Combining Supply And Demand

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Supply Quizzes & Trivia

Questions and Answers
  • 1. 

    When quantity demanded equals quantity supplied

    • A.

      Price ceiling

    • B.

      Minimum wage

    • C.

      Equilibrium

    • D.

      Price floor

    • E.

      Shortage

    • F.

      Rent control

    • G.

      Surplus

    • H.

      Disequilibrium

    Correct Answer
    C. Equilibrium
    Explanation
    Equilibrium refers to the state in a market where the quantity demanded by consumers is equal to the quantity supplied by producers. In this state, there is no shortage or surplus of goods, and the market is in balance. The price is determined by the interaction of supply and demand forces, and it remains stable in the equilibrium.

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  • 2. 

    When quantity supplied is not equal to quantity demanded

    • A.

      Price ceiling

    • B.

      Minimum wage

    • C.

      Equilibrium

    • D.

      Price floor

    • E.

      Shortage

    • F.

      Rent control

    • G.

      Surplus

    • H.

      Disequilibrium

    Correct Answer
    H. Disequilibrium
    Explanation
    Disequilibrium refers to a situation where the quantity supplied is not equal to the quantity demanded. This can occur when there is a disruption in the market, such as the implementation of a price ceiling or a price floor. In the case of a price ceiling, the maximum price set by the government may result in a shortage, where the quantity demanded exceeds the quantity supplied. Conversely, a price floor, such as a minimum wage, may lead to a surplus, where the quantity supplied exceeds the quantity demanded. In both cases, there is a disequilibrium in the market, causing an imbalance between supply and demand.

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  • 3. 

    When quantity demanded is more than quantity supplied

    • A.

      Price ceiling

    • B.

      Minimum wage

    • C.

      Equilibrium

    • D.

      Price floor

    • E.

      Shortage

    • F.

      Rent control

    • G.

      Surplus

    • H.

      Disequilibrium

    Correct Answer
    E. Shortage
    Explanation
    A shortage occurs when the quantity demanded of a good or service exceeds the quantity supplied. This can happen due to various reasons such as a sudden increase in demand or a decrease in supply. In the case of a shortage, the market price is typically below the equilibrium price, leading to an imbalance between supply and demand. As a result, consumers may struggle to find the desired quantity of the product, leading to a shortage in the market.

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  • 4. 

    A maximum legal price that can be charged for a good

    • A.

      Price ceiling

    • B.

      Minimum wage

    • C.

      Equilibrium

    • D.

      Price floor

    • E.

      Shortage

    • F.

      Rent control

    • G.

      Surplus

    • H.

      Disequilibrium

    Correct Answer
    A. Price ceiling
    Explanation
    A price ceiling is a maximum legal price that can be charged for a good. It is a government-imposed restriction on prices to prevent them from rising above a certain level. This is often done to protect consumers and ensure affordability of essential goods and services. A price ceiling can lead to shortages as suppliers may not find it profitable to produce or sell goods at the capped price.

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  • 5. 

    A government set price floor on the earnings of workers

    • A.

      Price ceiling

    • B.

      Minimum wage

    • C.

      Equilibrium

    • D.

      Price floor

    • E.

      Shortage

    • F.

      Rent control

    • G.

      Surplus

    • H.

      Disequilibrium

    Correct Answer
    B. Minimum wage
    Explanation
    The correct answer is minimum wage. Minimum wage refers to the lowest wage rate that employers are legally required to pay to their employees. It is a government-imposed price floor on the earnings of workers, ensuring that they receive a certain level of income. This policy aims to protect workers from exploitation and poverty by setting a baseline wage that employers must adhere to.

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  • 6. 

    The amount of a product that cannot be sold at a given price

    • A.

      Price ceiling

    • B.

      Minimum wage

    • C.

      Equilibrium

    • D.

      Price floor

    • E.

      Shortage

    • F.

      Rent control

    • G.

      Surplus

    • H.

