Economic Principles and Market Dynamics

Without government intervention, how is the market for gasoline in this community likely to be affected after an earthquake?

• The price of gasoline will increase as it will become harder to find.

• Temporary shortages of gasoline will result in a price reduction by producers.

• Gasoline demand will decline until it is widely available again.

• Citizens will purchase substitute products to satisfy their demand for gasoline.

Without government intervention, how is the market for water in this community likely to be affected after an earthquake?

• The price of water will increase as it will become harder to find.

• Temporary shortages of water will result in a price reduction by producers.

• Water demand will decline until it is widely available again.

• Citizens will purchase substitute products to satisfy their demand for water.

If a country that was previously producing at point C is now producing at point D, what explains the movement?

• Shifted some resources from the production of food to the production of clothes.

• Shifted some resources from the production of clothes to the production of food.

• Acquired more resources allowing them to produce more clothes and food.

• Saw an increase in the demand for clothes and food.

How can a country achieve point F on a production possibilities curve?

• Through Investing

• Through Trade

• It can't be done

• Shifting resources from clothes to food

What economic principle is described by the idea that when two countries trade freely, they both gain because they receive goods cheaper or better than they could produce themselves?

• Absolute advantage

• Comparative advantage

• Internal trade

• None

In economics, what is the opportunity cost of producing goods?

• Profit lost in production

• Money spent on production

• Forfeited production of another good

• Labor employed in production

The basic problem of economics, where available resources will never be enough to satisfy all human needs and wants, leads to which outcome?

• Inflation expands purchasing power.

• Workers earn more through overtime pay.

• Scarcity requires people to make choices.

• Personal expenses increase on an annual basis.

Why must all economic systems answer the questions of what goods should be produced, how they should be produced, and for whom they should be produced?

• The forces of supply and demand are unreliable.

• There are unlimited wants and limited resources.

• There is inequality in the distribution of resources.

• The opportunity cost of specialization is high.

What is Market Risk?

• Difference between low and high market prices

• Uncertainty in future market values and potential loss

• Certain gain in future market values

• Expected profit from the market

What may increase the risk in the market?

• Change in economic conditions

• Lowering trade barriers

• Increment in company earnings

• Emerging technology