# ECON 202 Chapter 4 Questions

## Unlock all answers in this set

question
In a perfectly competitive market, the goods offered for sale are all exactly the same. T/F
true
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In a competitive market, each seller has limited control over the price of his product because a. other sellers are offering similar products. b. these markets are highly regulated by the government. c. buyers exert more control over the price than do sellers. d. sellers usually agree to set a common price that will allow each seller to earn a comfortable profit.
A
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if there is a shortage, then the price of the good falls
false, price of good rises when there is a shortage
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A leftward shift of a supply curve is called a(n) a. decrease in quantity supplied. b. increase in quantity supplied. c. decrease in supply. d. increase in supply.
C
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if there is a surplus, the price of the good will fall T/F
true
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The law of demand states that, other things equal, when the price of a good rises, the quantity demanded of the good rises, and when the price falls, the quantity demanded falls. T/F
false
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A market
a group of buyers and sellers of a particular good or service
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who determines demand?
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who determines supply?
Sellers
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The forces that make market economies work are a. politics and religion. b. taxes and government spending. c. supply and demand. d. work and leisure.
C
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Suppose that when the price of a 16 oz. to-go cup of gourmet coffee is \$4.25, students purchase 750 cups per day. If the price decreases to \$3.75 per cup, which of the following is the most likely outcome? a. Students would purchase fewer than 750 cups per day. b. Student would continue to purchase 750 cups per day. c. Students would purchase more than 750 cups per day. d. We do not have enough information to answer this question.
C
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equilibrium price can be determined by the intersection of the supply and demand curves T/F
true
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a movement of a point downward and to the left on the supply curve indicates an increase in the quantity supplied T/F
false, it would be a decrease in the quantity supplied
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For a market for a good or service to exist, there must be a a. group of buyers and sellers. b. specific time and place at which the good or service is traded. c. high degree of organization present. d. All of the above are correct.
A
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Which of the following events would unambiguously cause a decrease in the equilibrium price of cotton shirts? a. an increase in the price of wool shirts and an increase in the price of raw cotton b. a decrease in the price of wool shirts and a decrease in the price of raw cotton c. an increase in the price of wool shirts and a decrease in the price of raw cotton d. a decrease in the price of wool shirts and an increase in the price of raw cotton
B
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In a market economy, supply and demand determine a. the price at which each good is sold but not the quantity of each good produced. b. neither the quantity of each good produced nor the price at which it is sold. c. the quantity of each good produced but not the price at which it is sold. d. both the quantity of each good produced and the price at which it is sold.
D
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A movement upward and to the left along a demand curve is called a(n) a. increase in demand. b. increase in quantity demanded. c. decrease in quantity demanded. d. decrease in demand.
C
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The quantity demanded of a good is the amount that buyers are a. willing to purchase. b. able to purchase. c. willing and able to purchase. d. willing, able, and need to purchase.
C
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A rightward shift of a demand curve is called a(n) a. decrease in quantity demanded. b. increase in quantity demanded. c. increase in demand. d. decrease in demand.
C
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When quantity demanded increases at every possible price, the demand curve has a. shifted to the right. b. shifted to the left. c. not shifted; rather, we have moved along the demand curve to a new point on the same curve. d. not shifted; rather, the demand curve has become steeper.
A
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Prices allocate a market economy's scarce resources. T/F
true
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Which of the following is not a characteristic of a perfectly competitive market? a. Different sellers sell identical products. b. There are many sellers. c. Sellers must accept the price the market determines. d. All of the above are characteristics of a perfectly competitive market.
D
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The quantity supplied of a good is the amount that a. sellers are willing and able to sell. b. sellers are able to produce. c. buyers are willing and able to purchase. d. buyers and sellers agree will be brought to market.
A
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Which of the following would shift the supply of Green Bay Packers football jerseys to the left? a. The technology of sewing machines use to make the jerseys improves. b. The cost of the fabric used to make the jerseys increases. c. The Green Bay Packers make it to the Super Bowl. d. The price of the jerseys increases by \$15.
B
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a perfectly competitive market has limited buyers and sellers T/F
false, there are many buyers and many sellers
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No individual buyer or seller can impact the market price T/F
true, they are price takers
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Quantity Demanded (Qd)
the amount of a good or service that a consumer is willing and able to purchase at a given price
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demand schedule
a table that shows the relationship between the price of a good and the quantity demanded
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demand curve
a graph of the relationship between the price of a good and the quantity demanded
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an individual demand curve is a demand curve for a single buyer T/F
true
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a market demand curve is a demand curve for all buyers T/F
true
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Law of Demand
the claim that, other things being equal, the quantity demanded of a good falls when the price of the good rises
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there is an inverse relationship between price and Qd because the marginal benefit (satisfaction) falls as additional units of a good are consumed T/F
true
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Anything that decreases the quantity demanded at every price causes the demand curve to shift to the right T/F
false, decrease is to the left
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Anything that increases the quantity demanded at every price causes the demand curve to shift to the right T/F
true
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Factors that shift the demand curve
income, prices of related goods, tastes, expectations, number of buyers
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Quantity Supplied (Qs)
amount that sellers are willing and able to sell at a specific price. (point on the supply curve)
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supply schedule
a table that shows the relationship between the price of a good and the quantity supplied
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supply curve
a graph of the relationship between the price of a good and the quantity supplied
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an individual supply curve is a supply curve for a single seller T/F
true
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a market supply curve is a supply curve for all sellers T/F
true
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Law of Supply
the claim that, other things equal, the quantity supplied of a good rises when the price of the good rises
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there is a positive relationship between price and Qs because the marginal cost (opportunity cost) rises as additional units of a good are produced T/F
true
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anything that decreases the quantity supplied at every price causes the supply curve to shift to the left T/F
true
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anything that increases the quantity supplied at every price causes the supply curve to shift to the left T/F
false, increase is shift to the right
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Factors that shift the supply curve
input prices, technology, expectations, number of sellers
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Equilibrium
a situation in which the market price has reached the level at which quantity supplied equals quantity demanded (Qd=Qs)
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surplus
A situation in which quantity supplied is greater than quantity demanded (Qs>Qd) and price is greater than equilibrium price (P>P*)
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shortage
A situation in which quantity demanded is greater than quantity supplied (Qd>Qs) and equilibrium price is greater than price (P*>P)
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an increase in demand means the demand curve will shift to the right, and equilibrium quantity and equilibrium price will go up T/F