Economics - Unit 2 - How Markets Work - Post Test

The law of demand states that as price decreases

• wages decrease
• production increases
• demand increases
• quality decreases

Quality demanded moves along the demand curve in response to changes in

• price.
• income.
• preferences.
• expectations.

Supply depends on the willingness and ability of

• donors to contribute.
• producers to produce.
• advertisers to promote.
• consumers to purchase.

According to the law of supply, what happens as price increases?

• The demand decreases.
• The quantity supplied increases.
• The supply curve becomes flat.
• The supply curve shifts to the left.

The degree to which the quantity demanded responds to changes in price is called

• elasticity.
• revenue.
• schedule.
• utility.

Which of these is the best example of diminishing marginal utility?

• A shortage of bike paths makes bicycles less useful.
• Bicycles become less useful as they get old and start to rust.
• Someone who has one bicycle will have less use for another.
• People with cars have less use for bicycles than people without cars have.

Which of these situations best illustrates market equilibrium?

• The price of soap does not vary much from week to week.
• Soap production ensures a good profit for the manufacturer.
• Everyone who wants or needs soap can easily afford to buy it.
• The amount of soap made matches the amount of soap that people want to buy.

How is the market-clearing price determined?

• It is fixed by each manufacturer.
• It is reached through trial and error.
• It is calculated by economic analysts.
• It is set by a government commission.

The equilibrium price is the price at which

• consumers start reducing demand.
• producers' total revenue is highest.
• demand and supply curves intersect.
• neither demand nor supply will shift.

Which of these might best signal furniture makers to cut back production?

• a fall in the cost of essential raw materials
• an increase in availability of skilled workers
• an introduction of competitors into the market
• a drop in the price consumers are willing to pay