WorksheetsPrice Elasticity: Demand and Supply
Total questions: 145
Worksheet time: 2hrs 25mins
What does price elasticity measure in economics?
Responsiveness of quantity to price changes
Total revenue at current market price
Consumer satisfaction over time
Number of buyers in a given market
Which general elasticity formula is correct?
Change in quantity over change in independent variable
Quantity demanded plus price change divided
Change in price over change in quantity demanded
Average quantity over average price level
Price elasticity of demand is typically reported using which value?
Square of elasticity coefficient
Absolute value of the coefficient
Signed negative coefficient value
Reciprocal of price change percent
Which category applies when percentage change in quantity is greater than percentage change in price?
Elastic demand case
Inelastic demand case
Unitary demand case
Perfectly inelastic case
When percentage change in quantity equals percentage change in price, demand is classified as
Perfectly elastic demand
Unitary elastic demand
Income elastic demand
Perfectly inelastic demand
If percentage change in quantity is less than percentage change in price, demand is
Unitary demand situation
Inelastic demand situation
Giffen demand situation
Elastic demand situation
Which statement about the midpoint (arc) method is accurate?
It ignores quantity changes in calculation
It uses averages of initial and final values
It requires infinitesimal price changes
It uses only initial values as base cases
Given an elasticity magnitude less than 1, the demand for coffee in the example is
Inelastic demand case
Elastic demand case
Unitary demand case
Perfectly elastic case
Which factor increases demand elasticity according to the text?
Greater necessity of the product
Lower share of income spent
Shorter time to respond
More available substitutes for consumers
Demand tends to be inelastic when the product is a
Luxury good with many brands
Basic necessity for households
Service with low budget share
Item with many substitutes
Which time-related statement is correct for elasticity?
More time to adjust makes demand more elastic
Less time to adjust makes demand more elastic
Time has no effect on elasticity at all
Only producers’ time affects elasticity
Price elasticity of supply is generally understood to be
Zero under all market conditions
Undefined for discrete price changes
Negative because of inverse relationship
Positive because price and quantity move together
Which interpretation aligns with an elasticity magnitude greater than one?
Quantity response is proportionally larger
Quantity response is proportionally smaller
Quantity response is exactly proportional
Quantity does not change at all
Which formula expresses price elasticity of demand using percentages?
Change in price times change in quantity demanded
Percentage change in price over percentage change in quantity demanded
Percentage change in quantity demanded over percentage change in price
Price over quantity demanded difference measure
When computed elasticity equals zero because quantity does not change as price changes, demand is
Cross-price elastic in classification
Perfectly inelastic in classification
Perfectly elastic in classification
Unitary elastic in classification
Which formula correctly expresses income elasticity of demand (ηd)?
Percentage change in quantity supplied over percentage change in income
Percentage change in income over percentage change in quantity demanded
Percentage change in quantity demanded over percentage change in income
Percentage change in price over percentage change in quantity
A normal good is best described as a product where demand does what as consumers’ income rises?
Remains unchanged despite income growth
Increases when income increases
Decreases when income increases
Fluctuates randomly with income changes
An inferior good is characterized by which demand pattern as income increases?
Demand falls as income rises
Demand becomes perfectly elastic with income
Demand stays constant across incomes
Demand increases with higher income
Charlie’s quantity demanded for beef steak rises from 1 to 4 when income rises from 25,000 to 32,500. Using the given method, what is ηd for beef steak?
+1.67 using inverse ratio
+0.30 using income proportion
+3.0 using midpoint method
+10.0 using base-period normalization
For fried chicken, Charlie’s quantity demanded drops from 4 to 2 as income rises from 25,000 to 32,500. What is the sign and magnitude of ηd reported?
0.30 indicating unit elasticity
−0.50 indicating mild inferiority
+1.67 indicating normal good
−1.67 indicating inferior good
Which interpretation aligns with a positive income elasticity value?
Supply shifts left as income increases
Quantity demanded increases when income rises
Quantity demanded declines when income rises
Price falls with income growth
Which statement about determinants of price elasticity of supply is accurate?
Limited substitutes for inputs make supply more elastic
Longer production time always yields perfectly elastic supply
Greater input alternatives increase supply elasticity
More available resources tend to make supply less elastic
Given ηd = (Qd2 − Qd1)/Qd1 divided by ((I2 − I1)/I1), what happens to ηd if the income change denominator is small?
