Microeconomics Unit 3 Review

According to the image above, the flow of goods and services to consumers is illustrated by the arrows numbered.

• 1 & 3

• 6 & 8

• 2&4

• 5 & 7

According to the Circular Flow Model,

• Households sell productive resources to businesses

• Households sell goods and services to businesses

• Businesses sell productive resources to households

• Businesses buy goods and services sold by households

Within the Circular Flow Model, which is true of businesses?

• Businesses buy goods and services from households in exchange for money from households.

• Businesses sell goods and services to households in exchange for money from households.

• Households buy resources from businesses in exchange for money from businesses.

• Households sell products to businesses in exchange for money from businesses.

Which of the following is the best example of the Law of Supply?

• A sandwich shop decreases the number of sandwiches it supplies even though the price did not change.

• A sandwich shop increases the number of sandwiches it supplies even though the price did not change.

• A sandwich shop decreases the number of sandwiches they supply everyday when the price is increased.

• A sandwich shop increases the number of sandwiches they supply everyday when the price is increased.

Juanita and Sarah made 100 t-shirts with a picture of their school’s basketball team to celebrate winning the division championship. They initially sold the t-shirts for $5 each. The t-shirts began selling quickly. Juanita and Sarah realized that $5 a shirt would not cover their costs, so they raised the price to $8 a shirt. As a result, sales declined and they had 20 unsold t-shirts at the end of the year. Which term BEST describes what happened when Juanita and Sarah raised the price of the t-shirts?

• The law of demand

• The law of supply

• Opportunity cost

• Marginal Benefit

Assume that consumers begin purchasing more used cars. What would happen to the equilibrium price and quantity of used cars?

• Equilibrium price would increase and equilibrium price would decrease.

• Equilibrium price and quantity would both decrease.

• Equilibrium price would decrease and equilibrium quantity would increase.

• Equilibrium price and quantity would both increase.

What conclusion can be drawn from the supply curve above?

• An increase in the number of producers increased the supply of hamburgers.

• Competition drove one of the restaurants out of business.

• A drop in the cost of resources caused producers to increase the supply of hamburgers.

• A decrease in the number of producers decreased the supply of hamburgers.

What conclusion can be drawn from the demand curve above?

• Advertising did not affect the demand for jeans.

• Advertising decreased the demand for jeans.

• Advertising increased the demand for jeans.

• Jeans advertising mislead consumers.

If the government implemented a price ceiling at $20;

• There would be a shortage because quantity demanded would be greater than quantity supplied.

• There would be a surplus because quantity demanded would be greater than quantity supplied.

• There would be a shortage because quantity supplied would be greater than quantity demanded.

• There would be a surplus because quantity supplied would be greater than quantity demanded.

If the government implemented a price floor at $13;

• There would be a surplus because quantity demanded would be greater than quantity supplied.

• There would be a surplus because quantity supplied would be greater than quantity demanded.

• There would be a shortage because quantity supplied would be greater than quantity demanded.

• There would be a shortage because quantity demanded would be greater than quantity supplied.