Market Systems

What do economic profits and losses provide firms?

• They answer the question "Who will get the output?"

• They answer the question "How will the goods and services be produced?"

• They help determine which industries survive or fail.

• They are the expected outcomes of a decrease in dollar votes and an increase in dollar votes, respectively.

If a change in consumer preferences results in many more consumers registering their "dollar votes" in favor of peaches, which of the following will most likely follow?

• Profits of peach growers will rise and peach production will rise.

• Profits of peach growers will rise and peach production will fall.

• Profits of peach growers will fall and peach production will rise.

• Profits of peach growers will fall and peach production will fall.

Which of the following best characterizes the free market system?

• Widespread use of government price controls.

• Centralized decision-making.

• Limited use of capital goods.

• Private property rights

What best determines if a firm will earn a positive economic profit?

• Its total sales revenue equals the total cost of labor, capital, raw materials, and entrepreneurship

• It produces its output utilizing the least-cost production method

• It is regulated by government.

• Its total sales revenue exceeds the sum of all its costs.

With reference to the table. If A firm can produce a single unit of output by combining labor and capital in any of the combinations shown in the following table. Labor costs $2 per unit and capital costs $4 per unit. Which is the most efficient technique for producing the output?

• A

• B

• C

• D

What does it mean when an economist says that the demand for a product has increased?

• Quantity demanded is greater at each possible price.

• Firms make less of the product available for sale.

• Consumers respond to a lower price by buying more.

• The demand curve becomes steeper.

When movie ticket prices increase, families tend to spend less time watching movies and more time at home watching videos instead. What is best reflected in the scenario?

• Diminishing marginal utility.

• The income effect.

• The rationing function of markets.

• The substitution effect.

If consumer incomes increase, what will happen to the demand for product Y on the Demand Curve?

• It will necessarily remain unchanged.

• It will shift to the right if Y is a complementary good.

• It will shift to the right if Y is a normal good.

• It will shift to the right if Y is an inferior good.

When drawing demand and supply curves, which of the following is the primary influence on production and purchasing decisions as assumed by economists?

• Price.

• The cost of production.

• The overall state of the economy.

• Consumer incomes.

With refer to the following diagrams, which one of the diagrams best illustrates the effect of an increase in crude oil prices on the market for gasoline?

• A

• B

• C

• D