1. In a market economy, supply and demand determine both the quantity of each good produced and the price at which it is sold.

T (Market economy relies on supply and demand to determine production quantity and selling price of goods..)

2. In a competitive market, the quantity of each good produced and the price at which it is sold are not determined by any single buyer or seller.

T (e. In competitive markets, no single buyer or seller controls production quantity or selling price of goods)

3. The law of demand states that, other things equal, when the price of a good rises, the quantity demanded of the good rises, and when the price falls, the quantity demanded falls.

F (Because the relationship between price and quantity demanded is given as: Price increases -> quantity demanded decreases)

4. When quantity supplied exceeds quantity demanded at the current market price, the market has a surplus and market price will likely rise in the future to eliminate the surplus.

F (because market price will likely decrease to eliminate the surplus. Price adjustment mechanism: When surplus/shortage exists, current market is higher/smaller than the equilibrium price. The adjustment of current market price to eliminate surplus/shortag)

5. An increase in demand will cause an increase in price, which will cause an increase in quantity supplied.

T (An increase in demand leads to higher prices, incentivizing suppliers to produce more, increasing the quantity supplied)

6. If a good or service is sold in a competitive market free of government regulation, then the price of the good or service adjusts to balance supply and demand.

T (e In a competitive market, without government intervention, prices adjust to reach an equilibrium point where supply and demand are balanced.)

7. A price ceiling set above the equilibrium price causes quantity demanded to exceed quantity supplied.

F (If the price ceiling is set above the equilibrium price, it becomes ineffective and has no impact on the market since it does not bind the market price.)

8. A price floor set below the equilibrium price causes quantity supplied to exceed quantity demanded.

F (: If the price floor is set below the equilibrium price, it becomes ineffective and has no impact on the market since it does not bind the market price)

9. If the equilibrium wage is $4 per hour and the minimum wage is $5.15 per hour, then a shortage of labor will exist.

F (Because there is a surplus (unemployment) of labor will exist)

10. A tax on sellers and a decrease in input prices affect the supply curve in the same way.

F (A tax on seller -> Supply decreases -> Supply will shift to the LHS/ A decrease in input prices -> Supply increases -> Supply will shift to the RHS)

11. An increase in income will cause the demand curve to shift to the right.

F (The effects of income on demand are conditional on the type of goods (normal, inferior)

12. When an increase in the price of one good lowers the demand for another good, the two goods are called complements

T (Complements are two goods that are consumed together, so an increase in the price of one good reduces the demand for the other)

13. If a person expects the price of socks to increase next month, then that person’s current demand for socks will increase.

T ( someone expects a price increase, they may buy more of the good now to avoid higher costs later)

14. An increase in the price of pizza will shift the demand curve for pizza to the left.

F (An increase in the price of pizza will decrease the quantity demanded, meaning there will be a movement leftward along the quantity curve, reducing quantity demanded, not shifting the demand curve)

15. A reduction in an input price will cause a change in quantity supplied, but not a change in supply.

F (A reduction in an input price affects the cost of production, leading to a change in supply, not just quantity supplied.)

16. An increase in the price of ink will shift the supply curve for pens to the left.

T ( An increase in the price of ink (an input) will increase the production cost of pens, shifting the supply curve leftward.)

17. If a company making frozen orange juice expects the price of its product to be higher next month, it will supply more to the market this month.

F (Expecting higher future prices may lead the company to reduce current supply to sell at higher prices in the future)

18. Sellers respond to a surplus by cutting their prices.

T (Sellers decrease prices to sell excess inventory and reduce surplus in the market.)

19. When quantity demanded exceeds quantity supplied at the current market price, the market has a shortage and market price will likely rise in the future to eliminate the shortage.

T (A shortage occurs when demand exceeds supply, leading to price increases in the future as sellers try to balance the market.)

1. Necessities tend to have inelastic demands, whereas luxuries have elastic demands.

T (, because necessities have 0 < Edi < 1 so it is inelastic and luxuries have EDI > 1 so it is elastic)

2. Goods with close substitutes tend to have more elastic demands than do goods without close substitutes.

T (More subtitutes--> More elasti)

3. The demand for gasoline will respond more to a change in price over a period of five weeks than over a period of five years.