      Disequilibrium

    Correct Answer
    G. Surplus
    Explanation
    Surplus refers to the amount of a product that cannot be sold at a given price. It occurs when the quantity supplied of a product exceeds the quantity demanded at a particular price. This leads to an excess supply of the product in the market, resulting in a surplus.

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  • 7. 

    The sale and purchase of goods done in a way that avoids government controls on price and quantity supplied is called:

    • A.

      Rationing

    • B.

      Black market

    • C.

      Supply shock

    • D.

      Equilibrium

    Correct Answer
    B. Black market
    Explanation
    A black market refers to the sale and purchase of goods that are done outside the legal channels and without government regulation. It typically arises when there are government controls on price and quantity supplied, and people resort to illegal means to obtain goods at different prices or quantities. In a black market, sellers and buyers engage in transactions that are not officially recognized, allowing them to bypass government restrictions and regulations.

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  • 8. 

    Often due to natural disasters, a sudden shortage of a good is called:

    • A.

      Supply shock

    • B.

      Surplus

    • C.

      Equilibrium

    • D.

      Black market

    Correct Answer
    A. Supply shock
    Explanation
    A supply shock refers to a sudden and unexpected disruption in the supply of a good, often caused by natural disasters or other unforeseen events. This disruption leads to a shortage of the particular good in the market, as the supply is unable to meet the demand. This can result in price increases and economic instability. Therefore, the correct answer is supply shock.

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  • 9. 

    In general, what happens to the price of a good or service when a shortage of that good or service occurs?

    • A.

      It remains unchanged while quantity demanded drops

    • B.

      It increases until quantity demanded equals quantity supplied

    • C.

      A price ceiling is set by the government, lowering the price to meet the demand

    • D.

      It decreases until quantity demanded equals quantity supplied

    Correct Answer
    B. It increases until quantity demanded equals quantity supplied
    Explanation
    When a shortage of a good or service occurs, the price of that good or service increases until the quantity demanded equals the quantity supplied. This is because when there is a shortage, the demand for the good or service exceeds the available supply. As a result, sellers can increase the price to capitalize on the scarcity and maximize their profits. As the price increases, some consumers may be unable or unwilling to pay the higher price, leading to a decrease in the quantity demanded. Eventually, the price will reach a point where the quantity demanded equals the quantity supplied, and the market will reach equilibrium.

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  • 10. 

    What happens when a market is in disequilibrium and prices are flexible?

    • A.

      Market forces push toward equilibrium

    • B.

      Sellers wates their resources

    • C.

      Excess demand is created

    • D.

      Unsold goods are thrown out

    Correct Answer
    A. Market forces push toward equilibrium
    Explanation
    When a market is in disequilibrium and prices are flexible, market forces will push towards equilibrium. This means that the forces of supply and demand will adjust the price levels until they reach a point where the quantity demanded equals the quantity supplied. In this situation, sellers may need to adjust their prices or production levels to meet the demand. However, there is no mention of sellers wasting their resources, excess demand being created, or unsold goods being thrown out in the given options.

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  • 11. 

    Why does a government place price ceilings, such as rent control, on some "essential" goods?

    • A.

      To prevent the development of a black market when the supply of a good increases

    • B.

      To encourage an increase in supply of necessary items when the price of a good decreases

    • C.

      As an attempt to make these goods affordable for all consumers by limiting the impact of a shortage on price

    • D.

      To help reduce the demand of these goods when price increases

    Correct Answer
    C. As an attempt to make these goods affordable for all consumers by limiting the impact of a shortage on price
    Explanation
    Price ceilings, such as rent control, are placed by the government to make essential goods affordable for all consumers. By limiting the impact of a shortage on price, the government ensures that the prices of these goods do not skyrocket, making them unaffordable for certain individuals. This helps ensure that everyone has access to these essential goods, even during times of scarcity.

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  • 12. 

    What happens to the price of a good or service when there is excess demand?

    • A.

      The price stays the same

    • B.

      The price goes up

    • C.

      The government sets the price

    • D.

