Deck 2: Markets and the Market Process

Question 1

What incentives are created under a random allocation scheme?

A) Fairness
B) Equal results for all
C) To be first
D) To be in favor with or match up with government's rules
E) No incentives are created

Answer 1

No incentives are created

Question 2

The efficiency of an economic system is a measure of

A) how well off people are.
B) how well a system satisfies people's wants and needs.
C) the standard of living.
D) inflation.
E) unemployment.

Answer 2

how well a system satisfies people's wants and needs.

Question 3

Why is the market system not universally relied on to allocate goods and services?

A) Government wants to impose its preferences.
B) People do not like the outcome.
C) The market simply cannot function.
D) The market system is not always the most efficient allocation mechanism.
E) All of these.

Answer 3

All of these.

Question 4

When economists say that people are self-interested, they mean that people are

A) using their scarce resources to maximize their well-being.
B) selfish.
C) greedy for other peoples' possessions.
D) efficiently substituting market demands for complementary goods.
E) reacting to shortages by creating surpluses of socially acceptable wants and needs.

Question 5

In the long run, under which allocation mechanism will a society grow most quickly?

A) Market
B) Government
C) First-come, first served
D) Random
E) All of these mechanisms will lead to long-run, sustained economic growth

Question 6

Even in the United States, not all allocation is carried out in a market because, in some cases,

A) people want more of the product.
B) people want less of the product.
C) the market outcome is not always efficient.
D) people support the market outcome.
E) people disagree with a random allocation.

Question 7

Which of the following is not an allocation mechanism?

A) Fairness
B) Markets
C) First come, first served
D) Random
E) Government

Question 8

Which of the following mechanisms is unfair?

A) Market.
B) First-come, first-served.
C) Government
D) Random
E) All of these are unfair in a sense; it depends on the incentives each creates.

Question 9

____ is an example of an allocation mechanism.

A) Market
B) First-come, first-served
C) Government dictate
D) Random
E) All of these are examples of allocation mechanisms.

Question 10

What incentives are created under a government allocation scheme?

A) Fairness
B) Equality for all
C) To be first
D) To be in favor with or match up with government's rules
E) To acquire purchasing ability (to obtain income and wealth)

Question 11

Even in the United States, not all allocation is carried out in a market because, in some cases, people

A) want more of the product.
B) want less of the product.
C) do not like the market outcome.
D) support the market outcome.
E) disagree with a random allocation.

Question 12

What incentives are created under a first come, first served allocation mechanism?

A) Fairness
B) Equality for all
C) To be first
D) To produce the most
E) To acquire purchasing ability (to obtain income and wealth)

Question 13

One reason governments pay so much for military weapons is

A) they are greedy.
B) they do not want a free market system for military weapons.
C) consumers want more than the government is willing to buy.
D) they want to pay more, assuming they will get better-quality weapons.
E) all of these.

Question 14

Which of the following examples deals with price, with the allocation of goods and services, and also with demand and supply?

A) Lodging in Phoenix may cost twice as much in the winter as in the summer.
B) Lodging in Colorado may cost much more in the winter than in the summer.
C) People will pay scalpers many times the face value of a ticket to a popular show.
D) Customers in a crowded restaurant may slip the headwaiter some money in order to be seated more quickly.
E) All of these

Question 15

What incentives are created under a market allocation scheme?

A) Fairness
B) Equality for all
C) To be first
D) To be in favor with or match up with government's rules
E) To acquire purchasing ability (to obtain income and wealth)

Question 16

The market system is said to be efficient because it

A) takes fewer resources to work than any other system.
B) requires more labor than any other system.
C) determines the price.
D) allocates resources to who wants them.
E) creates fewer goods and services than other systems.

Question 17

The market system results in

A) economic growth
B) an increased standard of living
C) efficiency
D) motivation for sellers to improve the quality of their products
E) All of these result from the market system.

Question 18

The market system may not be efficient because people want more of the product. In this situation, the market

A) is not able to account for all costs and benefits.
B) is always able to account for all costs and benefits.
C) accounts for all costs and benefits except in the case of fast food.
D) cannot account for the cost of Styrofoam cups.
E) is unable to measure the cost of cigarettes.

Question 19

Which of the following exemplifies the market allocation mechanism?

