Applied Economics Quiz

What does the Law of Demand state?

• Price and demand are directly proportional.

• When the price rises, demand falls; when the price falls, demand increases.

• Demand is independent of price.

• Price decreases when demand increases

What is Ceteris Paribus?

• The concept of unlimited wants.

• “All other things being equal.”

• A term for market equilibrium.

• The law of supply and demand.

Which of the following affects demand?

• Input costs

• Consumer taste

• Technology

• Time

How does consumer income affect demand?

• As income increases, demand generally decreases.

• Only low-income consumers affect demand.

• Income levels do not impact demand.

• Higher income generally leads to increased demand.

If a substitute’s price drops, what happens to the demand for the original product?

• Demand increases.

• Demand remains constant.

• Demand decreases.

• Demand becomes irrelevant.

What is the Law of Supply?

• Price and supply are inversely proportional.

• As price increases, supply increases.

• Supply remains fixed regardless of price.

• Price decreases as supply increases.

What happens to supply if input costs fall?

• Supply increases.

• Supply decreases.

• Supply remains unchanged.

• Supply depends on demand

How does technology impact supply?

• Improves efficiency, increasing supply.

• Slows down production, decreasing supply.

• Has no impact on supply.

• Only affects labor-intensive industries.

What is market equilibrium?

• The interaction of only demand forces.

• When demand exceeds supply.

• The point where supply equals demand.

• The lowest price point of a good.

Which type of market structure includes independent buyers and sellers with identical products?

• Monopoly

• Pure competition

• Oligopoly

• Monopolistic competition