      The price goes down

    Correct Answer
    B. The price goes up
    Explanation
    When there is excess demand for a good or service, it means that the quantity demanded exceeds the quantity supplied at the current price. In this situation, suppliers may increase the price to take advantage of the high demand and maximize their profits. By increasing the price, suppliers can reduce the quantity demanded and bring it closer to the available supply. This increase in price helps to balance the market and eliminate the excess demand. Therefore, the correct answer is that the price goes up.

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  • 13. 

    If a baker's supply of bread exceeds the demand for bread, he should:

    • A.

      Stop selling bread

    • B.

      Sell only bread

    • C.

      Lower the price of bread

    • D.

      Raise the price of bread

    Correct Answer
    C. Lower the price of bread
    Explanation
    When the supply of bread exceeds the demand, it means that there is an excess of bread available in the market. To address this situation, the baker should lower the price of bread. By reducing the price, the baker can attract more customers and encourage them to purchase the excess bread. This strategy helps to balance the supply and demand by stimulating more sales and reducing the surplus inventory.

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  • 14. 

    How did an improvement in the technology for producing digital cameras affect the digital camera market?

    • A.

      The supply curve shifted to the left

    • B.

      The supply curve shifted to the right

    • C.

      The demand curve shifted to the right

    • D.

      The demand curve shifted to the left

    Correct Answer
    B. The supply curve shifted to the right
    Explanation
    An improvement in the technology for producing digital cameras would result in an increase in the supply of digital cameras, as it would make it easier and more efficient to produce them. This increase in supply would cause the supply curve to shift to the right. As a result, there would be more digital cameras available in the market, leading to a decrease in prices and an increase in quantity demanded. Therefore, the correct answer is that the supply curve shifted to the right.

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  • 15. 

    How did the market react to an increased supply of digital cameras?

    • A.

      Suppliers struggled to keep up with consumer demand for cameras

    • B.

      Manufacturers produced fewer cameras

    • C.

      Suppliers increased prices on the cameras

    • D.

      A surplus of cameras forced suppliers to reduce prices

    Correct Answer
    D. A surplus of cameras forced suppliers to reduce prices
    Explanation
    The market reacted to an increased supply of digital cameras by forcing suppliers to reduce prices due to a surplus of cameras. This means that there were more cameras available than there were buyers, leading to a decrease in demand. In order to sell their excess inventory, suppliers had to lower prices to attract customers and stimulate sales.

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  • 16. 

    What does a company generally do when demand for its goods goes up?

    • A.

      It rations goods

    • B.

      It lowers prices

    • C.

      It raises prices

    • D.

      There is no set response

    Correct Answer
    C. It raises prices
    Explanation
    When the demand for a company's goods goes up, the company generally raises prices. This is because an increase in demand indicates that consumers are willing to pay more for the goods, and the company can take advantage of this by increasing prices to maximize profits. By raising prices, the company can also manage the increased demand and ensure that supply meets the demand.

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  • 17. 

    What happens to the equilibrium price when supply goes down?

    • A.

      The price goes up

    • B.

      The price goes down

    • C.

      The price stays the same

    • D.

      The prices goes up, and then goes down

    Correct Answer
    A. The price goes up
    Explanation
    When the supply of a product decreases, there is less of it available in the market. This creates a scarcity, as the demand for the product remains constant or may even increase. As a result, the equilibrium price, which is the price at which the quantity demanded equals the quantity supplied, will increase. In other words, when the supply goes down, the price goes up to balance the market.

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  • 18. 

    During World War II, the United States used rationing to

    • A.

      Limit production agricultural goods

    • B.

      Meet shortages of goods that could be used in the war effort

    • C.

      Give away goods that could not be used in the war effort

    • D.

      Stop the black market of oil and steel

    Correct Answer
    B. Meet shortages of goods that could be used in the war effort
    Explanation
    During World War II, the United States implemented rationing as a way to meet the shortages of goods that were essential for the war effort. Rationing was a system that limited the amount of certain goods that individuals could purchase or consume. By doing so, it ensured that these goods were distributed fairly and efficiently, prioritizing their use for the military and other war-related purposes. Rationing helped to conserve resources, manage supply and demand, and ensure that the necessary goods were available for the war effort.

