Econ Unit 2 Test

Which of the following is the BEST example of a product market transaction?

• Cindy provides labor at her part-time job at a grocery store bakery.

• Cindy gets ingredients at the grocery store to make cookies for her family

• Cindy gives her manager cookies as a thank you for giving her time off for a family vacation.

• Cindy gets ingredients at the grocery store to make cookies for her home-based catering business.

How do businesses get factors of production according to the pure market circular flow of economic activity?

• from households through the resource market

• from government through the resource market

• from government through the product market

• from households through the product market

Which TWO situations could economists illustrate as a factor market transaction on a pure market circular flow diagram?

• A student receives wages for working as a line cook at a fast-food restaurant.

• A mother puts part of her income into a college savings account for her son.

• A patient uses health insurance to pay for long-term hospitalization.

• A teacher receives wages for his or her job at a public school.

• A man rents his land to an oil company.

Based upon a circular flow diagram, how do businesses receive revenue from households?

• in the factor market as a payment for resources

• in the product market as a payment for resources

• in the factor market as a payment for goods and services

• in the product market as a payment for goods and services

Andy works for Mama's Pizza restaurant. He delivers pizzas on the weekend. Andy does not work during the week; however, he orders pizza from the restaurant each Monday when he is home alone. His work colleague, Ted, delivers the pizzas on Mondays.

Which describes the difference between Andy’s factor market and product market transactions?

• Andy acts as a firm in the product market when he sells his labor, while he acts as a household in the factor market when he buys the good of pizza.

• Andy acts as a firm in the product market when he sells pizza to customers, while he acts as a household in the factor market when he buys the good of pizza.

• Andy acts as a firm in the product market when he buys the labor of Ted who delivers pizza to him, and also acts as a firm in the factor market when he sells the good of pizza to customers.

• Andy acts as a household in the product market when he buys the good of pizza from the restaurant, and also acts a household in the factor market when he sells his labor to the restaurant on the weekends.

WhichTWO economic situations could be explained using the circular flow model of resources, money, and goods and services?

• Government spending increases leading to inflation.

• The demand for all goods and services decreases leading to deflation.

• The production possibilities of an economy increase leading to economic growth.

• Firms increase wages leading to an increase in household funds available for consumption.

• Consumption expenditures on goods and services increase leading firms to buy more factors of production.

Which of the following BEST defines the law of supply?

• Producers will provide more goods and services as prices increase.

• Producers will provide fewer goods and services as prices increase.

• Consumers will purchase more goods and services as prices increase

• Consumers will purchase fewer goods and services as prices increase.

Which of the following BEST describes where market clearing price is found on a supply and demand graph?

• The point can be found at any point where supply exceeds demand.

• The point can be found at any point where demand exceeds supply.

• The point can be found where the supply curve and demand curve intersect.

• The point can be found at any point above the intersection of supply and demand.

The price in the orange juice market increases. People decide to buy less orange juice and drink something else instead.

What economic law does this BEST illustrate?

• law of supply

• law of demand

• law of diminishing returns

• law of diminishing marginal utility

What causes a change in the quantity supplied and the supply for a product?

• A change in the product’s costs of production causes both a change in quantity supplied and a change in supply.

• A change in the product’s price causes a change in quantity supplied; a change in the product’s market conditions causes a change in supply.

• A change in the product’s price causes a change in quantity supplied; a change in the product’s demand causes a change in supply.

• A change in the product’s market conditions causes a change in quantity supplied; a change in the product’s costs of production causes a change in supply.