Question

1. what does the law of demand say? (ssemi2a)

a relative change in price is caused by changes in demand.
b demand for an economic product varies inversely with its price.
c consumers select alternative ways of spending income.
d relationship between changing prices & total receipts is a direct one.

1. which of the following is not a complement? (ssemi3b)

a razors and shaving cream
b peanut butter and jelly
c footballs and basketballs
d rims and tires

1. when there is a change in quantity demanded what is the only thing that actually changes?

a the quantity of the item
b the price of the item
c the quality of the item
d how the item is advertised

1. one disadvantage of owning a sole proprietorship?

a it is difficult to set up
b the legal structure is complex
c owners have unlimited liability
d owners are required to get a charter

1. prices serve as a link between sellers and whom/what? (ssemi2d)

a foreign investors
b producers
c government
d consumers

1. on a supply and demand curve, a surplus would be found where in relationship to market equilibrium? (ssemi2b)

a below
b above
c even
d right

1. in a market economy, what does a high price usually signal? (ssemi2c)

a producers to supply more & consumers to buy less
b producers & consumers to buy more
c producers to offer less & consumers to buy more
d government to step in & protect consumers.

1. what is an advantage of a free market?

a everyone has excess income
b limited number of alternative products
c food and housing are very inexpensive
d the market finds its own equilibrium

1. if a competitive market is at equilibrium, and a sudden increase in demand occurs, what will result? (ssemi2b)

a shortage will occur and price will rise.
b surplus will occur and the price will fall.
c shortage will occur and the price will fall.
d surplus will occur and the price will rise.

1. what does it mean when the market is said to “clear”? (ssemi2b)

a d = s
b d > s
c d < s
d prices move up or down significantly

1. what is the only real example of a price floor in our economy?

a rent controls
b minimum wage
c price limits
d none of the above

Explanation:

1. The law of demand states that the quantity demanded of a good varies inversely with its price, all else being equal.
2. Complements are goods that are used together. Footballs and basketballs are substitutes, not complements.
3. A change in quantity demanded is caused by a change in the price of the item.
4. One disadvantage of sole - proprietorship is that owners have unlimited liability.
5. Prices serve as a link between sellers and consumers.
6. A surplus occurs above the market - equilibrium price.
7. In a market economy, a high price signals producers to supply more and consumers to buy less.
8. An advantage of a free market is that it finds its own equilibrium.
9. If demand increases in a competitive market at equilibrium, a shortage will occur and the price will rise.
10. When the market clears, demand (D) equals supply (S).
11. The minimum wage is an example of a price floor.

Answer:

1. B. Demand for an economic product varies inversely with its price.
2. C. Footballs and Basketballs
3. B. The price of the item
4. C. owners have unlimited liability
5. D. Consumers
6. B. above
7. A. Producers to supply more & consumers to buy less
8. D. The market finds its own equilibrium
9. A. Shortage will occur and price will rise.
10. A. D = S
11. B. Minimum Wage