.
a.
True
b.
False
49. When price is below the equilibrium level, there is a shortage of the commodity being sold.
a.
True
b.
False
50. When price is above the equilibrium level, suppliers offer more than demanders wish to buy.
a.
True
b.
False
51. A price above equilibrium always yields a surplus.
a.
True
b.
False
52. A shortage occurs when price is higher than the market equilibrium.
a.
True
b.
False
53. A surplus occurs when price is higher than the market equilibrium.
a.
True
b.
False
54. Equilibrium is reached where there is no inherent force causing quantity supplied or quantity demanded to change.
a.
True
b.
False
55. At equilibrium, the market will clear, with no surpluses or shortages occurring.
a.
True
b.
False
56. The laws of supply and demand force prices to an equilibrium.
a.
True
b.
False
57. Any factor that shifts the demand curve to the left but does not affect the supply curve will lower the equilibrium price
and raise the equilibrium quantity.
a.
True
b.
False
58. If demand increases, the equilibrium price and equilibrium quantity will both fall, everything else being equal.
a.
True
b.
False
59. Any factor that shifts the supply curve inward and to the left and does not affect the demand curve will raise the
equilibrium price and reduce the equilibrium quantity.
a.
True
b.
False
60. If supply increases, the equilibrium price will rise and the equilibrium quantity will fall.
a.
True
b.
False
61. Rent controls are designed to protect consumers from high rents.
a.
True
b.
False
62. Enacting a law controlling rents near a major university will increase the affordable housing for college students.
a.
True
b.
False
63. Black-market prices are below equilibrium prices because sellers want to sell large quantities.
a.
True
b.
False
64. Rent controls and controls on other prices often aggravate the very problem they are intended to solve.
a.
True
b.
False
65. Regulations are sometimes used to “correct” the failures of a market mechanism.
a.
True
b.
False
66. A black market develops only when quantity demanded exceeds quantity supplied.
a.
True
b.
False
67. A price ceiling is only effective if it is above the market equilibrium.
a.
True
b.
False
68. Price ceilings set a legal maximum price on a product or commodity.
a.
True
b.
False
69. Price ceilings lead to market surpluses.
a.
True
b.
False
70. Rent controls are most often designed to protect the investment made by apartment building owners.
a.
True
b.
False
71. Rent controls encourage investment in housing because they bring stability to the market.
a.
True
b.
False
72. Since rent controls have been in effect in New York City, apartments have been more plentiful.
a.
True
b.
False
73. If the government puts price controls on medical care, this will increase the supply of affordable care in the United
States.
a.
True
b.
False
74. Price floors are only effective below the market equilibrium.
a.
True
b.
False
75. Price floors set a legal minimum price on a product or commodity.
a.
True
b.
False