Chapter 4 and 5 Economics Chapter 4 and 5 Economics

The first set of questions will deal with demand

The degree to which changes in a good’s price affect the quantity demanded by consumers:

Elasticity of Demand

_______ is the key variable affecting demand.

Price

A good that can be used to replace the purchase of similar goods when prices rise:

Substitute (Goods)

A good that is commonly used with other goods:

Complementary (Goods)

A non-price variable that affects demand: (You did a group activity on this….)

Determinant of Demand

According to the theory of diminishing marginal returns, as more units of a product are consumed, the satisfaction from consuming each additional unit ________.

decreases or declines

Demand is _______ when a small decrease in a product’s price leads to a major increase in the quantity demanded. ( elastic or inelastic )

Elastic

Buying chicken, when the price of steak rises, is an example of the ________ __________.

Substitution Effect

The total amount of money a company receives by selling goods and services:

Total Revenue

A national advertising campaign by a bicycle company generates interest in the sport of mountain biking. What will happen to the demand curve for the mountain bikes? ( shift to: the left or right )

It will move to the right

True or False: The law of demand states that consumers will buy more of a good when its price is lower and less when its price is higher:

True

The information from a demand schedule plotted on a graph:

Demand Curve

The band ‘Discount Brown’ receives great reviews from around the country. The band’s popularity rises, causing the demand curve to shift: A) To the right B) To the left C) Upward to the sky D) Upward to the moon

A. To the right A. To the right

A demand curve is only a “snapshot” of a market because it: A) Represents a long period of time B) Contains only quantities that consumers are willing to buy C) Contains only quantities that consumers are able to buy D) Represents a specific time period

D. Represents a specific time period

Any increase or decrease in consumers’ purchasing power caused by a change in price:

Income Effect

If the price of butter falls, what will happen to demand for substitute goods, such as margarine: A) It will remain the same B) It will rise C) It will fall D) It will fluctuate

C. It will fall

If a product is a necessity, it will tend to have_________ demand.

Inelastic

True or False Demand schedules and demand curves chart how changes in price affect quantity demanded for a specific period of time.

True

The passage of time allows factors other than price to: A) Reduce the market size B) Lower the demand for a product C) Shift the entire demand curve D) Increase the demand for a product

C. Shift the entire demand curve

True/False: Complementary goods are goods that are bought in the expectation of having more income.

False Complementary goods are goods that are commonly used with other goods, such as paint brushes and paint.

As income rises, demand for goods: A) Decreases B) Increases C) Remains stable D) Fluctuates

B. Increases

This is an example of: A. Demand Curve B. Income Effect C. Law of Demand D. Demand Schedule

D. Demand Schedule

In economics, the desire to own something and the ability to pay for it is called: A) Elasticity of demand B) Demand C) Quantity demanded D) Law of Demand

B. Demand

This is an example of: This is an example of: A. Demand Curve B. Income Effect C. Law of Demand D. Demand Schedule A. Demand Curve B. Income Effect C. Law of Demand D. Demand Schedule

A. Demand Curve

The picture is a classic example of what factor with the law of demand:

Substitution Effect

If the U.S. government prohibited trade with a foreign country, the demand curve back in American for its products sold to that country would shift:

to the left

True or False: Private business decisions have no effect on the market size:

False It expands or contracts the size of the market

This describes demand whose elasticity is EXACTLY equal to one:

Unitary-elastic

A type of good that has inelastic demand: A) Necessity B) Want C) Diminishing marginal utility D) Substitute

A. Necessity

The next set of questions will deal with supply

The quantity of goods and services that producers offer at various possible prices during given time period:

Supply

A tool that shows the relationship between the price of a good or service and the quantity that producers will supply:

Supply Schedule

The amount of money remaining after producers have paid all of their costs:

Profit

A payment of money to the government to help fund government services: A) subsidy B) regulation C) tax D) cost of production

C) tax

Rent, interest on loans, property insurance premiums, local and state property taxes, and salaries: A) Variable Cost B) Total cost C) Marginal Cost D) Fixed Cost Rent, interest on loans, property insurance premiums, local and state property taxes, and salaries: A) Variable Cost B) Total cost C) Marginal Cost D) Fixed Cost

D) Fixed Cost

Production costs that changes as the level of output changes: A) Variable Cost B) Total cost C) Marginal Cost D) Fixed Cost

A) Variable Cost

The sum of fixed and variable production costs: A) Variable Cost B) Total cost C) Marginal Cost D) Fixed Cost

B) Total Cost

Money payment given by the government to businesses to help them out is called:

Subsidy

This….plots on a graph the information contained in a supplied schedule.

Supply Curve

In a free enterprise system, the main key factor affecting the quantity supplied is: A) Competition B) Price C) Profits D) Taxes

B. Price

_________ supply exists when a small change in a good’s price causes a major change in the quantity supplied.

Elastic

When loose government regulations pass new laws in Congress to make it easier on a company, this will lead to _________ supply. A) Fluctuate B) Decrease C) Increase D) Stabilize

C) Increase

A level of production at which the marginal product of labor decreases as the number of workers increases: A level of production at which the marginal product of labor decreases as the number of workers increases: A) Marginal Product of labor B) Increasing Marginal Returns C) Variable Costs D) Diminishing Marginal Returns

A business makes a profit when its revenues are greater than its: A) Fixed costs B) Variable costs C) Cost of Production D) Overhead

C) Cost of Production

Gold is an example of a good that has: A) Elasticity of supply B) Inelastic supply C) Elastic supply D) Diminishing returns

B. Inelastic supply

Sports teams’ souvenirs are an example of goods that have: A. Negative returns B. Inelastic Supply C. Elastic Supply D. Diminishing Marginal Returns

C. Elastic Supply

Which of the following is an example of a good with inelastic supply: A. Fine art B. Space shuttles C. Beachfront property D. All of the above

D. All of the above

If a good can be made quickly and inexpensively, it has: A) Elasticity of Supply B) Inelastic Supply C) Elastic Supply D) Diminishing Marginal Returns

C. Elastic Supply

New technology makes the production of I-pods more efficient and less expensive. How will this affect the supply of I-pods: A) Supply will remain the same B) Supply will increase C) Supply will fall D) Supply will fluctuate

B. Supply will increase

The production costs that do not change with the level of outputs are called: A. Marginal costs B. Variable costs C. Fixed costs D. Total Costs

C. Fixed Costs

The degree to which changes in price affect the quantity supplied is called the: A) Substitution Effect B) Cost of Production C) Elasticity of Supply D) Supply Schedule

C) Elasticity of Supply

Raw materials are an example of: A) Marginal costs B) Variable costs C) Fixed costs D) Total costs

B. Variable Costs

With a worker’s wage: (example) the high school kid making the fries at McDonalds is an example of what type of cost to a business: A) Marginal costs B) Variable costs C) Fixed costs D) Total costs

B. Variable Costs

Depreciation of your capital goods (your machines in your plant) is an example of: A) Marginal costs B) Variable costs C) Fixed costs D) Total costs

C. Fixed Costs

Renting a building for business is an example of: A) Marginal costs B) Variable costs C) Fixed costs D) Total costs

C. Fixed Costs

When the U.S. Congress rules on how companies should conduct business, this is called a _____________. A) Regulation B) Tax C) Subsidy D) Average Cost

A) Regulation

Last Question: This is an example of a supply _______. Last Question: This is an example of a supply _______.

Curve

Last Question: This is an example of supply ________.

Schedule