Unit 2 Test- Supply, Demand And Competition

Demand can only occur when a buyer is willing and able to buy. This means that the buyer has both the desire and the financial capacity to make a purchase. Being willing refers to the buyer's intention or desire to acquire a product or service, while being able refers to having the necessary financial resources to actually make the purchase. Without both willingness and ability, demand cannot be generated as the buyer would not be able to fulfill the transaction.

If the quantity supplied is greater than the quantity demanded, it means that there is an excess supply in the market. This leads to a surplus, where there are more goods or services available than there are buyers for them. In this situation, sellers may be forced to lower prices or find other ways to reduce the surplus, such as offering discounts or increasing marketing efforts.

When two products are commonly used together, they are considered complements. Complementary products are items that are used in conjunction with each other, enhancing the value or usefulness of both products. For example, peanut butter and jelly are commonly used together to make a sandwich. The demand for one product is directly related to the demand for the other, making them complements.

According to the Law of Demand, there is an inverse relationship between price and demand. When prices increase, consumers tend to buy less of a product or service, resulting in a decrease in demand. This is because higher prices make the product less affordable or desirable for consumers, leading to a decrease in their willingness to purchase it.

When a hurricane hits the gulf coast and closes oil refineries, there will be a disruption in the production and supply of oil. This decrease in supply coupled with the constant demand for oil will lead to an increase in its price. The reduced availability of oil due to refinery closures will create a scarcity in the market, causing the price to rise.

An elastic product is characterized by the presence of many competing brands. This means that there are multiple options available to consumers, and they have the freedom to choose between different brands based on their preferences and needs. In such a market, each brand has to compete with others to attract customers, leading to price competition and responsive changes in demand. This characteristic is in contrast to a monopoly, where there is only one seller dominating the market and consumers have limited or no alternative options.

Street lights are not private goods because they are non-excludable and non-rivalrous. Non-excludable means that it is difficult to exclude individuals from benefiting from street lights once they are provided. Non-rivalrous means that one person's use or enjoyment of street lights does not diminish the availability or use by others. In contrast, paper, rubber, and cars are private goods as they are both excludable and rivalrous, meaning that they can be owned exclusively and one person's use of them reduces their availability for others.

Supply and demand determines the price in the U.S. When the supply of a product is high and the demand is low, the price tends to decrease. Conversely, when the supply is low and the demand is high, the price tends to increase. This is because when there is a surplus of a product, sellers are willing to lower the price to attract buyers. On the other hand, when there is a shortage, sellers can increase the price since consumers are willing to pay more to obtain the product. Therefore, the interaction between supply and demand is what ultimately determines the price in the U.S.

The owner of a business falls best into the category of entrepreneurship because entrepreneurship refers to the process of starting, organizing, and managing a business venture. An entrepreneur is someone who takes risks and initiates a business idea, brings together the necessary resources, and takes the responsibility for its success or failure. Therefore, the owner of a business can be considered an entrepreneur as they demonstrate the qualities of innovation, leadership, and risk-taking in creating and managing their business.

If the price that people are willing to pay for mountain bikes increases, it indicates that there is a higher demand for these bikes. In response to this increased demand, suppliers are likely to increase their production of mountain bikes in order to meet the higher demand and take advantage of the higher prices. Therefore, the supply of bikes will usually increase.

According to the Law of Supply, when the price of a good or service increases, the quantity supplied by producers also increases. This is because higher prices incentivize producers to supply more of the good or service in order to maximize their profits. As a result, the supply curve slopes upward, indicating a positive relationship between price and quantity supplied. Therefore, the correct answer is "Increases".

The correct answer is "Merger." A merger refers to the combination of two or more companies into a single entity. In this case, if Cold Stone Creamery and Baskin Robbins were to join together, it would be considered a merger as they would be combining their operations and resources to form a unified company.

A drought will cause a decrease in the supply of water, which will result in a shift of the supply curve for water-hungry vegetables to the left. This means that the quantity supplied of these vegetables will decrease at any given price level. The decrease in water availability due to the drought will make it more difficult for farmers to produce these vegetables, leading to a reduction in supply.