ηd equals one due to proportionality
ηd turns negative automatically
ηd approaches zero regardless of quantity change
ηd becomes larger in magnitude for a given quantity change
Which term describes the recurring ups and downs in aggregate economic performance over time?
Structural growth path of trends
Secular stagnation in long runs
Seasonal patterns within quarters
Business cycle fluctuations over years
During which business cycle phase do output and employment generally rise from a trough?
Expansion or boom phase begins
Recession or slump phase starts
Peak or highest point phase
Depression or deep slump phase
What is aggregate output most closely measured by in macroeconomics?
Total value of GDP in a period
Average real wages over time
Net exports minus imports
Government current expenditures
Which statement best distinguishes GDP from GNI?
GDP excludes nonresidents, GNI excludes residents
GDP includes residents abroad, GNI excludes foreign income
GDP measures value added only, GNI measures final sales
GDP counts production within territory, GNI counts residents' income
A prolonged and deep recession is called what?
Depression in economic activity
Disinflation in price levels
Devaluation of the currency
Deficit in fiscal accounts
Moving from a peak to a trough is labeled as which phase?
Stagnation, plateau, or lull
Recovery, rebound, or surge
Expansion, boom, or upswing
Contraction, recession, or slump
Which event would most likely reduce both GDP growth and GNI growth for a country like the Philippines?
Minor policy change on road tolls
Good harvest in one farming region
Local festival increasing tourism briefly
Global financial crisis reducing exports
In the diagram of the business cycle, the highest point of output in a cycle is called what?
Base of potential output
Trend of long-run growth
Trough of the current cycle
Peak of the current cycle
Why might unemployment temporarily increase even in a healthy, dynamic economy?
Wage rigidity never adjusting
Job search after voluntary quits
Permanent collapse of demand
Zero labor market turnover
Which situation is an example of frictional unemployment?
Wages fixed above equilibrium
Automation replacing machinists
Industry shutdown from imports
A new graduate seeking first job
What macroeconomic indicator is defined as the percentage of the jobless labor force?
Underemployment composite rate
Employment-to-population ratio
Labor force participation
Unemployment rate percentage
Which statement about expansions and contractions is most accurate?
Expansions can be longer or gradual
Expansions always equal contractions
Contractions are always very slow
Cycles follow regular fixed timing
If output has just left a trough and is rising at a positive rate, what is true about the level of output?
Level exceeds potential GDP
Level is at a new cycle peak
Level is at long-run trend
Level remains low but growing
Which definition of value added aligns with measuring GNI?
Portion added at each production stage
Total retail price before taxation
Foreign remittances minus imports
Capital stock purchased by firms
When unemployment exceeds a minimum amount at going wages, what market condition exists?
Labor market clears instantly
Excess demand for labor exists
Excess supply of labor persists
No search frictions are present
Which statement best defines inflation in macroeconomics?
A fall in nominal wages across industries
A sustained increase in overall price level
A rise in production with constant prices
A one-time jump in select commodity prices
Hyperinflation is most accurately described as which scenario?
Prices rising only in luxury goods markets
A steady 2% annual increase in prices
Rapid, persistent price increases over short intervals
Temporary spikes followed by quick deflation
Which outcome is a typical cost of inflation for households and firms?
Higher real balances without trade-offs
Perfectly predictable long-run contracts
Lower uncertainty about future prices
Reduced purchasing power and menu costs
Deflation refers to which macroeconomic condition?
A sustained decrease in the overall price level
A slowdown in GDP with fixed prices
A fall in some administered energy prices
Seasonal discounts in retail sectors
In June 2022, which Philippine sector saw notably high price pressure compared with May?
Information services moving from 2.8% to 2.9%
Recreation rising sharply from 1.7% to 3.5%
Health care increasing from 4.8% to 6.1%
Transport with a jump from about 14.6% to 17.1%
In the circular flow, which flow represents income to households from firms?
Exports of goods to foreign markets
Wages, interest, dividends, and rent
Taxes and import duties paid to government
Purchases of public goods by households
Which sector is classified as the foreign sector in the circular flow model?
Private firms sector
Rest of the World sector
Public government sector
Household consumer sector
What is a leakage from the household sector as described in the circular flow?
Saving by households during the period
Exports sold to foreigners
Government purchases of goods
Payment of wages by firms
Which statement best distinguishes the roles of households and firms in factor and product markets within the diagram?
Firms demand taxes from households and supply savings
Firms supply labor to households and demand goods
Households demand labor from firms and supply goods
Households supply labor to firms and demand goods
If the government’s total payments exceed its tax revenues in the diagram context, what condition does the government experience?