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  • 19. 

    How are prices a signal to producers?

    • A.

      When the price is low it tells producers that too much is being produced

    • B.

      When the price is low it tells producers that not enough is being produced

    Correct Answer
    A. When the price is low it tells producers that too much is being produced
    Explanation
    When the price is low, it indicates that there is an excess supply of the product in the market. This signals to producers that they need to reduce their production levels because there is already a surplus of the product available. By reducing production, producers can avoid further lowering the price and potentially facing losses. Therefore, when prices are low, it serves as a signal for producers to adjust their production levels accordingly.

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  • 20. 

    Each of the following will cause the demand for butter to increase EXCEPT

    • A.

      An increase in the price of margarine

    • B.

      A scientific study that shows butter is good for people's health

    • C.

      An increase in the number of people who are unemployed

    • D.

      An increase in the number of people who might purchase butter

    Correct Answer
    C. An increase in the number of people who are unemployed
    Explanation
    An increase in the number of people who are unemployed is not expected to cause the demand for butter to increase. When people are unemployed, they generally have less disposable income to spend on goods like butter. Therefore, the demand for butter is not likely to be affected by an increase in unemployment.

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  • 21. 

    Each of the following will cause supply to increase except

    • A.

      Workers are trained to be more efficient

    • B.

      A new lower cost source of electric power is found

    • C.

      Firms invest in new technology that reduce their costs of production

    • D.

      A number of experienced workers retire and are replaced by new workers

    Correct Answer
    D. A number of experienced workers retire and are replaced by new workers
    Explanation
    When a number of experienced workers retire and are replaced by new workers, it does not directly cause an increase in supply. The retirement and replacement of workers may have an impact on the labor force and productivity, but it does not directly affect the supply of goods or services. On the other hand, the other options mentioned in the question - training workers to be more efficient, finding a new lower cost source of electric power, and investing in new technology to reduce production costs - all have the potential to increase the supply of goods or services.

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  • 22. 

    Suppose that the current equilibrium price for natural gas is $1.05 per thousand cubic feet.  The government decides to impose a price ceiling of $.90 This will cause:

    • A.

      The quantity demanded to decrease and the quantity supplied to decrease

    • B.

      The quantity demanded to decrease and the quantity supplied to increase

    • C.

      The quantity demanded to increase and the quantity supplied to decrease

    • D.

      The quantity demanded to increase and the quantity supplied to increase

    Correct Answer
    C. The quantity demanded to increase and the quantity supplied to decrease
    Explanation
    When the government imposes a price ceiling of $.90, it means that the price cannot exceed this limit. Since the current equilibrium price is $1.05, the price ceiling is below the equilibrium price. This will lead to a shortage of natural gas, as the quantity demanded will increase due to the lower price, but the quantity supplied will decrease as producers will not be willing to supply as much at the lower price. Therefore, the correct answer is that the quantity demanded will increase and the quantity supplied will decrease.

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  • 23. 

    An excise tax increases the cost of production for tobacco and results in the supply curve to shift to the left

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    An excise tax is a tax imposed on specific goods, such as tobacco, at the production or sale stage. When an excise tax is imposed on tobacco, it increases the cost of production for tobacco manufacturers. This increase in production costs leads to a decrease in the supply of tobacco products, causing the supply curve to shift to the left. As a result, the quantity of tobacco available in the market decreases, and the price of tobacco products increases. Therefore, the statement "An excise tax increases the cost of production for tobacco and results in the supply curve to shift to the left" is true.

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  • 24. 

    Predict how the equilibrium price of coffee would be affected by the following changes: Draw a supply and demand curve and show the work.  Poor growing conditions for coffee beans (demand remains constant)

    • A.

      Supply curve shifts to the right, results in an increase in the equilibrium price

    • B.

      Supply curve shifts to the left. Results in an increase in the equilibrium price.

    • C.

      Demand curve shifts to the right. Results in an increase in the equilibrium price.

    • D.