An unintended side effect refers to the impact or consequence of an action or decision that is not intended or foreseen by the person or entity responsible. It is often an external effect that affects individuals or entities who are not directly involved in the action or decision. This term is commonly known as an externality.

Scarcity refers to the basic economic problem of limited resources and unlimited wants. It is the condition where there are insufficient resources to fulfill all human needs and wants. This scarcity forces individuals, businesses, and governments to make choices about how to allocate resources efficiently. It is a fundamental economic problem because it affects all aspects of the economy, including production, consumption, and distribution. Scarcity necessitates the study of economics and the development of economic models and assumptions to understand how to best allocate scarce resources.

Specialization refers to a country's ability to produce a particular good or service more efficiently and effectively than other countries. This can be due to various factors, such as access to specific resources, advanced technology, or skilled labor. By specializing in the production of certain goods, a country can achieve economies of scale, increase productivity, and gain a comparative advantage in international trade. This allows the country to focus on its strengths and trade with other nations, leading to increased efficiency and overall economic growth.

Competition keeps price low because when multiple businesses or sellers compete with each other to attract customers, they often lower their prices to gain a competitive edge. This is because customers tend to choose the option that offers the best value for their money. As a result, businesses are motivated to keep their prices low to remain competitive and attract more customers. In a competitive market, this continuous pressure to offer lower prices helps to keep the overall price level low.

When resources that are scarce are used efficiently, productivity goes up. This is because efficient utilization of scarce resources allows for maximum output to be achieved with minimal waste or inefficiency. By optimizing the use of limited resources, productivity is increased as more can be produced with the same amount of input. This leads to higher efficiency, improved output, and ultimately an increase in productivity.

The correct answer is Totalitarian. Totalitarianism refers to a political system where the government has complete control over all aspects of society, including the economy. In a totalitarian economy, the government dictates what goods and services are produced, how they are distributed, and sets the prices. This type of economy is characterized by a lack of individual freedoms and limited economic choices for the citizens. Traditional, Market, and Mixed economies, on the other hand, allow for varying degrees of individual freedom and market forces to determine economic activities.

Minimum wage is an example of a price floor. A price floor is a government-imposed minimum price that is set above the equilibrium price in a market. In the case of minimum wage, it is the lowest hourly wage rate that an employer can legally pay to its employees. By setting a minimum wage, the government aims to ensure that workers receive a fair and decent wage, preventing exploitation and poverty. However, this can also lead to unintended consequences such as reduced employment opportunities, as businesses may not be able to afford to hire as many workers at the higher wage rate.

A factor good is a good that is used in the production of another good. It includes resources such as raw materials, labor, machinery, and capital. These factor goods are essential inputs in the production process and are transformed into a final good or service. Therefore, factor goods play a crucial role in the production and supply chain of goods and services.

If an item has a substitute, it means that there is another similar product that can be used in its place. This indicates that the demand for the item is likely to be elastic, meaning that consumers are more likely to switch to the substitute if there is a change in price or availability. Inelastic demand refers to situations where consumers are less responsive to changes in price or availability, while complementary refers to products that are used together. Utility refers to the satisfaction or usefulness that a consumer derives from a product, but it is not directly related to the concept of substitutes.

The concept of inelasticity in economics explains that a change in price does not significantly affect the demand for a product or service. In the context of the recent rise in gas prices, if the demand for gas remains relatively constant despite the increase in price, it suggests that the demand for gas is inelastic. This could be due to limited alternatives or necessities, such as commuting to work or essential transportation needs, where consumers are willing to pay higher prices for gas without significantly reducing their demand.

Investing capital into a business with the expectation of making a profit is a characteristic of a market economy. In a market economy, individuals and businesses have the freedom to make their own economic decisions, including investing in businesses. This is in contrast to a traditional economy where economic decisions are based on customs and traditions, a command economy where the government controls economic decisions, or a disclosed economy which is not a recognized economic system.

