Economics Quiz: Production, Distribution, And Consumption Of Goods And Services!

1. The supply and demand model examines how prices and quantities are determined:

In markets

By governments

By churches

By monopolists

The correct answer is "in markets" because the supply and demand model specifically focuses on the interaction between buyers and sellers in competitive markets. It analyzes how the equilibrium price and quantity of a good or service are determined based on the forces of supply and demand. This model does not consider the influence of governments, churches, or monopolists in determining prices and quantities.

Explanation

The correct answer is "in markets" because the supply and demand model specifically focuses on the interaction between buyers and sellers in competitive markets. It analyzes how the equilibrium price and quantity of a good or service are determined based on the forces of supply and demand. This model does not consider the influence of governments, churches, or monopolists in determining prices and quantities.

2. When an economics student draws a supply and demand diagram to model an increase in the income, she is assuming this change happens:

Semper fidelis

Ceteris paribus

Ipso facto

De facto

The correct answer is "ceteris paribus." Ceteris paribus is a Latin phrase that means "all other things being equal." When the economics student draws a supply and demand diagram to model an increase in income, she is assuming that all other factors affecting the supply and demand of the product remain constant. This assumption allows her to isolate the effect of the increase in income on the equilibrium price and quantity in the model.

Explanation

The correct answer is "ceteris paribus." Ceteris paribus is a Latin phrase that means "all other things being equal." When the economics student draws a supply and demand diagram to model an increase in income, she is assuming that all other factors affecting the supply and demand of the product remain constant. This assumption allows her to isolate the effect of the increase in income on the equilibrium price and quantity in the model.

3. Without an increase in price, an increase in demand will lead to

A shortage

A surplus

Socialism

Equilibrium

When there is an increase in demand without a corresponding increase in price, it means that more people want to buy a product or service at the same price. This creates a situation where the quantity demanded exceeds the quantity supplied, resulting in a shortage. In other words, there is not enough supply to meet the increased demand, leading to a shortage of the product or service in the market.

Explanation

When there is an increase in demand without a corresponding increase in price, it means that more people want to buy a product or service at the same price. This creates a situation where the quantity demanded exceeds the quantity supplied, resulting in a shortage. In other words, there is not enough supply to meet the increased demand, leading to a shortage of the product or service in the market.

4. If the supply and demand curves cross at the price of $2, at any price above that there will be

An equilibrium

A surplus

A shortage

A crisis

If the supply and demand curves cross at the price of $2, it means that at this price, the quantity supplied equals the quantity demanded, creating an equilibrium. However, if the price is set above $2, there will be a surplus. This means that the quantity supplied will exceed the quantity demanded, resulting in excess supply in the market. Therefore, the correct answer is a surplus.

Explanation

If the supply and demand curves cross at the price of $2, it means that at this price, the quantity supplied equals the quantity demanded, creating an equilibrium. However, if the price is set above $2, there will be a surplus. This means that the quantity supplied will exceed the quantity demanded, resulting in excess supply in the market. Therefore, the correct answer is a surplus.

5. An increase in the income of consumers will cause the

Supply of all good to rise

Demand for all goods to rise

Supply for all good to fall

The demand for some good to rise and for other to fall

An increase in the income of consumers will cause the demand for some goods to rise and for others to fall. When consumers have more income, they are likely to spend more on certain goods that they previously couldn't afford, leading to an increase in demand for those goods. On the other hand, they may also choose to spend less on certain goods that they no longer consider necessary or affordable, resulting in a decrease in demand for those goods. Therefore, the overall effect of an increase in consumer income is a mixed impact on the demand for different goods.

Explanation

An increase in the income of consumers will cause the demand for some goods to rise and for others to fall. When consumers have more income, they are likely to spend more on certain goods that they previously couldn't afford, leading to an increase in demand for those goods. On the other hand, they may also choose to spend less on certain goods that they no longer consider necessary or affordable, resulting in a decrease in demand for those goods. Therefore, the overall effect of an increase in consumer income is a mixed impact on the demand for different goods.

6. If the supply and demand curves cross at a quantity of 100, then the price necessary to get firms to sell more than that will be to ___ equilibrium.