A) Prices of swim suits are marked down in September.
B) A store limits the quantity of an item that a customer can purchase.
C) Medicare (health care for the elderly).
D) Christmas decorations and merchandise in stores by Halloween.
E) All of these are examples of the market allocation mechanism.

Question 20

For a free market to exist, economists say that

A) the government must act in the best interest of the political leadership.
B) all's well that ends well.
C) supply must determine demand.
D) there must be voluntary exchanges and secure private property rights.
E) everything must have a price that is lower than competitive offerings from other countries.

Question 21

Which of the following is not constant along an individual consumer's demand curve for Coke?

A) The price of Coke
B) The price of Pepsi
C) The consumer's income
D) The consumer's tastes
E) All of these

Question 22

Which of the following goods are bought and sold in a market?

A) Food
B) Stocks
C) Foreign goods
D) Drugs
E) All of these

Question 23

What does the market process refer to?

A) The trading, buying, and selling of goods, services, and resources
B) Barter exchange only
C) Money exchange only
D) The process of allocating goods fairly
E) The process of ensuring that supermarkets exist

Question 24

In general, the purpose of markets is to

A) facilitate the exchange of goods and services between buyers and sellers.
B) provide a means for illegal transactions.
C) provide a forum for the exchange of political benefits.
D) provide a means for unrecorded payments.
E) facilitate the exchange of illegal commodities.

Question 25

Which of the following is an example of a market?

A) The exchange of votes and benefits by voters and politicians
B) The exchange of shares of stock
C) Sales and purchases of illegal drugs
D) The exchange of a particular good at many different locations
E) All of these

Question 26

The market process tends to ensure that

A) consumers get the products firms want to sell them.
B) consumers get the products they want.
C) producers get the products they want.
D) consumers are not left out.
E) inefficiency exists.

Question 27

A table or list of the prices and the corresponding quantities demanded of a particular good is called a

A) demand curve.
B) demand schedule.
C) supply curve.
D) supply schedule.
E) production possibilities schedule.

Question 28

The following is an example of the random allocation mechanism

A) Long lines of people waiting to purchase the new Apple iPad
B) The raffle drawing for a trip to Hawaii
C) The American interstate freeway system
D) The $5 pizza special at the nearby-campus pizzeria
E) None of these is an example of the market allocation mechanism.

Question 29

The following is an example of the market allocation mechanism

A) Long lines of people waiting to purchase the new Apple iPad
B) The raffle drawing for a trip to Hawaii
C) The American interstate freeway system
D) The $5 pizza special at the nearby-campus pizzeria
E) None of these is an example of the market allocation mechanism.

Question 30

An example of the market allocation mechanism is

A) The 50% off sale on Christmas items on December 26.
B) A one-pound box of See's candy selling for US $40 in Hong Kong.
C) Discounted matinee movie tickets
D) Buyers paying more than the suggested retail price for a Mazda Miata when they were introduced in the U.S. in 1990.
E) All of these are examples of the market mechanism.

Question 31

A market

A) makes possible the exchange of goods and services between buyers and sellers.
B) refers only to a specialized place or service where goods and services are exchanged.
C) refers only to a formally organized place where a well-defined commodity is always traded.
D) refers only to a localized place or service that facilitates the exchange of goods and services.
E) refers to both large and small places where poorly defined commodities are traded.

Question 32

An individual demand schedule or curve shows the various quantities of a good that a person

A) wants and is able to purchase at alternative prices, everything else held the same.
B) has purchased at alternative prices, everything else held the same.
C) is able to purchase at alternative prices, everything else held the same.
D) is able to purchase at alternative income levels, everything else held the same.
E) has purchased at alternative income levels, everything else held the same.

Question 33

According to the law of demand, if the price of compact disks decreased, everything else held constant, the

A) demand for compact disks would increase.
B) quantity demanded of compact disks would decrease.
C) quantity demanded of compact disks would increase.
D) demand for compact disks would decrease.
E) quantity demanded of compact disks would not change.

Question 34

The law of demand illustrates that

A) as price decreases, demand increases.
B) price changes are always in the same direction as demand changes.
C) as price increases, quantity demanded increases.
D) as price decreases, quantity supplied increases.
E) as price decreases, quantity demanded increases.

Question 35

Which of the following is not a likely result in a market system?