F (The demand for gasoline will respond more to a change in price over a period of five years than over a period of five weeks)

4. Price elasticity of demand along a linear, downward-sloping demand curve increases as price falls.

F (BECAUSE when Price elasticity of demand along a linear , downward-sloping demand curve decreases as price falls. E(DP) decreases when moving from A to B (when the price decreases) )

5. If demand is perfectly inelastic, the demand curve is vertical, and the price elasticity of demand equals 0.

T (Perfectly inelastic demand means quantity demanded remains constant regardless of price changes, resulting in a vertical demand curve with price elasticity equal to 0)

6. The cross-price elasticity of garlic salt and onion salt is -2, which indicates that garlic salt and onion salt are substitutes.

F (A cross-price elasticity of -2 indicates that garlic salt and onion salt are complements, not substitutes. A negative value implies they are consumed together, with an increase in one leading to a decrease in the demand for the other)

1. Diminishing marginal productivity implies decreasing total product.

False (If Diminishing marginal productivity (MP) occurs but MP is still positive--> Total product still increases but at a lower rate ( the speed of change decreases). -> Total produce will decrease if MP is negative)

2. Diminishing marginal product exists when the production function becomes flatter as inputs increase.

True. The Slope of TP is MP, thus TP becomes flatter that implies diminishing marginal product

3. If the marginal cost of producing the tenth unit of output is $3, and if the average total cost of producing the tenth unit of output is $2, then at ten units of output, average total cost is rising.

True (MC of 10th =3 and ATC of 10th =2 --> MC>ATC--> ATC is increasing)

4. If the marginal cost of producing the fifth unit of output is higher than the marginal cost of producing the fourth unit of output, then at five units of output, average total cost must be rising.

FALSE (MC is rising => ATC can be rising or falling)

5. The shape of the marginal cost curve tells a producer something about the marginal product of her workers.

TRUE (MC = delta(VC)/delta(Q) = w*delta(L)/delta(Q) = w/( (delta Q) / delta L = w/MP(L) -> MC and MP(L) are negative relationship

1. For a firm operating in a perfectly competitive industry, total revenue, marginal revenue, and average revenue are all equal.

False (Because TR differs from MR (MR=TR’(Q))/ BUT MR=AR because P* is the market price and constant. / TR=P* x Q -> MR=P* and AR=TR/Q=P*)

2. In competitive markets, firms that raise their prices are typically rewarded with larger profits.

False (Competitive firms are price takers. If they raise the price, they will lose all market shares. In general, for other types of firms, they cannot simply raise the price to obtain the higher profits because of the law of demand.)

3. A firm operating in a perfectly competitive industry will continue to operate in the short run but earn losses if the market price is less than that firm’s average total cost but greater than the firm’s average variable cost.

True (AVC<P<ATC  firm will earn losses but continue to produce.)

4. A firm will shut down in the short run if revenue is not sufficient to cover all of its fixed costs of production.

False (To know whether firms shutdown or not, we have compare: Loss if firm produce: TR-FC-VC<0 (implying the loss) + Loss if firm does not produce: -FC --> TR-FC-VC vs -FC -> TR vs VC) )

5. In a long-run equilibrium where firms have identical costs, it is possible that some firms in a competitive market are making a positive economic profit.

False (In the long-run, competitive firms make a zero economic profit since there is a free entry and exit because of a weak market power. )

6. All firms maximize profits by producing an output level where marginal revenue equals marginal cost; for firms operating in perfectly competitive industries, maximizing profits also means producing an output level where price equals marginal cost.

TRUE (vẽ hình của perfect competition)

7. A firm operating in a perfectly competitive industry will shut down in the short run but earn losses if the market price is less than that firm’s average variable cost.

TRUE (When the market price is less than AVC, the firm can't produce anymore, hence, they'll have to shut down)

8. In the short run, a firm should exit the industry if its marginal cost exceeds its marginal revenue.

FALSE (Firms will exit if P< AVC)

9. The supply curve of a firm in a competitive market is the average variable cost curve above the minimum of marginal cost.

False (For a competitive firm, the supply curve is the marginal cost (MC) but only when P>AVC_min)

1. Even with market power, Monopolists cannot achieve any level of profit they desire because they will sell lower quantities at higher prices.

TRUE (This is because they are constrained by the demand curve for their product. The demand curve shows how much consumers are willing to buy at different prices. If a monopolist sets a price that is too high, consumers will simply buy less of the product. This will lead to lower profits for the monopolist.)

2. Copyrights and patents are examples of barriers to entry that afford firms monopoly pricing powers.

TRUE (Copyrights and patents grant exclusive rights, restricting competition and allowing firms to charge higher prices.)

