ECON 2020 CH3 – Flashcards

Which of the following is NOT characteristic of a market economy? -Significant government intervention -Little or no government intervention -Buyers and sellers motivated by self-interest -Prices determined by demand and supply

In a competitive market, the price of the product is -independently set by each competing seller. -set by the market leader and then copied by other sellers. -jointly set after a meeting of all sellers in the market. -set by market supply and demand.

Which of the following firms participates in a competitive market? -A new car manufacturer, such as Ford, Honda, Toyota, or GMC -A software producer, such as Microsoft -A corn farmer -A local electric utility company

In an imperfect market, individual firms

Which of the following firms operates as a monopoly? -A car manufacturer -A local water utility -A corn farmer -A fish vendor at a neighborhood market

According to the law of demand, what is the relationship between price and quantity demanded?

A change in which of the following will cause a change in the quantity demanded of coffee? -Consumer income -The price of green tea, a substitute for coffee -The number of coffee consumers -The price of coffee

Suppose that burgers and fries are complements in consumption. If the price of fries increases -overall demand for burgers will increase -overall demand for burgers will decrease -quantity demanded for burgers will increase -quantity demanded for burgers will decrease

Suppose that Coca Cola and Pepsi are substitutes in consumption. If the price of Coca Cola decreases, then -both the equilibrium price and the quantity of Pepsi demanded will decrease. -both the equilibrium price and the quantity of Pepsi demanded will increase. -the equilibrium price of Pepsi will increase and the quantity demanded of Pepsi will decrease. -the equilibrium price of Pepsi will decrease and the quantity demanded of Pepsi will increase.

According to the law of supply, what is the relationship between price and quantity supplied?

A change in which of the following will cause a change in the quantity supplied of coffee? -The technology or the production process of making coffee -Anticipation of a change in the price of coffee -The wages of coffee bean pickers -The price of coffee

Which of the following will cause a rightward shift in the supply curve for tobacco? -A fall in the number of tobacco farmers in the market -An increase in taxes on tobacco -Removal of government subsidies to tobacco farmers -An improvement in the technology used in the production of tobacco

Flour is a factor of production of cupcakes. How will an increase in the price of flour affect the market for cupcakes? -Overall supply will increase -Overall supply will decrease -Quantity supplied will increase -Quantity supplied will decrease

Suppose pasta salad is a normal good. If the price of pasta (a major ingredient in pasta salad) increases and income also increases, the -equilibrium quantity and equilibrium price of pasta salad will increase. -equilibrium quantity of pasta salad will decrease and the equilibrium price of pasta salad may either increase or decrease. -equilibrium quantity of pasta salad may either increase or decrease and the equilibrium price of pasta salad will increase. -equilibrium quantity and equilibrium price of pasta salad will both decrease.

What must happen to the market price in order for a shortage to be eliminated?

Law of Demand

Movement along a demand curve

Shift in demand

Increase in quantity demanded caused by

Decrease in quantity demanded caused by

Increase in Demand is a shift to the ______

Increase in Demand

Decrease in Demand

Decrease in Demand is a shift to the ______

If the price of a complement Y for good X goes up

If the price of a complement Y for good X goes down

If the price of a substitute Y for good X goes up

If the price of a substitute Y for good X goes down

Law of Supply

Movement along a supply curve

Shift in supply

What affects both supply and demand?