Economics Unit 2 Microeconomics Summative Review

The statement "the quantity demanded of a product varies inversely with its price" is a definition of 

• the law of demand. 
• the invisible hand. 
• the law of competition. 
• laissez-faire. 

Assuming that the graph follows the normal laws of economics, the line represents 

• supply. 
• equilibrium price.
• demand. 
• production possibilities. 

The new oven in Mr. Brown's bakery allows him to produce bread more efficiently and more cheaply. What is the MOST LIKELY effect for consumers? 

• the price drops and the quantity demanded increases 
• the price rises and the quantity demanded increases
• the price drops and the quantity demanded decreases 
• the price rises and the quantity demanded decreases 

In a market economy, a high price will usually cause 

• producers to supply more and consumers to buy less. 
• producers to offer less and consumers to buy less. 
• producers to offer less and consumers to buy more. 
• producers to supply more and consumers to buy more. 

Which factor might cause an increase in the supply of a product? 

• fewer sellers in the marketplace 

• an increase in the cost of raw materials 

• the introduction of new technology 

• a decrease in productivity 

The graph shows a demand curve. What can be said about the demand line moving to the right? 

• Demand has increased. 
• Demand has decreased. 
• This indicates a reduced supply. 
• An equilibrium price has been determined.

The diagram shows the circular flow of goods and resources. What is the primary purpose of this chart? 

• It shows how households and businesses interact in a market economy. 
• It shows the relationship between supply and demand. 
• It shows the need for government intervention in any economic system.
• It indicates the changing tastes in the product market. 

According to this diagram showing the circular flow of goods and resources, where do individuals spend the income they earn? 

• in the product market 
• in individual households 
• in the capital market 
• in the factor market 

If the supply of computer engineers increases at the same time that the demand for these workers decreases, what would be the MOST LIKELY effect on wages for these workers? 

• Wages would decline as the competition for jobs increases. 
• Wages would increase as competition for these workers increases. 
• Wages would stay the same as job opportunities increase. 
• Wages would increase as the number of workers increases. 

The Law of Supply states that 

• the quantity supplied of a product will increase when the price of that product increases.
• when the supply of a product decreases, the price of the product falls. 
• the supply of a product is not affected by its price. 
• when the supply of a product increases, the price of the product rises.