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

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  • 1/10 Questions

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

    • In markets
    • By governments
    • By churches
    • By monopolists
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About This Quiz

Chapter one seemed to go well enough for you, but as we continue to delve deeper into our ongoing studies of economics, you’ll see things start to get a little more complex. Keep at it, however, as this social science will go a long way towards providing you with a sense of understanding when it comes to how we analyze the production, distribution, and consumption of goods and services.

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

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  • 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

    Correct Answer
    A. Ceteris paribus
    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.

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  • 3. 

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

    • A shortage

    • A surplus

    • Socialism

    • Equilibrium

    Correct Answer
    A. A shortage
    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.

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  • 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

    Correct Answer
    A. 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.

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  • 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

    Correct Answer
    A. The demand for some good to rise and for other to fall
    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.

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  • 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

    Correct Answer
    A. Above
    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.

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  • 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

    Correct Answer
    A. Communist
    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.

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  • 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

    Correct Answer
    A. The production of most good comes with increasing marginal costs
    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.

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  • 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

    Correct Answer
    A. Income
    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.

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  • 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

    Correct Answer
    A. Change in expected future price
    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.

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  • Mar 20, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Apr 29, 2012
    Quiz Created by
    Melkinsey2000
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