Supply, Demand, and Prices Test Review

A hungry man is willing to pay a high price for food. After he is no longer hungry, he is not willing to pay the same high price. Which of the following best defines this example?

• a. a complement

• b. diminishing marginal utility

• c. unit elasticity

• d. the substitution effect

Which of these do producers of an item hope to achieve when adopting new technologies?

• a. inelasticity of supply of that item

• b. a repeal of subsidies for production of that item

• c. a shift of the supply curve for that item to the left

• d. a shift of the supply curve for that item to the right

To estimate elasticity, compare the _____ of a price change to the _____ of the change in total revenue

• a. amount, amount

• b. amount, direction

• c. direction, amount

• d. direction, direction

Without prices, the three basic questions of WHAT, HOW, and FOR WHOM to produce are answered by

• a. consumers.

• b. producers.

• c. govern ent

• market

Which would an economist consider a likely complement for coffee?

• a. water

• b. tea

• c. chicken

• d. donuts

Which of these best describes the influence of high prices on the behavior of producers?

• a. High prices are an incentive for producers to produce less.

• b. High prices are an incentive for producers to produce more.

• c. High prices have no significant influence on the behavior of producers.

• d. High prices influence producers to use fewer raw materials and less labor

Which of these best enables a firm to establish its profit-maximizing quantity of output?

• a. a periodic marginal analysis

• b. a periodic analysis of total revenue

• c. a periodic determination of its overhead

• d. a periodic determination of its break-even point

What are the characteristics of demand?

• a. the desire and ability to buy a product

• b. the ability and willingness to buy a product

• c. the willingness and desire to buy a product

• d. the desire, ability, and willingness to buy a product

Which stage(s) of production are distinguished by increases in output?

• a. Stage I

• b. Stages I and II

• c. Stages II and III

• d. Stages I, II, and III

Which is the opposite of a surplus?

• a. inelastic

• b. shortage

• c. equilibrium

• d. floor