True False vi mo 1

Authored by Tùng Vũ

Financial Education

1st Grade

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FILL IN THE BLANKS QUESTION

30 sec • 1 pt

1. Scarcity means that there is less of a good or resource available than people wish to have.

(a)

FILL IN THE BLANKS QUESTION

30 sec • 1 pt

2. Economics is the study of how evenly goods and services are distributed within society.

(a)

FILL IN THE BLANKS QUESTION

30 sec • 1 pt

3. The cost of an action is measured in terms of foregone opportunities.

(a)

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30 sec • 1 pt

4. Tuition is the single-largest cost of attending college for most student

(a)

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30 sec • 1 pt

5. If wages for bankers increase, then bankers leisure time would have a lower opportunity cost.

(a)

FILL IN THE BLANKS QUESTION

30 sec • 1 pt

6. If a firm considers whether they should expand the business. At that point of time, the marginal revenue from selling more products to market is higher than the marginal cost, thus firm should expand their business.

(a)

FILL IN THE BLANKS QUESTION

30 sec • 1 pt

4. Opportunity cost refers to how many inputs a producer requires to produce a good.

(a)

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True False vi mo 1

1. Scarcity means that there is less of a good or resource available than people wish to have.

(a)

2. Economics is the study of how evenly goods and services are distributed within society.

(a)

3. The cost of an action is measured in terms of foregone opportunities.

(a)

4. Tuition is the single-largest cost of attending college for most student

(a)

5. If wages for bankers increase, then bankers leisure time would have a lower opportunity cost.

(a)

6. If a firm considers whether they should expand the business. At that point of time, the marginal revenue from selling more products to market is higher than the marginal cost, thus firm should expand their business.

(a)

4. Opportunity cost refers to how many inputs a producer requires to produce a good.

(a)

5. For a country producing two goods, the opportunity cost of one good will be the inverse of the opportunity cost of the other good.

(a)

6. Ha can make a bird house in 3 hours and he can make a bird feeder in 1 hour. The opportunity cost to Ha of making a bird house is 1/3 bird feeder.

(a)

1. In a market economy, supply and demand determine both the quantity of each good produced and the price at which it is sold.

(a)

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Popular Resources on Wayground

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True False vi mo 1

1. Scarcity means that there is less of a good or resource available than people wish to have. (a)

2. Economics is the study of how evenly goods and services are distributed within society. (a)

3. The cost of an action is measured in terms of foregone opportunities. (a)

4. Tuition is the single-largest cost of attending college for most student (a)

5. If wages for bankers increase, then bankers leisure time would have a lower opportunity cost. (a)

6. If a firm considers whether they should expand the business. At that point of time, the marginal revenue from selling more products to market is higher than the marginal cost, thus firm should expand their business. (a)

4. Opportunity cost refers to how many inputs a producer requires to produce a good. (a)

5. For a country producing two goods, the opportunity cost of one good will be the inverse of the opportunity cost of the other good. (a)

6. Ha can make a bird house in 3 hours and he can make a bird feeder in 1 hour. The opportunity cost to Ha of making a bird house is 1/3 bird feeder. (a)

1. In a market economy, supply and demand determine both the quantity of each good produced and the price at which it is sold. (a)

Access all questions and much more by creating a free account

Popular Resources on Wayground

Discover more resources for Financial Education

1. Scarcity means that there is less of a good or resource available than people wish to have.

(a)

2. Economics is the study of how evenly goods and services are distributed within society.

(a)

3. The cost of an action is measured in terms of foregone opportunities.

(a)

4. Tuition is the single-largest cost of attending college for most student

(a)

5. If wages for bankers increase, then bankers leisure time would have a lower opportunity cost.

(a)

6. If a firm considers whether they should expand the business. At that point of time, the marginal revenue from selling more products to market is higher than the marginal cost, thus firm should expand their business.

(a)

4. Opportunity cost refers to how many inputs a producer requires to produce a good.

(a)

5. For a country producing two goods, the opportunity cost of one good will be the inverse of the opportunity cost of the other good.

(a)

6. Ha can make a bird house in 3 hours and he can make a bird feeder in 1 hour. The opportunity cost to Ha of making a bird house is 1/3 bird feeder.

(a)

1. In a market economy, supply and demand determine both the quantity of each good produced and the price at which it is sold.

(a)