      Demand curve shifts to the left. Results in an increase in the equilibrium price

    Correct Answer
    B. Supply curve shifts to the left. Results in an increase in the equilibrium price.
    Explanation
    Poor growing conditions for coffee beans would lead to a decrease in the supply of coffee. When the supply curve shifts to the left, it means that there is less coffee available in the market at every price level. This decrease in supply, while the demand remains constant, would result in a decrease in the equilibrium quantity and an increase in the equilibrium price of coffee. Therefore, the correct answer is that the supply curve shifts to the left, resulting in an increase in the equilibrium price.

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  • 25. 

    Predict how the equilibrium price of coffee would be affected by the following changes: Draw a supply and demand curve and show the work.  A major advertising campaign in the United States claims that coffee increases brain development in teenagers.

    • A.

      Supply curve shifts to the right, results in an increase in the equilibrium price

    • B.

      Supply curve shifts to the left. Results in an increase in the equilibrium price.

    • C.

      Demand curve shifts to the right. Results in an increase in the equilibrium price.

    • D.

      Demand curve shifts to the left. Results in an increase in the equilibrium price

    Correct Answer
    C. Demand curve shifts to the right. Results in an increase in the equilibrium price.
    Explanation
    When a major advertising campaign claims that coffee increases brain development in teenagers, it is likely to increase the demand for coffee among teenagers. This increase in demand will shift the demand curve to the right. As a result, the equilibrium price of coffee will increase because there will be more consumers willing to buy coffee at each price level. The increase in demand will create a shortage in the market, leading to an increase in the equilibrium price.

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  • 26. 

    Predict how the equilibrium price of coffee would be affected by the following changes: Draw a supply and demand curve and show the work.  A new medical study warns that drinking coffee may lead to migraine headaches. 

    • A.

      Supply curve shifts to the right, results in an increase in the equilibrium price

    • B.

      Supply curve shifts to the left. Results in an increase in the equilibrium price.

    • C.

      Demand curve shifts to the right. Results in an increase in the equilibrium price.

    • D.

      Demand curve shifts to the left. Results in a decrease in the equilibrium price

    Correct Answer
    D. Demand curve shifts to the left. Results in a decrease in the equilibrium price
    Explanation
    The correct answer is that the demand curve shifts to the left, resulting in a decrease in the equilibrium price. This is because the new medical study warns that drinking coffee may lead to migraine headaches, which could discourage some consumers from purchasing coffee. As a result, there is a decrease in demand, causing the demand curve to shift to the left. With a decrease in demand, the equilibrium price decreases as well, as producers will need to lower prices in order to sell their coffee.

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  • 27. 

    Which newspaper headline will most likely shift the demand curve for flu shots to the right?

    • A.

      New inhaler protects against flu without shot

    • B.

      Contaminated Flu Vaccine Sickens patients

    • C.

      Suppliers produce a surplus of flu vaccines

    • D.

      Health Expers Predict severe flue season ahead

    Correct Answer
    D. Health Expers Predict severe flue season ahead
    Explanation
    The headline "Health Experts Predict severe flu season ahead" will most likely shift the demand curve for flu shots to the right. This is because the prediction of a severe flu season creates a sense of urgency and increases the perceived need for flu shots among the population. As a result, more people will be willing to buy flu shots, leading to an increase in demand and a shift of the demand curve to the right.

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  • 28. 

    Rent control is an example of a

    • A.

      Price ceiling

    • B.

      Price floor

    • C.

      Price wall

    • D.

      Price door

    Correct Answer
    A. Price ceiling
    Explanation
    Rent control is a policy that sets a maximum limit on the amount landlords can charge for rent. This creates a price ceiling, as it prevents the price of rent from rising above a certain level. A price ceiling is a government-imposed restriction on how high a price can be charged for a particular good or service. In this case, rent control acts as a price ceiling by limiting the amount landlords can charge for rent, aiming to make housing more affordable for tenants.

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  • 29. 

