ECON 2301 Chapter 3

1. In the circular flow model, the market economy creates Continuous

repetitive flows of goods and services, and factors

2. From an economic prospective, which of the following are true of a market

Buyers and sellers interact in their desire to buy and sell a good or service, It is a

3. virtual and/or physical institution or space

The pursuit of buyers and sellers in making themselves better off.

4. International participants participate the factor market by supplying resources demanding resources

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5. Due to scarce resources, every individual, whether rich or poor, is faced with an opportunity cost when choosing to produce or consume more of one good over another.

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6. The ability and willingness to buy specific quantities of a good at alternative places in a given time period, ceteris paribus is the definition of demand.

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7. A table showing the quantities of a good a consumer is willing and able to buy at alternative places in a given time period, ceteris paribus is a

Demand schedule.

8. Quantity demanded is illustrated on the horizontal (x) axis, while price is illustrated on the verticle (y) axis

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9. Which of the following is a determinant of demand

Income

10. The supply curve is

An Upward sloping curve

11. Equilibrium price and equilibrium quantity the supply curve intersects the demand curve

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12. What determines market price and equilibrium output in a market

The interaction of buyers and sellers

13. The interaction between buyers and sellers determines equilibrium price and equilibrium quantity

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14. Market surplus is the amount by which the quantity supplied exceeds the quantity demanded at a given price.

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15. True or False: A shortage occurs when quantity supplies exceeds quantity demanded

False

16. The use of market prices and sales to signal desired outputs (or resource allocation) is called

The Market Mechanism

17. Which of the following best describes why a surplus would not persist for very long

A surplus prompts sellers to lower the price to encourage buyers by increasing the incentive to buy.

17. The equilibrium price will change whenever the supply or demand curve shifts

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18. At an equilibrium price, there is neither a surplus nor a shortage because the quantity demanded by consumers at a specific price is identical to the quantity supplied at that same price.

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19. A surge in demand while holding supply constant results in a(n) increase in both equilibrium price and quantity.

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20. The three main decisions that must be addressed by an economic system included

How output is produced, What goods and services to produce, For Whom output is produced

21. The economies question of' What to produce' is about decisions related to the mix (quantity and type) if goods and services to make available in a given economy.

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22. A shift leftward, A decrease in supply while holding demand constant results in an increase in equilibrium price, but a decrease in equilibrium quantity

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23. All of the following would cause an increase in equilibrium price and quality, except

An increase in supply while holding demand constant

24. The economic question of' How to produce' is about decisions related to the mix of factor in outs (land,labor,capital...)used to produce goods and services.

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25. The economic question of 'From whom to produce' is about decisions related to who is going to consume the goods and services produced.

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26. Price Ceiling is the upper limit imposed on the price of a good.

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27. International participants participate the product market by

supplying imports, demanding exports

28. A demand schedule organizes the relationship between price and quantity in tabular format, whereas the demand curve is graphical representation of this relationship.

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29. Which of the following would result in a change in supply

An increase in the exercise tax on cigarettes, An increase or decrease in wages, An increase in the number of shoe stores at the local mall.

30. An unfavorable change in consumer tastes and preference for a product will decrease demand, illustrated as a short of the demand curve to the left.

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31. Which of the following are examples of a market

eBay, a local gas station, The New York Stock Exchange, a pay-to-pay online gaming site

32. Which of the following illustrates the relationship between a good and its complement

When the price of lettuce increase, the demand for salad dressing decreases, 33. when the price 0f tuition decreases, the demand for textbooks increases

34. Market supply is a schedule or curve showing the various amounts of a product that producers are willing and able to make available for sale at each possible price during a specific period.

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35. Producers seek the efficient use of resources with a goal of increasing their profit.

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36. Demand only exists if someone is willing and able to pay for the good

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37. The determinants of supply are any factors other than the product's price that have effect on the supply of a good or service and cause the supply curve to shifts.

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38. The demand curve shows the quantities of a product that will be purchased at various possible prices, other things equal.

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39. Which pair exemplifies complementary goods

a hot dog and relish

40. Demand is an expression of consumer buying intentions, or willingness to buy, not a statement of actual purchases.

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41. Government provided goods and services are not free because

consumers and businesses pay taxes to receive the goods or service, a cost is borne by society in utilizing these resources to produce any good or service

42. Choose all of the following that will cause a change in supply rather than change in quantity supplied.Producer expectations, Number of sellers,Technology.

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43. Which of the following define ceteris paribus

other-things-equal, The idea that factors other than those being considered in a particular analysis do not change.

44. Which of the following are determinant of supply

Taxes, Subsides

45. The law of demand is illustrated by a downward-sloping curve.

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46. A shift of the supply curve to the right reflects a(n) increase in supply, while a shift of the supply curve to the left reflects a(n) decrease in supply.

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47. The goal of consumers is to maximize

Utility

48. Which of the following refers to a change in quantity supplied

A movement from one point to another on a fixed curve

49. Which of the following illustrates a change in quantity demanded

As a result of increasing prices, Mr. Snow decides to buy fewer shovels during a snowy winter.

50. The determinant of supply dealing with alternative products that can be produces by firms is called

Price changed or paid for substitute goods in production

51. Supply refers to the production of a product, whereas demand refers to the consumption of a product.

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