A balanced circular flow
Dissaving by the government sector
An increase in household income
A trade surplus with foreigners
A country increases imports while household incomes remain constant. Using the circular flow, which immediate effect is most likely?
More spending leaks abroad, reducing domestic demand
Firms’ wage payments automatically rise for workers
Government tax revenues increase without policy change
Household savings must fall to exactly offset imports
Which transaction correctly matches to the goods-and-services market described with the circular flow?
Households buying appliances from firms
Firms paying wages to employees
Government collecting income taxes
Households receiving dividends from firms
Which market arena involves purchases of finished products by households, firms, government, and the rest of the world?
Labor market for employment contracts
Foreign exchange market for currencies
Goods-and-services market for finished outputs
Money market for financial assets
In the labor market, what is the typical role of households?
Households regulate wages through policy
Households issue treasury bills for funding
Households demand final goods from firms
Households supply labor services to employers
Which statement best describes the money (financial) market?
Only government hires and pays workers
Prices are fixed by administrative rule
Only firms trade consumer products
Funds flow between savers and borrowers
What do firms and the government do in the labor market?
They set monetary policy instruments
They demand labor services from households
They supply consumer goods to buyers
They issue shares to raise equity funds
Which is an example of a financial instrument representing ownership in a firm?
Corporate bonds offering voting rights
Treasury bills paying wage income
Dividends representing fixed coupons
Shares of stock granting profit rights
Dividends are best defined as which of the following?
Portion of profits paid to shareholders
Interest charged on corporate loans
Taxes collected from household income
Premiums paid to insurance clients
Which action is part of fiscal policy?
Changing government spending and taxation
Managing exchange rate peg adjustments
Setting bank reserve requirement ratios
Targeting money supply growth rates
An expansionary fiscal policy most likely involves which change?
Increasing government spending on programs
Raising policy rates to slow borrowing
Cutting exports to improve trade balance
Reducing labor supply through regulation
What is the primary focus of monetary policy in the Philippine framework described?
Maximizing employment through wage subsidies
Managing imports through tariff schedules
Balancing the budget by raising income taxes
Maintaining price stability via inflation targeting
In the goods-and-services market, how do firms interact with each other?
They buy intermediate and capital goods
They exchange workers for training credits
They swap shares to avoid competition
They coordinate tax rates across sectors
Which transaction is a leakage from household spending in the circular flow description?
Household saving reducing current outlays
Household receipt of dividend income
Household payment of wages to workers
Household purchase of local groceries
Imports and exports in the circular flow primarily link domestic agents with which sector?
Central monetary authority unit
Nonprofit institutions sector
Underground informal economy
Rest of the world trading partners
Which instrument is issued by corporations when they borrow in financial markets?
Demand deposits created by banks
Treasury notes financing public deficits
Preferred dividends guaranteeing yields
Corporate bonds promising future payments
If the government’s revenue is less than its payments to households and firms, which condition occurs?
The government is running a trade surplus
The government is expanding labor supply
The government is dissaving during the period
The government is tightening monetary policy
Which policy action best matches contractionary fiscal policy?
Reducing government spending or raising taxes
Lowering interest rates to spur bank lending
Increasing transfer payments to households
Buying corporate bonds in open markets
Which statement best defines Gross Domestic Product (GDP)?
Market value of goods made by citizens abroad
Total value of all goods including intermediate goods
Sum of corporate profits and household incomes only
Total market value of all final goods and services
Why are intermediate goods excluded when calculating GDP?
Because they have no market prices available
To avoid double counting across production stages
Because firms cannot report their quantities
Since they are always imported from abroad
In the car example, why is the price of tires not added separately to GDP?
Tires are produced outside the country’s borders
Tires are classified as used goods, not new goods
The car’s final price already reflects the tires’ value
Tires are services, not tangible goods
What does the value-added approach measure at each production stage?
Wages paid to labor and interest to capital
Number of units produced and shipped
Total sales revenue at every stage combined
Increase in value as inputs become outputs
Using the gasoline example, which total should be used for GDP from the production chain?
Sum of value added at all stages equals final price
Only the initial crude oil value at extraction stage
Only the profit margin of the final retail seller
Sum of all sales values across all stages combined
Which transaction is counted in current GDP?
A broker’s fee for selling existing shares
Resale of a three-year-old used car
Transfer of ownership of a ten-year-old house
Purchase of previously issued government bonds
Which scenario illustrates double counting if included in GDP?