    Pierre Omidyar "I want people to be entrepreneurs," said Pierre Omidyar, "...because they think they can change the world....not because they think they can make a lot of money."  As the founder of the online auction side eBay, Omidyar has done both. Born in France to Iranian parents, Omidyar became an immigrant when he moved to Maryland with his family as a child..  He graduated from college in 1988 with a degree in computer science.  Omidyar then worked as a software engineer for several companies and became interested in the technical challenges of online commerce. Inspired by his fiancee's desire to buy and sell Pez dispensers online, Omidyar founded the Web site that would become eBay in 1995.  He thought of eBay as an experiment, a way to "give the individual the power to be a producer as well as a consumer." Omidyar's experiment succeeded beyond his wildest expectations.  within just two years, his site was hosting 80,000 auctions a day.  In 2007, total sales of goods at eBay.com reached $59.35 billion.  The equilibrium price of many things is now determined by what they sell for on eBay. Pierre Omidyar's entrepreneurial skill as _______helped him found eBay.

    • A.

      Pez producer

    • B.

      Auctioneer

    • C.

      Software engineer

    • D.

      Consumer

    Correct Answer
    C. Software engineer
    Explanation
    Pierre Omidyar's background as a software engineer helped him found eBay. His experience and knowledge in computer science allowed him to understand the technical challenges of online commerce and develop the necessary software and infrastructure for the platform. This expertise was crucial in creating a successful online auction site like eBay.

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  • 30. 

    Pierre Omidyar "I want people to be entrepreneurs," said Pierre Omidyar, "...because they think they can change the world....not because they think they can make a lot of money."  As the founder of the online auction side eBay, Omidyar has done both. Born in France to Iranian parents, Omidyar became an immigrant when he moved to Maryland with his family as a child..  He graduated from college in 1988 with a degree in computer science.  Omidyar then worked as a software engineer for several companies and became interested in the technical challenges of online commerce. Inspired by his fiancee's desire to buy and sell Pez dispensers online, Omidyar founded the Web site that would become eBay in 1995.  He thought of eBay as an experiment, a way to "give the individual the power to be a producer as well as a consumer." Omidyar's experiment succeeded beyond his wildest expectations.  within just two years, his site was hosting 80,000 auctions a day.  In 2007, total sales of goods at eBay.com reached $59.35 billion.  The equilibrium price of many things is now determined by what they sell for on eBay. The value of an item on eBay often establitshes its _________elsewhere

    • A.

      Supply

    • B.

      Demand

    • C.

      Equilibrium price

    • D.

      Disequilibrium

    Correct Answer
    C. Equilibrium price
    Explanation
    The value of an item on eBay often establishes its equilibrium price elsewhere. This means that the price at which an item sells on eBay can influence and determine the price of the same item in other markets or platforms. As eBay is a widely used and popular online marketplace, the prices at which items are bought and sold on the platform can serve as a reference point for determining the fair market value or equilibrium price of those items.

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  • 31. 

    A benefit of prices, over rationing, is that the price system is able to allocate resources equally to all consumers.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    The statement is false because the price system does not allocate resources equally to all consumers. In fact, the price system allocates resources based on the ability to pay, which means that those with higher incomes have more purchasing power and can access more resources. This leads to an unequal distribution of resources, as those with lower incomes may struggle to afford essential goods and services.

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  • 32. 

    If a 20% change in the price of a product results in an 8% change in the quantity demanded, then the demand for the product is?

    • A.

      Elastic; 4.0

    • B.

      Inelastic; .8

    • C.

      elastic; 2.5

    • D.

      Inelastic; .4

    Correct Answer
    D. Inelastic; .4
    Explanation
    If a 20% change in price results in only an 8% change in quantity demanded, it indicates that the demand for the product is inelastic. This means that the change in price has a relatively smaller impact on the quantity demanded. The value of 0.4 suggests that for every 1% change in price, there is a 0.4% change in quantity demanded. This low value further confirms the inelastic nature of the demand for the product.

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  • 33. 

    What would happen to the demand curve for Axe deodorant if Lady Gaga, Lil Wayne, Taylor Swift, and Pitbull all announce that it is the only deodorant that they use when performing?  What would be the reason for this shift?

