Expert answer:Economics quiz easy
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Unit 2 Evaluation
Economics
BUSH 035 060
This evaluation will cover the lessons in this unit. It is open book, meaning you can use your
textbook, syllabus, and other course materials. To submit the evaluation, follow the directions
provided.
Multiple-Choice
Select the response that best completes the statement or answers the question.
_____
1. What is the relationship between start-up costs and a competitive market?
a.
b.
c.
d.
_____
High start-up costs are likely to make a market less competitive.
High start-up costs are likely to make a market more competitive.
Low start-up costs are likely to make a market less competitive.
There is no relationship between start-up costs and competitiveness.
2. In general, what happens to the price of a good or service when a shortage of that
good or service occurs?
a.
b.
c.
d.
_____
3. When the price of a product goes down, what happens?
a.
b.
c.
d.
_____
It remains unchanged while quantity demanded drops.
It increases until quantity demanded equals quantity supplied.
A price ceiling is imposed, lowering the price to meet the demand.
It decreases until quantity demanded equals quantity supplied.
Existing producers expand, and new producers enter the market.
Some producers produce less, and others drop out of the market.
Existing firms continue their usual output but earn less.
New firms enter the market as older ones drop out.
4. A supply schedule is characterized by which of the following?
a.
b.
c.
d.
Unit 2 Evaluation
It shows the quantity supplied at only one price.
It shows the factors that could influence supply.
It is sensitive to changes in the costs of labor and parts.
It lists supply for a specific good at various prices.
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_____
5. Why does an economist create a market demand schedule?
a.
b.
c.
d.
_____
6. Which of the following are ways the government controls markets?
a.
b.
c.
d.
_____
to learn what demands the market will make under unusual conditions
to have an idea of how a market would act under different conditions
to predict how people will change their buying habits when prices change
to show how various conditions can change the demand for a good
price ceilings and price floors
equilibrium price and equilibrium point
shortages and surpluses
subsidies and disequilibrium
7. One way that firms in a monopolistic competition engage in nonprice competition is
through
a.
b.
c.
d.
_____
8. What does it mean when you have demand for a good or service?
a.
b.
c.
d.
_____
advertising.
production.
fixed costs.
variable costs.
You can afford the good but may be unwilling to buy it.
You want the good but may not have the money for it.
You are able to buy the good but not at the given price.
You are willing and able to buy the good at the given price.
9. What can cause an entire demand curve to shift?
a.
b.
c.
d.
_____ 10.
a decrease in price
an increase in price
uncertainty about the future price
a change in demographics
How did an improvement in the technology for producing digital cameras affect supply?
a.
b.
c.
d.
The supply curve moved to the left.
The supply curve moved to the right.
The demand curve moved to the right.
The demand curve moved to the left.
_____ 11. Which of the following will happen if the price of butter goes up?
a.
b.
c.
d.
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The demand for butter increases.
The demand for margarine increases.
The demand curve for butter moves to the right.
The demand curve for margarine moves to the left.
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_____ 12. Why is perfect competition among businesses rare?
a.
b.
c.
d.
Most businesses are small.
Most businesses produce commodities.
Most businesses face barriers to entry.
Most businesses require government control.
_____ 13. How does elasticity affect a company’s pricing policy?
a. If demand is inelastic, the company knows that an increase in price would reduce
total revenues.
b. If demand is elastic at the current price, the company knows that an increase in
price would reduce total revenues.
c. If demand is unitary elastic, the company knows that a decrease in price would
decrease total revenues.
d. If demand is unitary elastic, the company knows that an increase price would
increase total revenues.
_____ 14. What does a company generally do when demand for its goods goes up?
a.
b.
c.
d.
It rations goods.
It raises prices.
It cuts prices.
There is no set response.
_____ 15. During World War II, the United States used rationing to
a.
b.
c.
d.
limit production.
meet tremendous shortages.
give away goods.
stop the black market.
_____ 16. If a firm raises the price of a product with elastic demand, what will happen to total
revenue?
a.
b.
c.
d.
It increases.
