Eco 102 H Review (Chapter 4: The Market Forces Of Supply And Demand)
Choose the BEST answer. Read the explanation if there is.
Questions and Answers
- 1.
Prices and Inputs are the forces that make market economies work.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
Supply and demand are the forces that make market economies work.Rate this question:
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- 2.
The term supply and demand refer to the behavior of people as they interact with one another in a monopolistic market.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
...in a competitive market.Rate this question:
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- 3.
A market is a group of households and firms of a particular good or service.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
...buyers and sellers...Rate this question:
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- 4.
A less organized market has buyers and sellers who meet at a specific time and place, where an auctioneer helps set price and arrange sales.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
highly organized marketRate this question:
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- 5.
Price and quantity are determined by all buyers and sellers as they interact in the marketplace.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
Price and quantity in a marketplace are determined through the interaction of all buyers and sellers. This means that the price at which a good or service is sold and the quantity that is exchanged is influenced by the collective decisions and actions of all participants in the market. Buyers and sellers negotiate and compete with each other, leading to the establishment of an equilibrium price and quantity. Therefore, the statement "Price and quantity are determined by all buyers and sellers as they interact in the marketplace" is true.Rate this question:
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- 6.
Economists use the term competitive market to describe the a market in which there are so many buyers and so many sellers that each has a negligible impact on the market.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
A competitive market is characterized by a large number of buyers and sellers, where no individual buyer or seller has enough market power to influence the price or quantity of the product. In such a market, each buyer and seller is a price taker, meaning they accept the prevailing market price. This ensures that market forces of supply and demand determine the price and quantity exchanged. Therefore, the statement that economists use the term competitive market to describe a market with so many buyers and sellers that each has a negligible impact on the market is true.Rate this question:
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- 7.
What are the two characteristics of the highest form of competition in the market?
- A.
The buyers and sellers are so numerous that no single buyer or seller has any influence over the market price.
- B.
The buyers and sellers are only few that they directly influence the market price.
- C.
The goods offered for sale are exactly the same
- D.
The goods offered for sale are different.
Correct Answer(s)
A. The buyers and sellers are so numerous that no single buyer or seller has any influence over the market price.
C. The goods offered for sale are exactly the sameExplanation
The highest form of competition in the market is characterized by a large number of buyers and sellers, where no individual buyer or seller has the power to influence the market price. This ensures that the market operates under perfect competition, where prices are determined solely by supply and demand forces. Additionally, in this type of competition, the goods offered for sale are identical, meaning that there is no differentiation between products and consumers have no preference for one seller over another based on product features.Rate this question:
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- 8.
Because buyers and sellers in perfectly competitive market mus accept the price the market determines, they are said to be price takers.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
Buyers and sellers in a perfectly competitive market have no control over the price and must accept the market-determined price. They cannot influence or negotiate the price as there are many buyers and sellers in the market, making it impossible for any individual to have an impact on the price. Therefore, they are referred to as price takers, as they have to accept the prevailing price without any ability to alter it.Rate this question:
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- 9.
Perfecetly competitive markets are the easiest to analyze because everyone participating in the market takes the price as given by market conditions.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
In perfectly competitive markets, all participants are price takers, meaning they have no control over the market price and must accept it as given. This makes analysis easier because there is no need to consider individual market power or strategic behavior. Instead, the focus can be on understanding how supply and demand interact to determine the market price and quantity.Rate this question:
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- 10.
The quantity demanded of any good is the amount of the good that sellers are willing to sell to the market.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
...buyers are willing and able to purchase.Rate this question:
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- 11.
The demand schedule is a table that shows the relationship between the supply of the good and the quantity demanded, holding constant everything else.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
...between the price of the good and the quantity demanded.Rate this question:
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- 12.
The downward-sloping line relating price and quantity demanded is called the demand curve.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
The statement is true because the demand curve is a graphical representation of the relationship between the price of a product and the quantity of the product that consumers are willing to buy at that price. It shows that as the price of a product increases, the quantity demanded decreases, and vice versa. This inverse relationship between price and quantity demanded is illustrated by a downward-sloping line on the demand curve.Rate this question:
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- 13.
