Question 1

A monopoly is a market with one
A)seller, and that seller is a price taker.
B)seller, and that seller sets the price.
C)buyer, and that buyer is a price taker.
D)buyer, and that buyer sets the price.

Accepted Answer

In a monopoly, there is only one seller who has complete control over the market and can set the price without fear of competition. Therefore, the correct answer is B, where the seller sets the price.

Question 2

In a market economy, supply and demand are important because they
A)play a critical role in the allocation of the economy's scarce resources.
B)determine how much of each good gets produced.
C)can be used to predict the impact on the economy of various events and policies.
D)All of the above are correct.

Accepted Answer

Supply and demand play a critical role in the allocation of resources in the economy, determining how much of each good gets produced, and can be used to predict the impact of events and policies on the economy. Therefore, all of the above options are correct.

Question 3

In a market economy, supply and demand determine
A)both the quantity of each good produced and the price at which it is sold.
B)the quantity of each good produced but not the price at which it is sold.
C)the price at which each good is sold but not the quantity of each good produced.
D)neither the quantity of each good produced nor the price at which it is sold.

Accepted Answer

In a market economy, both the quantity of each good produced and the price at which it is sold are determined by the interaction of supply and demand. Producers respond to market signals of high demand by increasing production, which in turn may lower the price as supply increases. Conversely, if demand is low, producers may decrease production, which would limit supply and potentially raise prices. Therefore, due to the interplay of supply and demand, market economies let prices guide the allocation of resources and determine the production and distribution of goods and services.

Question 4

In a market economy, supply and demand are important because they
A)are direct policy tools used by government agencies to regulate the economy.
B)illustrate when an market is in equilibrium, but they are not helpful when a market is out of equilibrium.
C)can be used to predict the impact on the economy of various events and policies.
D)All of the above are correct.

Accepted Answer

Supply and demand can be used to predict the impact on the economy of various events and policies. While they are not direct policy tools used by government agencies to regulate the economy, they do help illustrate when a market is in equilibrium and when it is not.

Question 5

Which of the following is not a reason perfect competition is a useful simplification, despite the diversity of market types we find in the world?
A)Perfectly competitive markets are the easiest to analyze because everyone participating in the market takes the price as given by market conditions.
B)Some degree of competition is present in most markets.
C)There are many buyers and many sellers in all types of markets.
D)Many of the lessons that we learn by studying supply and demand under perfect competition apply in more complicated markets as well.

Accepted Answer

The statement "There are many buyers and many sellers in all types of markets" is not entirely accurate. Some markets, such as oligopolies and monopolies, may have few sellers or even just one. Therefore, choice C is not a reason why perfect competition is a useful simplification.

Question 6

If a firm is a price taker, it operates in a
A)competitive market.
B)monopoly market.
C)oligopoly market.
D)monopolistically competitive market.

Accepted Answer

A firm operating in a competitive market is a price taker, meaning it has no control over the price of the goods or services it sells and must instead accept the market price. In a competitive market, there are many buyers and sellers, and no single firm has the power to influence the market price. Monopoly and oligopoly markets involve fewer sellers and more pricing power, while monopolistically competitive markets feature differentiated products and some pricing power for individual firms.

Question 7

Which of the following would most likely serve as an example of a monopoly?
A)a bakery in a large city
B)a bank in a large city
C)a local cable television company
D)a small group of corn farmers

Accepted Answer

A local cable television company most likely serves as an example of a monopoly because there is typically only one cable company that offers service in a specific geographic area, giving them exclusive control over the market in that area.

Question 8

In a market economy,
A)supply determines demand and demand, in turn, determines prices.
B)demand determines supply and supply, in turn, determines prices.
C)the allocation of scarce resources determines prices and prices, in turn, determine supply and demand.
D)supply and demand determine prices and prices, in turn, allocate the economy's scarce resources.

Accepted Answer

In a market economy, supply and demand are the driving forces behind the allocation of scarce resources and the determination of prices. When the demand for a good or service exceeds its supply, the price of that good or service will increase, which in turn will incentivize suppliers to produce more of it. Conversely, when the supply of a good or service exceeds its demand, the price of that good or service will decrease, which will incentivize consumers to buy more of it. Therefore, supply and demand work together to allocate resources and determine prices in the market economy.

Question 9

Assume the market for pork is perfectly competitive. When one pork buyer exits the market,
A)the price of pork increases.
B)the price of pork decreases.
C)the price of pork does not change.
D)there is no longer a market for pork.

Accepted Answer

The answer of Assume the market for pork is perfectly...

Question 10

The two words economists use most often are
A)inflation and trade.
B)supply and demand.
C)competition and prices.
D)markets and equilibrium.

Accepted Answer

The two words that economists use most often are supply and demand. These are the fundamental concepts of economics that are used to explain how markets work and how prices are determined. Supply refers to the amount of a product or service that producers are willing and able to sell at a given price, while demand refers to the amount of a product or service that consumers are willing and able to buy at a given price. Understanding and analyzing supply and demand is essential for making economic decisions and predicting economic outcomes.

Question 11

The two words most often used by economists are
A)prices and quantities.
B)resources and allocation.
C)supply and demand.
D)efficiency and equity.

Accepted Answer

Supply and demand are fundamental concepts in economics and form the basis of most economic analysis. They determine the allocation of resources in society, the setting of prices, and much more. While the other options may be important, supply and demand are central to most economic models and theories.

Question 12

Which of the following would most likely serve as an example of a monopoly?
A)a restaurant in a large city
B)a dry cleaners in a large city
C)a local gas station
D)a local electrical company

Accepted Answer

A local electrical company is most likely to serve as an example of a monopoly, as it is the sole provider of electrical services in the area and has no competition.

Question 13

The forces that make market economies work are
A)work and leisure.
B)politics and religion.
C)supply and demand.
D)taxes and government spending.

Accepted Answer

Supply and demand is the cornerstone of market economies. It determines the prices of goods and services, and the allocation of resources based on consumer demands. The other choices - work and leisure, politics and religion, taxes and government spending - may have some impact on the economy but are not the primary driving forces of a market economy.

Quiz 4: The Market Forces of Supply and Demand

A monopoly is a market with one

In a market economy, supply and demand are important because they

In a market economy, supply and demand determine

In a market economy, supply and demand are important because they

Which of the following is not a reason perfect competition is a useful simplification, despite the diversity of market types we find in the world?

If a firm is a price taker, it operates in a

Which of the following would most likely serve as an example of a monopoly?

In a market economy,

Assume the market for pork is perfectly competitive. When one pork buyer exits the market,

The two words economists use most often are

The two words most often used by economists are

Which of the following would most likely serve as an example of a monopoly?

The forces that make market economies work are