Above

At

Below

Within 10% either way of

If the supply and demand curves cross at a quantity of 100, then the price necessary to get firms to sell more than that will be above equilibrium. This is because equilibrium is the point where the quantity demanded equals the quantity supplied. If firms want to sell more than the quantity demanded at equilibrium, they would have to increase the price to incentivize consumers to buy more. Therefore, the price would need to be above the equilibrium price.

Explanation

If the supply and demand curves cross at a quantity of 100, then the price necessary to get firms to sell more than that will be above equilibrium. This is because equilibrium is the point where the quantity demanded equals the quantity supplied. If firms want to sell more than the quantity demanded at equilibrium, they would have to increase the price to incentivize consumers to buy more. Therefore, the price would need to be above the equilibrium price.

7. ON the Heritage Foundation's scale of :economic freedom," the least :free" country would be the one whose economic system was purely;

Capitalist

Socialist

Unitarian

Communist

The correct answer is communist. The question asks about the least "free" country on the Heritage Foundation's scale of economic freedom. In a communist economic system, the government controls all means of production and distribution, limiting individual economic freedom. This is in contrast to a capitalist system, where individuals and private businesses have more economic freedom. Therefore, a communist system would be considered the least "free" on the scale of economic freedom.

Explanation

The correct answer is communist. The question asks about the least "free" country on the Heritage Foundation's scale of economic freedom. In a communist economic system, the government controls all means of production and distribution, limiting individual economic freedom. This is in contrast to a capitalist system, where individuals and private businesses have more economic freedom. Therefore, a communist system would be considered the least "free" on the scale of economic freedom.

8. The underlying reason for the upward-sloping nature of the supply curve is that

The production of most goods comes with increasing marginal benefits

The production of most good comes with increasing marginal costs

The consumption of most goods comes with decreasing marginal utility

The consumption of most goods comes with increasing marginal utility

The correct answer is that the production of most goods comes with increasing marginal costs. This means that as more units of a good are produced, the cost of producing each additional unit increases. This is due to factors such as diminishing returns, where additional inputs yield less output, and the need for additional resources and inputs to increase production. As a result, producers require higher prices to cover the increasing costs of production, leading to an upward-sloping supply curve.

Explanation

The correct answer is that the production of most goods comes with increasing marginal costs. This means that as more units of a good are produced, the cost of producing each additional unit increases. This is due to factors such as diminishing returns, where additional inputs yield less output, and the need for additional resources and inputs to increase production. As a result, producers require higher prices to cover the increasing costs of production, leading to an upward-sloping supply curve.

9. An increase in which of the following determinants of demand will have an ambiguous (uncertain) effect on price?

Taste

Price of a complement

Income

Price of substitute

An increase in income can have an ambiguous effect on price because it depends on the type of good or service being considered. For normal goods, an increase in income will lead to an increase in demand, which can potentially result in an increase in price. However, for inferior goods, an increase in income may lead to a decrease in demand, which can potentially result in a decrease in price. Therefore, the effect on price is uncertain and can vary depending on the specific circumstances.

Explanation

An increase in income can have an ambiguous effect on price because it depends on the type of good or service being considered. For normal goods, an increase in income will lead to an increase in demand, which can potentially result in an increase in price. However, for inferior goods, an increase in income may lead to a decrease in demand, which can potentially result in a decrease in price. Therefore, the effect on price is uncertain and can vary depending on the specific circumstances.

10. Which of the following will impact both supply and demand?

A change in price

A change in quantity

Change in expected future price

Change in income

A change in expected future price can impact both supply and demand. If individuals expect the price of a good to increase in the future, they may increase their current demand for it, leading to an increase in demand. On the other hand, suppliers may decrease their current supply in anticipation of higher future prices, leading to a decrease in supply. Therefore, a change in expected future price can affect both the quantity demanded and supplied, impacting both supply and demand.

Explanation

A change in expected future price can impact both supply and demand. If individuals expect the price of a good to increase in the future, they may increase their current demand for it, leading to an increase in demand. On the other hand, suppliers may decrease their current supply in anticipation of higher future prices, leading to a decrease in supply. Therefore, a change in expected future price can affect both the quantity demanded and supplied, impacting both supply and demand.