To analyze how market works, we need to determine the market demand.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
To analyze how the market works, it is important to determine the market demand. Understanding the market demand helps in identifying the needs and preferences of consumers, which in turn helps businesses make informed decisions regarding pricing, product development, and marketing strategies. By determining the market demand, businesses can assess the potential size of the market and evaluate the viability of their products or services. Therefore, it is true that determining market demand is essential for analyzing how the market works.Rate this question:
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- 14.
Because the market demand curve holds other things constant, it need not be stable over time.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
The market demand curve represents the relationship between the price of a good and the quantity demanded, assuming all other factors remain constant. However, over time, various factors such as income, tastes, and preferences can change, causing the market demand curve to shift. Therefore, the market demand curve is not necessarily stable over time and can change due to shifts in these other factors.Rate this question:
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- 15.
An increase in demand shifts the curve to the right, and a decrease shifts the curve to the left.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
An increase in demand refers to a situation where consumers are willing and able to buy more of a product at each price level. This leads to a shift of the demand curve to the right, indicating a higher quantity demanded at each price. Conversely, a decrease in demand occurs when consumers are willing and able to buy less of a product at each price level, resulting in a shift of the demand curve to the left, indicating a lower quantity demanded at each price. Therefore, the statement is true.Rate this question:
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- 16.
What are the 5 most important variables that can shift the demand curve?
- A.
Income
- B.
Prices of Complements
- C.
Number of Sellers
- D.
Prices of Related Goods
- E.
Tastes
- F.
Expectation
- G.
Number of buyers
Correct Answer(s)
A. Income
D. Prices of Related Goods
E. Tastes
F. Expectation
G. Number of buyersExplanation
The variables that can shift the demand curve include income, prices of related goods, tastes, expectation, and number of buyers. Changes in income can affect the purchasing power of consumers, leading to shifts in demand. Prices of related goods, such as substitutes or complements, can influence the demand for a particular product. Tastes and preferences of consumers can also impact the demand curve. Expectations about future prices or economic conditions can cause shifts in demand. Lastly, the number of buyers in the market can affect overall demand.Rate this question:
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- 17.
A curve shifts when there is a change in a relevant variable on either axis.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
...when there is a change in a relevant variable that is not measured on either axis.Rate this question:
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- 18.
Tobacco and marijuana appears to be complements rather than substitutes.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
Tobacco and marijuana are considered complements because they are often used together. Many people who smoke tobacco also smoke marijuana, and they may even mix the two substances together in a joint. This suggests that the two substances are consumed together, indicating a complementary relationship rather than a substitution.Rate this question:
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- 19.
Quantity supplied has a positive correlation with price.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
The statement suggests that there is a positive relationship between the quantity supplied and the price. This means that as the price of a product increases, the quantity supplied by producers also increases. This is in line with the law of supply, which states that producers are willing to supply more of a good at higher prices, as it becomes more profitable for them. Therefore, the correct answer is true.Rate this question:
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- 20.
Market demand and supply is the average demand and supply of all buyers and sellers respectively.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
...is the sum of all demand and supply...Rate this question:
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- 21.
What are the 4 most important factors that influence the quantity supplied.
- A.
Price of goods
- B.
Input Prices
- C.
Technology
- D.
Expectations
- E.
Number of Buyers
- F.
Number of Sellers
Correct Answer(s)
B. Input Prices
C. Technology
D. Expectations
F. Number of SellersExplanation
The correct answer is Input Prices, Technology, Expectations, and Number of Sellers. These factors play a crucial role in determining the quantity supplied of a good or service. Input prices refer to the cost of resources required for production, which directly affects the profitability of supplying the product. Technology influences the efficiency and productivity of production processes, thereby impacting the quantity that can be supplied. Expectations of future prices and market conditions also influence the quantity supplied. Lastly, the number of sellers in the market affects competition and availability of the product, ultimately affecting the quantity supplied.Rate this question:
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- 22.