Including broker fees for stock transactions
Summing value added at each production stage
Counting the purchase of newly built homes
Adding tire sales to the value of completed cars
Which output is included in a country’s GDP under the location principle?
Profits earned abroad by domestic corporations
Goods produced domestically by foreign-owned firms
Dividends received from foreign companies abroad
Wages of citizens working in another country
What distinguishes GDP from GNP?
GDP counts only final services, GNP counts only goods
GDP is expenditure based, GNP is income based
GDP excludes services, GNP includes all services
GDP counts location of production, GNP counts ownership
Consider a plant in the Philippines owned by a Japanese firm employing Filipino workers. Which is true?
Output counts in Philippine GDP but profits in Japan’s GNP
Output counts in Japan’s GDP but wages in Philippine GNP
Profits count in Philippine GDP and Japan’s GNP
Wages count in Japan’s GNP and Philippine GDP
Which statement about the expenditure and income approaches to GDP is accurate?
They differ because income excludes business profits
They differ because spending excludes household consumption
They yield the same total because spending equals income
They yield different totals due to statistical bias
Under the income approach, which payments are summed to compute GDP?
Wages, rents, interest, and profits received
Only profits retained by private corporations
Exports minus imports plus government transfers
Consumer purchases, investment, and government outlays
Which equation represents the expenditure approach to GDP?
GDP = W + R + I + P − IM
GDP = C + S + T + (EX − IM)
GDP = C+Ia+G+(EX−IM)
GDP = C+Ia−G+(IM−EX)
Personal consumption expenditures primarily include which items?
Consumer purchases of goods and services
Firm purchases of plant and equipment
Government salaries and transfers
Foreigners’ purchases of domestic goods
Durable goods are best described as
Payments to doctors and universities for services
Goods like food and gasoline, used up quickly
Items like automobiles and appliances, lasting long
Business inventories produced now for later sale
Non-durable goods are
Goods like cars, furniture, and appliances
Goods such as food, clothing, and gasoline
Spending on legal and educational services
Government purchases of final goods only
Services within consumption include
Payments to doctors, lawyers, and schools
Purchases of stocks, bonds, and mutual funds
Buying new residential housing units
Government payments of interest on debt
Gross private domestic investment excludes which financial item?
Purchases of stocks, bonds, or mutual funds
Changes in business inventories during period
Purchases of new machines and equipment
Construction of new residential housing
Non-residential investment refers to
Firm spending on machines, tools, and plants
Household purchases of food and clothing
Government spending on public school salaries
Foreigners buying domestically produced goods
Residential investment includes
Payments for medical and legal services
Spending on durable household appliances only
Expenditures for new houses and apartments
Government construction of military bases
A positive change in business inventories means
Imports exceeded exports for the quarter
Households consumed fewer services than usual
Government reduced its purchases of goods
Firms produced more than they sold this period
Government consumption and gross investment counts which items in GDP?
Interest payments on outstanding government debt
Transfer payments like pensions and stipends
State and local purchases of final goods and services
Private purchases of stocks and corporate bonds
Transfer payments are excluded from GDP because they
Do not pay for current production of goods or services
Include only benefits to veterans and retirees
Are financed by distortionary taxation policies
Occur only at the federal level of government
Net exports equal
Exports of goods and services minus imports
Imports plus exports divided by population
Domestic production sold to residents only
Foreign aid received from other countries
If imports exceed exports, the value of net exports is
Negative and reduces measured GDP
Positive and increases measured GDP
Zero and leaves GDP unchanged
Indeterminate without price indexes
Why must imports be subtracted in the expenditure approach?
Imports represent payments to domestic labor only
C, I^a, and G include spending on foreign goods
Imports always crowd out domestic investment
Imports are counted as transfer payments
A Philippine firm produces smartphones domestically and sells them in Germany. In GDP accounting, these smartphones are
Counted as transfers, not current output
Counted in German consumption and GDP only
Counted in Philippine exports and GDP
Excluded from GDP because sold abroad
Which item is included in national income as compensation of employees?
Employer contributions to social insurance
Interest paid by households on loans
Household purchases of goods and services
Government consumer subsidies to firms
Proprietors' income in the income approach refers to income from which source?
Corporate shareholders' dividends
Unincorporated businesses' owners
Government enterprise surpluses
Rental income from property
Which component is explicitly excluded from net interest in national income?
Interest paid by households and government
Interest received by banks from firms
Interest on business loans within firms
Interest on corporate bonds to investors
Indirect taxes minus subsidies represent which concept in national income?