    • A.

      The demand curve would shift left (inwards)- substitution effect

    • B.

      The demand curve would shift right (outwards)-tastes and advertising

    • C.

      The demand curve would shift right (outward)- expectations about the future

    • D.

      The demand curve would shift left (inwards)- taste and advertising

    Correct Answer
    B. The demand curve would shift right (outwards)-tastes and advertising
    Explanation
    If Lady Gaga, Lil Wayne, Taylor Swift, and Pitbull announce that Axe deodorant is the only deodorant they use when performing, it would create a positive association and endorsement of the product. This would increase the perceived value and desirability of Axe deodorant among their fans and followers. As a result, more people would be inclined to purchase Axe deodorant, leading to an increase in demand. This shift in the demand curve to the right is driven by the influence of tastes and advertising.

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  • 34. 

    Many high school students would like to own an expensive sports car.  This has led to a high demand for these sports cars in the United States for teenagers. 

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    The statement suggests that there is a high demand for expensive sports cars among high school students in the United States. However, it does not provide any evidence or data to support this claim. Therefore, we cannot conclude that the statement is true.

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  • 35. 

    Demand for a normal good decreases as money income increases

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    As money income increases, the demand for a normal good typically increases, not decreases. This is because people have more purchasing power and can afford to buy more of the normal good. Therefore, the statement "Demand for a normal good decreases as money income increases" is incorrect.

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  • 36. 

    When the price of a haircut was raised from $12 to $16, the number of hair cuts sold each day fell from 20 to 16.  What is the elasticity of demand for haircuts.

    • A.

      Elastic

    • B.

      Inelastic

    • C.

      Unitariy elastic

    Correct Answer
    B. Inelastic
    Explanation
    The given answer of "Inelastic" is correct because the percentage change in quantity demanded (-20%) is less than the percentage change in price (+33.33%). This indicates that the demand for haircuts is not very responsive to price changes, meaning that even though the price increased, the decrease in quantity demanded was relatively small. Therefore, the elasticity of demand for haircuts is inelastic.

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  • 37. 

    One purpose of advertising is to:

    • A.

      Shift a product's demand curve to the right (outward)

    • B.

      Shift a product's demand curve to the left (inward)

    • C.

      Make a produuct's demand more elastic

    • D.

      Help the consumers find the product's substitute goods.

    Correct Answer
    A. Shift a product's demand curve to the right (outward)
    Explanation
    Advertising is a marketing strategy used to promote a product and increase its demand. By creating awareness and generating interest among consumers, advertising aims to shift the demand curve of a product to the right or outward. This means that advertising can lead to an increase in the quantity demanded at each price level, resulting in higher sales and market share for the product.

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  • 38. 

    Which of the following is false about demand curves?

    • A.

      They normally slope down from left to right

    • B.

      They show the relationship between price and the quantity demanded

    • C.

      They can be used to calculate a product's elasticity of demand

    • D.

      They can slope down from the right to the left

    Correct Answer
    D. They can slope down from the right to the left
    Explanation
    Demand curves represent the relationship between price and quantity demanded. They typically slope down from left to right, indicating that as price increases, quantity demanded decreases. Demand curves can also be used to calculate a product's elasticity of demand, which measures the responsiveness of quantity demanded to changes in price. However, demand curves cannot slope down from the right to the left, as this would imply that quantity demanded increases as price decreases, which goes against the law of demand.

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  • 39. 

    Goods or services that are purchased and used in combination.

    • A.

      Normal Good

    • B.

      Inferior Good

    • C.

      Substitution Effect

    • D.

      Complementary Good

    • E.

      Partnership effect

    Correct Answer
    D. Complementary Good
    Explanation
    Complementary goods are goods or services that are purchased and used together in combination. They have a strong relationship where the demand for one good is directly related to the demand for the other. For example, if someone buys a printer, they will also need to buy ink cartridges for it. The demand for ink cartridges is complementary to the demand for printers. When the price of one complementary good increases, the demand for the other complementary good decreases, and vice versa. This is because consumers typically use these goods together, and they are seen as necessary complements to each other.

