ECO111 - CHAPTER 4

In a market economy, supply and demand determine

• a.

  both the quantity of each good produced and the price at which it is sold.

• b.

  the quantity of each good produced, but not the price at which it is sold.

• c.

  the price at which each good is sold, but not the quantity of each good produced.

• d.

  neither the quantity of each good produced nor the price at which it is sold.

A group of buyers and sellers of a particular good or service is called a(n)

• a.

  coalition.

• b.

  economy.

• c.

  market.

• d.

  competition.

A competitive market is a market in which

• a.

  an auctioneer helps set prices and arrange sales.

• b.

  there are only a few sellers.

• c.

  the forces of supply and demand do not apply.

• d.

  no individual buyer or seller has any significant impact on the market price.

Buyers and sellers who have no influence on market price are referred to as

• a.

  market pawns.

• b.

  monopolists.

• c.

  price takers.

• d.

  price makers.

A monopoly is a market

• a.

  with one seller, and that seller is a price taker.

• b.

  with one seller, and that seller sets the price.

• c.

  with one buyer, and that buyer is a price taker.

• d.

  with one buyer, and that buyer sets the price.

The quantity demanded of a good is the amount that buyers

• are willing to purchase.

  .

• are willing and able to purchase.

• are willing and able and need to purchase.

• are able to purchase

The law of demand states that, other things equal,

• a.

  when the price of a good falls, the demand for the good rises.

• b.

  when the price of a good rises, the quantity demanded of the good rises.

• c.

  when the price of a good rises, the demand for the good falls.

• d.

  when the price of a good falls, the quantity demanded of the good rises.

A table that shows the relationship between the price of a good and the quantity demanded of that good is called a

• a.

  price-quantity schedule.

• b.

  buyer schedule.

• c.

  demand schedule.

• d.

  demand curve.

When drawing a demand curve,

• a.

  demand is on the vertical axis and price is on the horizontal axis.

• b.

  quantity demanded is on the vertical axis and price is on the horizontal axis.

• c.

  price is on the vertical axis and demand is on the horizontal axis.

• d.

  price is on the vertical axis and quantity demanded is on the horizontal axis.

The market demand curve

• is found by vertically adding the individual demand curves.

• slopes upward.

• represents the sum of the prices that all the buyers are willing to pay for a given quantity of the good.

• represents the sum of the quantities demanded by all the buyers at each price of the good.