CHAP 4

In a market economy, supply and demand are important because they

• play a critical role in the allocation of the economy’s scarce resources.
• determine how much of each good gets produced.
• can be used to predict the impact on the economy of various events and policies.
• All of the above are correct.

In a market economy,

• supply determines demand and demand, in turn, determines prices.
• demand determines supply and supply, in turn, determines prices.
• the allocation of scarce resources determines prices and prices, in turn, determine supply and demand.
• supply and demand determine prices and prices, in turn, allocate the economy’s scarce resources.

Which of the following statements is correct?

• Buyers determine supply, and sellers determine demand.
• Buyers determine demand, and sellers determine supply.
• Buyers determine both demand and supply.
• Sellers determine both demand and supply.

A group of buyers and sellers of a particular good or service is called a(n)

• coalition.
• economy.
• market.
• competition.

Which of the following is an example of a highly organized market?

• the market for textbooks
• the market for spa services
• the market for soybeans
• the market for ice cream

Which of the following is an example of a less-than-highly-organized market?

• the market for U.S. Treasury bonds
• the market for corn
• the market for soybeans
• the market for ice cream

Most markets in the economy are

• markets in which sellers, rather than buyers, control the price of the product.
• markets in which buyers, rather than sellers, control the price of the product.
• perfectly competitive.
• highly competitive.

A competitive market is a market in which

• an auctioneer helps set prices and arrange sales.
• there are only a few sellers.
• the forces of supply and demand do not apply.
• no individual buyer or seller has any significant impact on the market price.

If a seller in a competitive market chooses to charge more than the going price, then

• the sellers’ profits must increase.
• the owners of the raw materials used in production would raise the prices for the raw materials.
• other sellers would also raise their prices.
• buyers will make purchases from other sellers.

Which of the following characteristics is required for a perfectly competitive market?

• The goods offered for sale are exactly the same.
• There are so many buyers and sellers that no single buyer or seller has any influence over the market price.
• It is difficult for new sellers to enter the market.
• Both a and b are correct.