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  • 40. 

    Which economic concept influences the availability of diamonds?

    • A.

      Quantity Supplied

    • B.

      Supply

    • C.

      Subsidy

    • D.

      Regulation

    Correct Answer
    B. Supply
    Explanation
    Supply refers to the total amount of a good or service that producers are willing and able to sell at a given price level. In the case of diamonds, supply represents the quantity of diamonds that diamond producers are willing to bring to the market for sale. This is influenced by various factors such as the cost of production, technology, availability of resources, and market conditions. Therefore, supply is the correct answer as it directly relates to the quantity of diamonds available in the market.

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  • 41. 

    An excise tax does which of the following?

    • A.

      It increases production costs

    • B.

      Decreases production costs

    • C.

      Does not affect production costs

    • D.

      Is a government payment that supports a business

    Correct Answer
    A. It increases production costs
    Explanation
    An excise tax is a type of tax imposed on specific goods or services, such as alcohol, tobacco, or gasoline. When an excise tax is implemented, the cost of production for the affected goods or services increases. This is because the tax is usually passed on to the consumer, leading to higher prices. As a result, businesses may need to adjust their production processes or pricing strategies to accommodate the increased costs, ultimately increasing production costs.

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  • 42. 

    When the price of a product increases, the producer is likely to:

    • A.

      Decrease quantity supplied

    • B.

      Stop producing the good

    • C.

      Increase the quantity supplied

    • D.

      Maintain the same quantity supplied

    Correct Answer
    C. Increase the quantity supplied
    Explanation
    When the price of a product increases, the producer is likely to increase the quantity supplied. This is because a higher price incentivizes producers to supply more of the product in order to maximize their profits. As the price increases, producers can earn more revenue from each unit sold, making it more profitable for them to increase their production and supply more of the product to the market. Therefore, an increase in price generally leads to an increase in the quantity supplied by the producer.

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  • 43. 

    The Apex plastic Corp finds a new way to produce plastic outdoor furniture from recycled milk bottles at a very low cost.  What will happen to the supply curve for plastic furniture?

    • A.

      The supply curve will shift left (a)

    • B.

      The supply curve will shift right (b)

    • C.

      The price for furniture will double

    • D.

      There will be no change

    Correct Answer
    B. The supply curve will shift right (b)
    Explanation
    When the Apex Plastic Corp finds a new way to produce plastic outdoor furniture from recycled milk bottles at a very low cost, it will lead to an increase in the supply of plastic furniture. This means that the supply curve for plastic furniture will shift to the right. With the ability to produce more furniture at a lower cost, the Apex Plastic Corp can offer a greater quantity of furniture to the market, resulting in a rightward shift of the supply curve.

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  • 44. 

    An increase in price will cause the Supply curve to shift to the right.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    An increase in price will not cause the Supply curve to shift to the right. The supply curve represents the relationship between price and quantity supplied, and a shift to the right indicates an increase in quantity supplied at each price level. However, an increase in price would typically result in a movement along the supply curve, known as a change in quantity supplied, rather than a shift.

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  • 45. 

    If the FDA begins to place an excise tax on the energy drinks such as Monster and Red Bull, the supply curve is expected to do what?

    • A.

      Shift right

    • B.

      Shift left

    • C.

      Not shift

    Correct Answer
    B. Shift left
    Explanation
    If the FDA begins to place an excise tax on energy drinks such as Monster and Red Bull, it is expected that the supply curve will shift left. This means that the quantity supplied of energy drinks will decrease at every given price level. The excise tax will increase the cost of producing energy drinks, leading to a decrease in supply as producers may find it less profitable to produce and sell these drinks.

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Our quizzes are rigorously reviewed, monitored and continuously updated by our expert board to maintain accuracy, relevance, and timeliness.

  • Current Version
  • Mar 21, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Apr 22, 2012
    Quiz Created by
    Historyperryhs
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