The correct answer is "State owned factories." This is because capitalism is an economic system characterized by private ownership of means of production and the operation of a free market. In capitalism, the means of production are owned and controlled by private individuals or entities, and the market forces of supply and demand determine prices and allocation of resources. State owned factories, on the other hand, are indicative of a socialist or communist economic system, where the government owns and controls the means of production.

The correct answer is "what to produce, how to produce, and for whom to produce for". The scarcity of resources refers to the limited availability of resources in relation to unlimited wants and needs. This scarcity forces society to make choices about what goods and services to produce, how to produce them efficiently, and who will benefit from the production. These choices are influenced by factors such as demand, supply, costs, and societal priorities.

Adam Smith is known for his work on economic principles. In his book "The Wealth of Nations," he discussed various economic concepts such as the division of labor, the role of self-interest in driving economic growth, and the importance of free markets. Smith's ideas laid the foundation for modern economics and greatly influenced the field. While he discussed the wealth of nations and the role of wealthy people in the economy, his primary focus was on economic principles rather than specific individuals or ideologies like consumer safety or socialism.

An increase in capital goods is not a factor of demand because capital goods refer to the tools, machinery, and equipment used in the production of goods and services. They are not directly related to the demand for the final products. Factors of demand typically include factors that influence consumer behavior such as an increase in customers, changes in income, or the availability of substitutes.

When the price of peanut butter decreases, it becomes more affordable and attractive to consumers. As a result, more people are likely to purchase peanut butter. Since peanut butter and jelly are often used together, the increased demand for peanut butter will likely lead to an increase in the demand for jelly as well. This is because people tend to buy both products together to make peanut butter and jelly sandwiches. Therefore, the decrease in the price of peanut butter will likely result in an increase in the demand for jelly.

Scarcity refers to the limited availability of resources in relation to the unlimited wants and desires of individuals. This means that there are not enough resources to fulfill every desire that people have. This concept highlights the fundamental economic problem of scarcity, where choices must be made about how limited resources are allocated among competing needs and wants.

A used car from Modern Nissan is not part of the GDP because GDP measures the total value of goods and services produced within a country's borders in a specific time period. A used car is not a newly produced good, but rather a second-hand item that has already been counted in the GDP when it was originally sold as a new car. Therefore, the sale of a used car does not contribute to the current GDP calculation.

Perfect competition is considered the most competitive type of competition because it involves a large number of buyers and sellers, with no single buyer or seller having control over the market. In perfect competition, there are no barriers to entry or exit, meaning that new firms can easily enter the market and compete with existing firms. Additionally, all firms in perfect competition produce identical products, making it impossible for any firm to differentiate itself based on product quality. This leads to intense competition and price competition, as firms strive to attract customers solely based on price.

As more suppliers enter the market, the supply of goods or services increases. This is because new suppliers bring additional products or services into the market, leading to a higher overall supply. With more options available, consumers have a greater choice, and competition among suppliers may also drive down prices. Therefore, the correct answer is "Supply rises."

Economic freedom refers to the ability of individuals to make their own economic decisions without interference from the government or other external entities. It includes the freedom to choose one's occupation, engage in voluntary exchange, and own and control property. When individuals accept the consequence of their actions, it means that they take responsibility for the outcomes of their economic decisions, whether they are positive or negative. This is a fundamental aspect of economic freedom, as it allows individuals to take risks, innovate, and learn from their mistakes, ultimately leading to economic growth and prosperity.

When individuals make decisions, they often have to give up or sacrifice something in order to choose one option over another. This concept is known as opportunity cost. It refers to the value of the next best alternative that is forgone when a decision is made. In other words, when individuals choose one option, they are giving up the benefits or opportunities that could have been gained from choosing the other options. Therefore, opportunity costs are the most suitable explanation for the given correct answer.

In a monopoly, there is only one seller in the market with no close substitutes for the product. In this situation, when a business increases the price and the demand does not change, it suggests that consumers have no other options or alternatives to turn to. Since there is no competition, the monopolistic business can dictate the price without fear of losing customers, resulting in a lack of responsiveness in demand to price changes.

