Unit 3 - The Price is Right Study Guide and Review

Which of the following most accurately describes how the equilibrium price of a good or service can be determined?

• matching the columns in a supply schedule and a demand schedule
• finding where the supply curve and the demand curve intersect
• doing market research to determine the maximum price consumers will pay
• moving the supply curve right or left until it matches the demand curve

Which of the following describes a situation in which the price of a good would rise?

• Producers cannot make enough of a good when that good becomes popular quickly.
• Production is increased in order to catch up with a sudden rise in demand.
• A new technology allows producers to increase supply very quickly.
• Consumers start using less of a good because more substitutes are available.

Which of the following accurately describes a shortage?

• The cost of producing a car is higher than the sale price of the same car.
• A car company tries to charge too high a price for a car and has to offer a rebate.
• A scarcity of natural resources pushes car companies into researching alternative fuels.
• Consumer demand for a certain car is greater than the number of cars that can be produced.

Which of the following occurs when someone buys a third winter coat?

• diminishing marginal utility
• efficient production
• substitution
• elasticity

Which of the following is a trait shared by all public goods?

• ability to exclude people
• elastic demand
• free-rider problem
• rivalry among consumers

Which of the following best describes why buying a home is an investment?

• Mortgage interest rates are so low that it's better to invest money in a house than in the stock market
• The interest rates on home loans are generally much lower than the interest rates on other loans.
• Housing prices can go up and down quickly in comparison to the overall inflation rate.
• When someone owns a home, s/he can generally sell it in the future for more than the original price.

Which of the following is one disadvantage of renting a place to live compared to buying a home?

• Rent is generally more than monthly mortgage payments.
• The landlord covers the expenses of maintaining the property.
• Residents can't alter their living space without permission.
• Tenants have to pay for all repairs to the building.

Which of the following tends to result in a decrease in the selling price of houses in an area?

• increase in the population of the city or town
• increase in the income of new residents in the city or town
• increase in the labor costs of construction
• increase in mortgage interest rates

Which of the following best explains the standard of living?

• how much an average person can afford to buy
• the rate of inflation for prices of normal goods
• a measurement of tax levels
• the set of rules for home ownership

Which of the following comes after a period of recession in the business cycle?

• a boom
• recovery
• stagflation
• a drought