A) Consumers increase their marginal profit.
B) Prices tend to be low.
C) Resources tend to be used where they are most valued.
D) Inefficient firms do not last.
E) Inefficiency does not last.

Question 36

Markets

A) must be specialized.
B) must be general.
C) must consist of one buyer and one seller.
D) must consist of many buyers and many sellers.
E) can be organized either loosely or formally.

Question 37

According to the law of demand,

A) the lower the price of a commodity, the lower the quantity demanded of that commodity.
B) as the price of a commodity increases, the quantity demanded of that commodity also increases.
C) the lower the price of a commodity, the greater the quantity demanded of that commodity.
D) the lower the price of a commodity, the greater the quantity supplied of that commodity.
E) as the price of a commodity increases, the quantity supplied of that commodity decreases.

Question 38

Which of the following is not held constant when constructing a demand curve for good X?

A) Consumer income
B) Consumer tastes
C) Price of good X
D) Prices of other goods
E) Consumer expectations

Question 39

The following is an example of the first-come, first-served allocation mechanism

A) Long lines of people waiting to purchase the new Apple iPad
B) The raffle drawing for a trip to Hawaii
C) The American interstate freeway system
D) The $5 pizza special at the nearby-campus pizzeria
E) None of these is an example of the market allocation mechanism.

Question 40

Which of the following statements concerning markets is false?

A) Buyers and sellers communicate with each other directly or indirectly about the quality and quantity of the product.
B) Buyers and sellers discuss, either face to face or through an agent or broker, what they are willing to pay and receive for a good or service.
C) Black markets deal with exchanges that violate the law.
D) Markets are always formally organized, like the stock market.
E) Underground market is the term given to unrecorded transactions, whether legal or illegal.

Question 41

If everyone expects the price of almonds to rise in the near future, what will happen to the market for almonds?

A) People will buy the same amount now.
B) People will buy less now, causing a decrease in demand.
C) The amount bought and sold today will increase.
D) The supply will increase today.
E) The amount bought and sold today will decrease.

Question 42

A boycott of lettuce would, if effective, cause a(n)

A) increase in the equilibrium quantity of lettuce bought and sold.
B) increase in the price of lettuce.
C) decrease in the demand for lettuce.
D) decrease in the supply of lettuce.
E) decrease in the demand for and the supply of lettuce.

Question 43

Which of the following may cause a change in demand for a product?

A) A change in the profitability of producing another product
B) A decrease in the cost of producing the product
C) A change in consumer incomes
D) A change in the price of the product
E) A change in the plans of producers

Question 44

Which of the following would not shift the demand curve for golf balls?

A) An increase in the price of golf clubs
B) A decrease in the popularity of golf
C) An increase in the number of golfers
D) All of these would shift the demand curve for golf balls
E) A decrease in the price of golf balls

Question 45

If consumers are willing and able to pay a higher price to obtain any particular quantity, then

A) demand has increased.
B) supply has increased.
C) demand has decreased.
D) supply has decreased.
E) both demand and supply have decreased.

Question 46

The market demand curve, with price on the vertical axis and quantity on the horizontal axis, is determined by

A) adding individual demand curves in a horizontal direction.
B) adding individual demand curves in a vertical direction.
C) subtracting the demand for the product from the supply of the product.
D) adding the demand for the product and the supply of the product.
E) subtracting supply from demand at each price.

Question 47

When economists say that the demand for a product has increased, they mean that

A) consumers are willing and able to purchase more at any given price.
B) the demand curve has shifted to the left.
C) the product has become more scarce and consumers therefore want it more.
D) consumers would be willing and able to pay less to receive the same quantity.
E) the price has decreased and consumers will therefore purchase more of the product.

Question 48

Refer to Table 2.1. The market demand schedule is given by what quantities corresponding to $14, $12, $10, $8, and $6?

A) 228, 176, 134, 97, 65
B) 15, 17, 24, 36, 58
C) 55, 97, 134, 176, 228
D) 20, 30, 40, 50, 60
E) 50, 80, 110, 140, 170

Question 49

A decrease in the price of a product causes

A) demand to increase.
B) the demand curve to shift to the left.
C) movement down along the demand curve.
D) movement up along the demand curve.
E) none of these.