Depreciation of private capital stock
Payments for factor services abroad
Total taxes collected before transfers
Net revenue received by the government
Net business transfer payments are defined as what?
Taxes paid by firms after subsidies
Net transfers made by businesses to others
Dividends distributed to households
Retained earnings kept by corporations
In the table shown, the surplus of government enterprises was negative. What does a negative value indicate?
Enterprises operated at a net loss
Enterprises paid no factor income
Taxes exceeded total subsidies
Subsidies were fully eliminated
Moving from GDP to GNP requires which adjustment?
Replace indirect taxes with subsidies value
Subtract statistical discrepancy entirely
Add depreciation of domestic capital stock
Add receipts of factor income from the rest of the world
Which sequence correctly links the aggregates when moving from GNP toward national income?
GNP minus depreciation equals NNP
GNP plus depreciation equals NNP
GNP minus statistical discrepancy equals GDP
GNP minus retained earnings equals NNP
What does the statistical discrepancy measure in national accounts?
Changes in depreciation over time
Measurement error in data collection
Unreported household cash income
Black market transactions only
Personal income excludes which portion of corporate profits?
Retained earnings kept by corporations
Interest paid on corporate debt
Dividends distributed to households
Corporate income taxes remitted
Disposable personal income is defined as what amount?
Personal income minus personal income taxes
GNP minus depreciation and discrepancy
National income minus all indirect taxes
Personal income minus corporate retained earnings
Which category is a component of household spending out of disposable personal income?
Exports of goods and services
Corporate inventory investment
Government capital formation
Personal consumption expenditures
If a household's monthly disposable personal income is Php 500 and its personal consumption expenditures are Php 450 with no interest payments or transfers, what is personal saving?
Php 500 for the month
Php 50 for the month
Php 450 for the month
Php 100 for the month
Personal saving can be negative when which situation occurs?
Indirect taxes rise and subsidies fall
Retained earnings increase sharply
GNP decreases but GDP increases
Spending exceeds disposable personal income
The personal saving rate is best described as which measure?
Percentage of disposable personal income saved
Ratio of personal income to national income
Share of wages in national income
Growth rate of household consumption
Which statement best defines the labor force participation rate (LFPR)?
Share of employed in total labor force
Share of underemployed in employed
Share of unemployed in total population
Share of labor force in adult population
Who is classified as employed during the reference period?
Anyone unavailable due to illness
Anyone actively seeking but not yet hired
Anyone with a full-time salaried position
Anyone who did any job for one hour
Which description fits frictional unemployment?
Long-term skill-job mismatch
Job loss due to wage floors
Short-run voluntary job transitions
Joblessness from business cycle downturns
Structural unemployment primarily arises from which situation?
Temporary layoffs for holidays
Mismatch between skills and jobs
Workers switching jobs between firms
Firms cutting wages during recessions
Cyclical unemployment is most closely associated with which macroeconomic condition?
Ups and downs of the business cycle
Seasonal patterns in agriculture
Voluntary quits for better matches
Technological change across industries
Which rate measures unemployed persons as a proportion of the total labor force?
Participation rate
Underemployment rate
Employment rate
Unemployment rate
Underemployment includes which group in its definition?
Employed wanting more hours
Discouraged workers only
Retirees returning to part-time work
Students not seeking any job
According to efficiency wage theory, why might paying above-market wages increase unemployment?
Government reduces labor taxes
More people apply than firms hire
Workers refuse job training programs
Firms instantly automate all tasks
Imperfect information causes unemployment when firms do what?
Set wages indexed to inflation
Set wages too high unintentionally
Set wages below minimum wage
Set wages exactly at market level
Minimum wage laws can create unemployment when which condition holds?
Market wage is above the floor
Market wage equals the floor
Market wage is below the floor
Market wage is indexed to CPI
Which practice can sustain cyclical unemployment by preventing wage cuts during downturns?
On-the-job training programs
Relative wage concerns
Short-run job search frictions
Seasonal employment contracts
Which statement about explicit contracts is most accurate?
They require wage cuts during booms
They fix wages for one to three years
They tie pay to daily inflation moves
They vary wages monthly with sales
How do cost-of-living adjustments (COLAs) affect wages during inflation?
Wages fall faster than prices
Wages remain permanently fixed
Wages rise with price increases
Wages fluctuate randomly
A software engineer leaves a job to search for a better fit and is unemployed for two months. Which type applies?