At the equilibrium price, the quantity of the good that buyers are willing and able to buy exactly balances the quantity of that sellers are willing and able to sell.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
At the equilibrium price, the quantity of the good that buyers are willing and able to buy exactly balances the quantity that sellers are willing and able to sell. This is because at the equilibrium price, the demand for the good matches the supply of the good. If the price is too high, buyers will be less willing and able to buy, leading to a surplus of the good. On the other hand, if the price is too low, sellers will be less willing and able to sell, leading to a shortage of the good. Therefore, at the equilibrium price, the quantity demanded equals the quantity supplied, resulting in a balance between buyers and sellers.Rate this question:
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- 23.
The equilibrium price is sometimes called the market-balancing price, because at this price, everyone in the market has been satisfied.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
...market-clearing priceRate this question:
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- 24.
The action of buyers and sellers naturally move markets toward the equilibrium of supply and demand.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
The statement is true because the interaction between buyers and sellers in a market is driven by their desire to maximize their own welfare. Buyers want to purchase goods or services at the lowest possible price, while sellers want to sell their goods or services at the highest possible price. This creates a dynamic where supply and demand adjust to find a balance, known as the equilibrium price. When there is excess demand, prices rise, incentivizing more sellers to enter the market and increasing supply. Conversely, when there is excess supply, prices decrease, incentivizing buyers to purchase more and reducing supply. This continuous adjustment process leads markets towards equilibrium.Rate this question:
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- 25.
A surplus is sometimes called a situation of excess demand.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
...excess supplyRate this question:
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- 26.
The law of supply and demand says that: the price of any good adjusts to bring quantity supplied and quantity demanded for that good into balance.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
The law of supply and demand states that the price of a good will adjust in order to bring the quantity supplied and the quantity demanded into equilibrium. This means that if the demand for a good increases, the price will rise until the quantity supplied meets the quantity demanded. Conversely, if the demand for a good decreases, the price will decrease until the quantity supplied matches the quantity demanded. Therefore, the statement is true.Rate this question:
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- 27.
What are the three steps in analyzing how some events affect the equilibrium in a market:
- A.
Decide whether the factor is found on the axes or not.
- B.
Determine the elasticity of the demand and supply.
- C.
Decide whether the event shifts the supply curve, demand curve, or, in some cases, both curves.
- D.
Decide whether the curve shifts to the right or to the left.
- E.
Use the supply-and-demand diagram to compare the initial and the new equilibrium.
Correct Answer(s)
C. Decide whether the event shifts the supply curve, demand curve, or, in some cases, both curves.
D. Decide whether the curve shifts to the right or to the left.
E. Use the supply-and-demand diagram to compare the initial and the new equilibrium.Explanation
The explanation for the given correct answer is that these three steps are necessary in order to analyze how some events affect the equilibrium in a market. First, it is important to determine whether the event shifts the supply curve, demand curve, or both curves. This helps to understand how the event impacts the market. Next, deciding whether the curve shifts to the right or to the left provides further insight into the direction of the change. Finally, using the supply-and-demand diagram to compare the initial and new equilibrium allows for a visual representation of the changes and their effects on the market.Rate this question:
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- 28.
A shift in supply curve is called a "change in supply," and a shift in the demand curve is called a "change in demand."
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
A shift in the supply curve refers to a change in the quantity supplied at every price point, caused by factors such as technology advancements, changes in production costs, or government policies. Similarly, a shift in the demand curve signifies a change in the quantity demanded at every price point, influenced by factors such as consumer preferences, income levels, or population changes. Therefore, it is correct to say that a shift in the supply curve is called a "change in supply," and a shift in the demand curve is called a "change in demand."Rate this question:
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- 29.
A movement along a fixed supply curve is called a "change in supply," and a movement along a fixed demand curve is called a "change in demand."
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
"change in quantity supplied" and "change in quantity demanded"Rate this question:
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- 30.
Buyers and sellers together determine the prices of the economy's many different goods and services.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
Supply and demandRate this question:
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- 31.
Change in supply and demand are the signals that guide the allocation of resoures.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
pricesRate this question:
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