Question 50

If the price of tennis rackets increases and causes the demand for tennis balls to shift to the left, then

A) tennis rackets and tennis balls are complements.
B) tennis rackets and tennis balls are substitutes.
C) tennis rackets and tennis balls are bads.
D) only tennis balls are bads.
E) tennis rackets and tennis balls are too expensive.

Question 51

If the population doubles in size, what can be expected to happen to the market for automobiles?

A) Automobile manufacturers will decrease supply.
B) The price of automobiles will decrease.
C) More automobiles will be sold at any given price.
D) People will use fewer automobiles.
E) None of these

Question 52

Refer to Table 2.1. If Maria and Jorgen are the only consumers in the market, the market demand schedule would be given by what quantities corresponding to $14, $12, $10, $8, and $6?

A) 40, 80, 110, 140, 170
B) 35, 67, 94, 126, 168
C) 170, 140, 110, 80, 50
D) 35, 47, 64, 86, 118
E) 30, 50, 70, 90, 110

Question 53

Which of the following statements is true?

A) An increase in demand always means the same as an increase in quantity demanded.
B) Price and quantity demanded are positively related.
C) An increase in quantity demanded means a movement along a given demand curve.
D) An increase in demand means a movement along a given demand curve.
E) An increase in demand means that consumers will purchase less of a product at each possible price.

Question 54

According to the data in Table 2.1, the market quantity of compact disks demanded at a price of $8 is

A) 176.
B) 36.
C) 92.
D) 50.
E) 90.

Question 55

Which of the following would most likely cause an increase in the demand for personal computers?

A) A reduction in the price of personal computers, other things being equal
B) An increase in the supply of personal computers, other things being equal
C) A requirement by universities that all students buy personal computers
D) An increase in the number of computer manufacturers, other things being equal
E) An increase in the cost of computer paper

Question 56

Assume that there is an inverse relationship between the price and quantity demanded of personal computers. If the price of computers increases, the

A) quantity supplied decreases.
B) quantity demanded decreases.
C) quantity demanded increases.
D) demand curve shifts to the left.
E) demand curve shifts to the right.

Question 57

Tennis rackets and tennis balls are

A) independent goods.
B) complementary goods.
C) substitute goods.
D) economic bads.
E) free goods.

Question 58

Assume the demand for watermelons is downward sloping. An increase in price from $1 per pound to $2 per pound

A) could have been caused by an increase in supply.
B) will cause a larger quantity of watermelons to be demanded.
C) will cause demand to decrease.
D) could have been caused by an extra-large crop yield.
E) will cause a smaller quantity of watermelons to be demanded.

Question 59

Which of the following will not cause the demand for ice cream to change?

A) A change in population size
B) A change in the price of ice cream
C) All of these would cause a change in the demand for ice cream.
D) A change in consumer preferences
E) A change in consumer incomes

Question 60

Which of the following will not cause a change in demand?

A) Changes in income
B) Changes in tastes and preferences
C) Changes in the price of the product
D) Changes in the number of buyers
E) Changes in the prices of related goods and services

Question 61

If beer and pretzels are complementary goods, then an increase in the price of beer, other things being equal, will result in a(n)

A) decrease in the demand for pretzels.
B) decrease in the demand for beer.
C) increase in the demand for pretzels.
D) increase in the quantity demanded of beer.
E) increase in the demand for beer.

Question 62

If an increase in the price of good X causes the demand for good Y to decrease, it can be concluded that

A) X and Y are substitutes.
B) X and Y are complements.
C) X and Y are inferior goods.
D) X and Y are superior goods.
E) there is collusion in the marketplace.

Question 63

The Federal Reserve and economists concerned about inflation monitor changes in technology, knowing improvements in technology tend to

A) decrease demand for technology.
B) increase the quantity supplied as prices decrease.
C) increase supply and lower prices.
D) reduce offshoring and increase gainsharing.
E) do all of these.

Question 64

According to the law of supply, if the price of electric ranges increased, everything else held constant, the

A) supply of electric ranges would decrease.
B) demand for gas ranges would increase.
C) demand for electric ranges would decrease.
D) supply of electric ranges would increase.
E) quantity supplied of electric ranges would increase.

Question 65

Which of the following would least affect the supply of automobiles?

