Unit 2 Review Microeconomics

With respect to the circular flow model, businesses provide households with which of the following?

• taxes and interest

• labor and taxes

• goods, services, and incomes

• public goods and transfer payments

Above is a "supply and demand" schedule that shows the number of pairs of socks that producers are willing to make at various prices, as well as the number of pairs that consumers are willing to purchase at each price.  Using this chart, what would happen if the price of the socks was set at $3.00 a pair?

• All socks would sell because it would be the equilibrium price.

• A shortage.

• A surplus.

• No socks would be produced because it would be the equilibrium price.

Using the chart above, what would happen if producers raised the price of a pair of socks to $6.00 a pair?

• The socks would be priced at the equilibrium price.

• No one would buy socks because they are priced too high.

• A surplus.

• A shortage.

A volcano erupts in Hawaii that destroys or damages many of the orchards that supply the United States with pineapples. What will be the effect on price and quantity of pineapples sold, assuming all else is equal?

• Price will rise and quantity will also rise.

• Price will drop and quantity will also drop.

• Price will drop but quantity will rise.

• Price will rise but quantity will drop.

The use of money in an economy solves which of the following problems?

• scarcity

• the condition of opportunity cost

• an efficient means of economic exchange

• trade barriers

With respect to raising funds, the primary difference between a corporation and other types of businesses is that

• they can sell shares of the company to the general public.

• they obtain loans from banks.

• they always have collateral, but other businesses do not.

• they can more easily make decisions about whether to seek a loan.

A market that has few barriers to entry, in which products that are not of identical quality and style are sold, and, therefore, firms can make greater-than-normal profits for short periods of time, is BEST described as

• monopolistic.

• oligopolistic.

• perfectly competitive.

• monopolistically competitive.

A breakthrough in nanotechnology allows silicon chips for computers to be produced much more quickly and cheaply. If demand for computers remains unchanged, what will be the effect upon market price and supply?

• Both price and supply will rise.

• Both price and supply will fall.

• The supply will rise while the price falls.

• The supply will fall while the price rises.

All of the following are characteristics of perfectly competitive markets EXCEPT

• the firm's prices are kept confidential.

• production is similar in quality.

• there is a large number of buyers and sellers.

• there are few barriers to entering the market.

A market structure in which only one producer supplies a good that is in demand, thereby permitting them to set the price by how much they supply, is called

• competition.

• monopoly.

• oligopoly.

• conglomerate.