Seasonal unemployment
Structural unemployment
Frictional unemployment
Cyclical unemployment
A coal miner loses a job because demand shifts to renewable energy and lacks retraining. Which type applies?
Cyclical unemployment
Structural unemployment
Voluntary nonparticipation
Frictional unemployment
Which idea best describes the life-cycle theory of consumption?
Young households never borrow for early spending
Consumption always equals income at every age
People spend only current income each period
Households smooth consumption over their lifetime
In the life-cycle pattern, how does income typically change over time?
Low early, lowest middle, high in retirement
Constant across all ages for workers
High early, constant, highest in retirement
Low early, high middle, low in retirement
What is a key reason young households may consume more than current income?
Borrowing against expected future earnings
Receiving mandatory government transfers
Selling accumulated retirement assets now
Facing unusually low interest rates always
When income rises in midlife, how is earlier borrowing typically handled?
Debt is rolled forever without repayment
Debt is repaid while maintaining consumption
Debt is repaid only after retirement begins
Debt is ignored and defaulted by design
What does it mean if a household has negative wealth?
Assets exceed debts by a small margin
Cash balances are unusually high always
Assets equal liabilities exactly at present
Debts exceed the value of owned assets
Which statement about positive wealth is correct?
Wealth never changes over the life cycle
Assets exceed debts, supporting later consumption
Debts exceed assets, limiting lifetime spending
Assets and debts are always equal by choice
What decision is jointly determined with consumption for most households?
Choice of immigration destination
Portfolio choice of corporate bonds
Labor supply choices for work and hours
Selection of preferred tax brackets
Which factor directly increases the opportunity cost of leisure?
A higher wage rate for work hours
A decline in market labor demand
A lower general price of services
A temporary fall in nonlabor income
What is the substitution effect of a wage rate increase?
Real income falls, hours of work rise
Leisure becomes cheaper, hours of work fall
Leisure becomes costlier, hours of work rise
Real income rises, hours of work fixed
Assuming leisure is a normal good, what is the income effect of a wage increase?
Households consume more leisure, work fewer hours
Households consume less leisure, work more hours
Households hold hours unchanged regardless
Households increase both leisure and hours
Why must we distinguish nominal from real wage rates?
Prices always move identically with wages
Real wages are always lower by law
Nominal wages cannot be measured directly
Prices of goods and services may change
If nominal wages rise 10% while all prices rise 10%, what happens to the real wage?
It doubles relative to last year
It falls significantly below zero
It rises by more than ten percent
It stays approximately unchanged
Which example best illustrates a change in purchasing power of wages?
An hour buys fewer goods at same nominal pay
A worker receives more hours at same wage
Tax filing date moves earlier in the year
A firm changes payroll software vendor
Which scenario most likely increases labor force size over time?
Lower immigration with constant births
Higher birth cohorts reaching working age
Fewer young people surviving to 20
Longer vacations mandated by firms
Which activity is a non-market alternative to supplying labor?
Raising a child at home without pay
Working overtime for higher wages
Freelancing on digital platforms
Training for a firm-sponsored role
Two identical households differ only in inherited wealth. What is the likely effect on their consumption paths?
The wealthier household consumes more over life
Neither household adjusts consumption ever
Both households consume exactly the same always
The poorer household consumes permanently more
A household receives an unexpected inheritance. What is a likely response?
Spend the entire amount immediately
Decrease consumption to save all funds
Avoid any change until retirement
Increase consumption now and in the future
Which statement best links consumption smoothing and accumulated savings late in life?
Young workers consume least to avoid saving
Midlife households hold zero financial assets
Retirees borrow more to raise current income
Saving during work years finances retirement
Which statement best describes firms in perfect competition regarding pricing power?
They set prices with limited collusion
They are price makers with full control
They are price takers with no control
They negotiate prices with each buyer
What is a defining characteristic of products in perfect competition?
Homogeneous or standardized products
Highly differentiated premium brands
Unique goods with no substitutes
Customized goods for niche markets
In perfect competition, what happens when economic profit exists in the short run?
Government sets price floors
Existing firms restrict output
New firms enter, increasing supply
Firms collude to keep prices
Which condition about buyers is typical in a perfectly competitive market?
Many buyers across a large market
Regional buyer monopolizes demand
Few buyers with strong bargaining
Single buyer dictating market terms
Which barrier is commonly associated with monopolies?
Abundant small-scale producers
Legal restrictions like licenses
Seasonal demand fluctuations
Low switching costs for users