A) An increase in the price of steel
B) An improvement in the technology of automobile manufacturing
C) An increase in the price of motor oil
D) A decrease in the number of automobile producers
E) An increase in the productivity of workers

Question 66

Suppose laborers have received a substantial pay increase. What would happen in those markets in which those workers are employed?

A) Demand would decrease.
B) Output would rise.
C) Price would fall.
D) Supply would increase.
E) Supply would decrease.

Question 67

The law of supply illustrates that

A) as price increases, quantity supplied decreases.
B) demand must increase to cause an increase in quantity supplied.
C) a change in price causes a change in supply.
D) price and quantity supplied move in the same direction.
E) price changes are always in the same direction as supply changes.

Question 68

An improvement in entrepreneurial skills applied to the production of a particular product would cause

A) the supply curve for that product to shift to the right.
B) a movement to the right along the supply curve for that product.
C) a movement to the left along the supply curve for that product.
D) an increase in the quantity supplied of that product.
E) a decrease in the quantity supplied of that product.

Question 69

A graph of a list of the prices and corresponding quantities supplied of a good or service is called

A) a supply curve.
B) a supply schedule.
C) a demand curve.
D) a demand schedule.
E) none of these.

Question 70

Economists use the term supply to refer to

A) the downward-sloping line that relates consumer expenditures to different output levels.
B) the upward-sloping line that relates consumer expenditures to different output levels.
C) a set of price and quantity-supplied combinations, everything else held constant.
D) a particular quantity supplied at a specific price.
E) the amount producers are willing but not able to produce at each price.

Question 71

Refer to Table 2.2. If Orobran decreased its bakers' wages, it would

A) increase its quantity supplied.
B) increase its supply but the market supply would fall.
C) decrease its supply but the market supply would rise.
D) increase its supply and the market supply would rise.
E) increase its quantity supplied, causing the market quantity supplied to fall.

Question 72

Every Friday night Elizabeth either goes bowling or goes to the movies. Because the price of bowling went up, Elizabeth now sees more movies. Elizabeth's behavior would be best described as a change in which determinant of demand?

A) The price of complementary goods
B) Expectations
C) Income
D) The number of buyers
E) The price of substitute goods

Question 73

A rightward shift in the demand curve for popcorn could be the result of a(n)

A) decrease in the number of buyers of popcorn.
B) decrease in the price of potato chips (a substitute good).
C) increase in the price of butter (a complementary good).
D) increase in income.
E) increase in the price of popcorn.

Question 74

An increase in the price of crude oil will most likely cause

A) an increase in demand for gasoline.
B) a decrease in demand for computer software.
C) governments to institute price controls.
D) an increase in global warming.
E) a decrease in the supply of products made using oil and oil derivatives.

Question 75

The quantity supplied is

A) the amount sellers are willing and able to offer at a given price during a particular time period, everything else held constant.
B) the amount sellers are willing and able to offer for sale at all possible prices.
C) a set of price and quantity-supplied combinations, everything else held constant.
D) a list of prices and the corresponding quantities supplied.
E) a downward-sloping line that relates expenditures to different levels of output.

Question 76

If a decrease in the demand for product X causes the demand curve for product Y to shift to the right, then X and Y are most likely to be which of the following?

A) Shoes and laces
B) Tennis balls and tennis rackets
C) Butter and margarine
D) Knives and forks
E) Cars and gasoline

Question 77

If the demand curve for product J shifts to the left as the price of product K increases, then

A) the number of consumers of product K has increased.
B) the income of consumers of product K has increased.
C) products J and K are substitute goods.
D) products J and K are complementary goods.
E) products J and K are not related.

Question 78

If producers must obtain a higher price to produce any given quantity, we can conclude that

A) supply decreased.
B) demand decreased.
C) demand increased.
D) supply increased.
E) both demand and supply increased.

Question 79

If farmers believe that it is more profitable to produce wheat than corn, we can expect the

A) price of wheat to rise.
B) supply of corn to increase.
C) quantity demanded of wheat to decrease.
D) demand for wheat to increase.
E) supply of corn to decrease.

Question 80

According to the data in Table 2.2, the market supply of bread is given by what quantities corresponding to $5, $4, $3, $2, $1?

A) 102, 84, 66, 48, 30
B) 60, 50, 40, 30, 20
C) 42, 34, 26, 18, 10
D) 90, 75, 60, 45, 30
E) 30, 25, 20, 15, 10