In perfect competition, businesses have no control over price because there are numerous buyers and sellers in the market, all offering identical products. This means that no single business can influence the market price as they are price takers. In a perfectly competitive market, prices are determined by the forces of supply and demand, and businesses must accept the prevailing market price in order to remain competitive.

A horizontal merger refers to the combination of two companies that operate in the same industry and at the same level of the supply chain. In this case, when Wachovia and Wells Fargo combined, it can be classified as a horizontal merger because both companies were operating in the banking industry. This type of merger allows the companies to expand their market share, increase their competitiveness, and achieve economies of scale.

The correct answer is "mixed". This means that the U.S economy is a combination of both market and command economies. In a mixed economy, the government and private sector both play a role in making economic decisions. While individuals and businesses have the freedom to make choices, the government also intervenes to regulate certain aspects and provide public goods and services. This allows for a balance between individual freedom and government control in the economy.

The cost of producing one more product is referred to as the marginal cost. It includes the additional expenses incurred in producing an additional unit, such as the cost of raw materials, labor, and any other variable costs. The marginal cost helps businesses determine the profitability of producing additional units and is crucial in making decisions regarding production levels and pricing strategies.

Anti-trust laws are regulations put in place by the government to prevent and control monopolies, promote competition, and ensure fair business practices. These laws aim to protect consumers and maintain a level playing field in the market. However, the statement "combines companies" does not align with the purpose of anti-trust laws. Instead, these laws focus on preventing mergers or acquisitions that may result in reduced competition or market dominance.

Temporal is not a type of monopoly because it refers to something related to time, such as a specific period or duration. Monopoly, on the other hand, is a market structure where a single company or entity has exclusive control over a particular product or service. The other options, geographic, natural, and technological, all represent different types of monopolies based on their respective characteristics or factors.

A consumer's choice of buying a new car instead of opening a savings account can be best explained by the economic term "trade off." This term refers to the decision-making process in which individuals have to sacrifice one option in order to gain another. In this case, the consumer is sacrificing the opportunity to save money in a savings account in exchange for the immediate benefit of owning a new car. The decision involves weighing the benefits and drawbacks of each option and making a trade-off based on personal preferences and priorities.

A vertical merger occurs when a company combines with another company that it buys supplies from. This type of merger allows the company to integrate its supply chain and gain more control over its production process. By joining forces with its supplier, the company can potentially reduce costs, improve efficiency, and have a more streamlined operation. This type of merger is often seen in industries where there is a strong interdependence between suppliers and buyers.

Theodore Roosevelt's policies against big businesses were known as trust busting. Trust busting refers to the actions taken by the government to break up or regulate monopolies and trusts in order to promote fair competition and prevent the concentration of economic power in the hands of a few. Roosevelt believed that some large corporations were engaging in unfair practices that hindered competition and harmed consumers, so he actively pursued antitrust actions to dismantle these trusts and promote a more level playing field in the economy.

OPEC, the Organization of the Petroleum Exporting Countries, is a prime example of a cartel. A cartel is a group of independent entities that join together to control the production, pricing, and distribution of a particular product or service. OPEC consists of 13 member countries that collectively control a significant portion of the world's oil reserves. They collaborate to influence oil prices and production levels, thereby exerting a considerable impact on the global oil market. This behavior aligns with the characteristics of a cartel, making it the correct answer in this case.

The correct answer is FTC. The Federal Trade Commission (FTC) is the government agency responsible for regulating advertising. They protect consumers from deceptive and unfair business practices by enforcing laws related to advertising, marketing, and consumer protection. The FTC ensures that advertisements are truthful, not misleading, and do not engage in unfair competition. They also investigate and take action against companies that violate these regulations, promoting fair and transparent advertising practices in the marketplace.

The term "surplus signals" refers to the signals or indicators that determine whether the price of a product or service is at the correct level. In this context, "Price is right" is the correct answer because it suggests that the price is set at the appropriate level. If the price is too high, it would indicate that the price is not right, and if the price is too low, it would also indicate that the price is not right. Therefore, "Price is right" is the correct answer as it signifies that the price is set correctly.