It decreases.
It is unitary.
It stays the same.
_____ 17. What conditions must be present before a product’s price will naturally move toward its
equilibrium price?
a.
b.
c.
d.
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price floors
high taxes
a free market
rationing
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_____ 18. If you create a demand schedule for an individual and for a market for the same
product, what will remain the same in both schedules?
a.
b.
c.
d.
prices of the goods or services
demand curve
percent difference at each price
quantity demanded
_____ 19. Why is a discounted airline ticket a form of price discrimination?
a.
b.
c.
d.
_____ 20.
People do not always use discounts.
Only some travelers get discounts.
The discount reduces the cost of the ticket.
More people can buy tickets at lower prices.
How does a manufacturer set total output to maximize profit?
a.
b.
c.
d.
set production so that total revenue plus cost is greatest
set production at the point where marginal revenue is smallest
set production at the point where marginal revenue equals marginal cost
set production so that marginal revenue and profit are the same
_____ 21. Your demand for a good is inelastic if you consider the good to be
a.
b.
c.
d.
inferior.
essential.
normal.
replaceable.
_____ 22. How is the total cost of a factory determined?
a.
b.
c.
d.
marginal cost plus fixed cost
fixed cost plus variable cost
marginal cost plus variable cost
marginal cost plus output cost
_____ 23. When government intervention causes the supply of a good to rise, what happens to
the supply curve?
a.
b.
c.
d.
It shifts to the left.
It shifts to the right.
It reverses direction.
The supply curve is not affected.
_____ 24. The substitution effect and the income effect describe
a.
b.
c.
d.
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how income changes when buyers change jobs.
choices that producers make to improve goods.
factors that influence consumer buying choices.
market changes that affect production of goods.
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_____ 25. What does a low price tell suppliers?
a.
b.
c.
d.
Not enough of a product is being produced.
Too much of a product is being produced.
Equilibrium has been reached.
Demand for a product will go down.
_____ 26. Businesses often use information such as age, income level, and occupation to sell
products to certain groups of people. Such statistical data are called
a.
b.
c.
d.
revenues.
complements.
markets.
demographics.
_____ 27. What is one reason the U.S. government regulates car manufacturing?
a.
b.
c.
d.
to keep out foreign-made cars
to keep U.S. car prices competitive
to offset the pollution caused by cars
to protect market competition
_____ 28. Owners of digital cameras have to buy memory cards in order to use the cameras.
Cameras and memory cards are
a.
b.
c.
d.
substitutes.
complements.
unrelated.
elastic.
_____ 29. Which market structure is easiest for a newcomer to enter?
a.
b.
c.
d.
_____ 30.
perfect competition
monopolistic competition
monopoly
All are easy to enter.
Businesses multiply the price they charge for a good by the quantity sold to calculate
a.
b.
c.
d.
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profit shares.
elastic demand.
total revenue.
market demand.
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_____ 31. What condition has been reached when buyers purchase exactly as much as sellers
are willing to sell?
a.
b.
c.
d.
supply and demand
shortage
equilibrium
price floor
_____ 32. If two shops sell the same merchandise but one offers a higher level of service, the
service distinction is
a.
b.
c.
d.
price fixing.
nonprice competition.
choice among substitute products.
local competition.
_____ 33. The price of home computers rises. According to the law of supply, what will computer
makers do?
a.
b.
c.
d.
make more computers
make fewer computers
stop making computers
make the same number of computers
_____ 34. What changes when you change an individual demand schedule into a market demand
schedule for the same product?
a.
b.
c.
d.
_____ 35.
quantity demanded
amount of the product being sold to each customer
the type of good or service being sold
the price of the product
What is an example of the income effect?
a.
b.
c.
d.
buying a new shirt instead of a new pair of shoes
paying more for a new computer
buying fewer pretzels because the price of pretzels increased
buying popcorn instead of pretzels because the price of pretzels increased
_____ 36. Before government approves a merger, companies must prove that the merger would
a.
b.
c.
d.
Unit 2 Evaluation
be beneficial by creating a monopoly.
lower costs and consumer prices or lead to a better product.
be good for certain consumers.
lower the number of competitors in the market.
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_____ 37. Gerda owns a grocery store. When decreasing prices force her to cut costs, one of the
first things she does is
a.
b.
c.
d.
stop paying her property taxes.
cut her rent costs in half.
decrease hours for some workers.
stop selling perishable foods.
_____ 38. If the supply of a good is inelastic,
a. producers will not change their quantity supplied by much if the market price
doubles.
b. a small increase in price will lead producers to sharply increase their quantity
supplied.
c. producers will increase their quantity supplied in response to sharp drops in the
market price.
d. producers have diminishing marginal returns of labor.
_____ 39. On what kinds of goods do governments generally place price ceilings?
a.
b.
c.
d.
_____ 40.
those that are cheap but could become more expensive without the ceiling
those that are not necessary but have become customary
those that are essential and cheap
those that are essential but too expensive for some consumers
In response to rising car traffic, demand for bicycles has increased. The new
equilibrium point will show
a.
b.
c.
d.
_____ 41.
more bicycles sold, but at a higher price.
fewer bicycles sold, but at a higher price.
more bicycles sold, but at a lower price.
no change in the number of bicycles sold.
How has deregulation helped consumers in some industries?
a.
b.
c.
d.
by raising prices
by raising costs
by lowering barriers to entry
by lowering prices
_____ 42. Which of the following is the best example of a good that has inelastic demand?
a.
b.
c.
d.
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boat
salt
movie ticket
diamond
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_____ 43. John likes to chew one piece of sugarless gum each day. The gum costs only a tiny
fraction of his weekly budget. The company that makes his favorite gum doubles its
prices. What will John do?
a.
b.
c.
d.
buy a cheaper brand
pay the doubled cost
give up chewing gum
try many different brands
_____ 44. In a perfectly competitive market, how much control over prices do companies have?
a.
b.
c.
d.
none
very little
some
total control
_____ 45. What kind of market runs most efficiently when one large firm supplies all of the
output?
a.
b.
c.
d.
a natural monopoly
a network
a perfect competition
an imperfect competition
_____ 46. Because her rent went up, Bonnie must spend less on other items. Which of the
following types of goods will Bonnie consume less of?
a.
b.
c.
d.
substitutes
normal goods
inferior goods
complements
_____ 47. What do sellers do if they expect the prices of their goods to increase dramatically in
the near future?
a.
b.
c.
d.
sell the goods now and try to invest the money instead of resupplying
sell the goods now but try to get the higher price for them
store the goods until the price rises
store the goods indefinitely regardless of when the price rises
_____ 48. Why do fads often lead to shortages, at least in the short term?
a. Buyers and sellers are unable to agree on a price for the good.
b. Laws prevent stores from responding to excess demand in time to prevent a
shortage.
c. Manufacturers charge such high prices for the goods that stores are unwilling to
pay.
d. Demand increases too quickly and unexpectedly for the supply to keep up.
Unit 2 Evaluation
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_____ 49. Jean needs a certain medicine. Even though the price for the medicine suddenly goes
up 200%, Jean continues to buy it. Why is Jean’s demand for this medicine inelastic?
a.
b.
c.
d.
_____ 50.
Its elasticity is exactly equal to 1.
It requires a small percentage of Jean’s income.
The product is a luxury.
There are few or no substitutes.
Elena is looking for an apartment. Which of the following is an example of her search
costs?
a. Elena must pay the first and last months’ rent before she can move into a new
apartment.
b. Elena pays movers $400 to help her transfer her belongings to the new apartment.
c. Elena misses two days of work at the supermarket to visit several different
apartments available for rent.
d. Elena pays $300 to stay at a hotel for four nights before the apartment is ready.
Carefully check your answers on this evaluation and make any corrections you feel are
necessary. When you are satisfied that you have answered the questions to the best of your
ability, transfer your answers to an answer sheet. Please refer to the information sheet that
came with your course materials.
Unit 2 Evaluation
BUSH 035
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