Ec 205 Test 1
Fundamentals of economics
Questions and Answers
- 1.
More supply and less demand _______ market equilibrium price
- A.
Increases
- B.
Decreases
- C.
Remains the same
- D.
Is indeterminate
Correct Answer
B. DecreasesExplanation
When there is more supply and less demand, it means that there are more products available in the market than there are buyers. This creates a surplus, causing sellers to lower their prices in order to attract more buyers. As a result, the market equilibrium price decreases.Rate this question:
-
- 2.
An increase in demand will cause a shortage which will cause firms to put ______________ on price
- A.
Increases
- B.
Decreases
- C.
Remains the same
- D.
Is indeterminate
Correct Answer
A. IncreasesExplanation
When there is an increase in demand, it means that more people want to buy a certain product. This leads to a shortage because the supply of the product is not enough to meet the increased demand. In order to manage the shortage and still make a profit, firms will increase the price of the product. By increasing the price, firms can control the demand and ensure that the limited supply is allocated to those who are willing to pay a higher price. Therefore, an increase in demand will cause firms to increase the price.Rate this question:
-
- 3.
If demand is elastic, price increases _________ total revenue.
- A.
Increases
- B.
Decreases
- C.
Remains the same
- D.
Is indeterminate
Correct Answer
B. DecreasesExplanation
When demand is elastic, it means that a small change in price will result in a proportionally larger change in quantity demanded. In this case, if the price increases, the quantity demanded will decrease by a greater proportion, leading to a decrease in total revenue. Therefore, the correct answer is "decreases".Rate this question:
-
- 4.
If demand is inelastic, price increases ____________ total revenue.
- A.
Increases
- B.
Decreases
- C.
Remains the same
- D.
Is indeterminate
Correct Answer
A. IncreasesExplanation
When demand is inelastic, it means that the quantity demanded is not very responsive to changes in price. In this case, if the price increases, the total revenue will also increase. This is because the increase in price outweighs the decrease in quantity demanded, resulting in a net increase in revenue.Rate this question:
-
- 5.
An increase in both supply and demand has an indeterminate effect on price and _______ quality
- A.
Increases
- B.
Decreases
- C.
Remains the same
- D.
Is indeterminate
Correct Answer
A. IncreasesExplanation
When both supply and demand increase, it is difficult to determine the effect on price and quality. An increase in supply typically leads to a decrease in price, while an increase in demand leads to an increase in price. However, the effect on quality is uncertain as it can vary depending on various factors such as production capabilities, market competition, and consumer preferences. Therefore, it is indeterminate whether an increase in both supply and demand will have a positive or negative impact on quality.Rate this question:
-
- 6.
An increase in both supply and demand ___________ price and increases quality
- A.
Increases
- B.
Decreases
- C.
Remains the same
- D.
Is indeterminate on
Correct Answer
D. Is indeterminate onExplanation
The statement suggests that an increase in both supply and demand has an indeterminate effect on price and increases quality. This means that it is unclear how the increase in supply and demand will specifically impact price, as it could vary depending on other factors. However, it is stated that the increase in both supply and demand will definitely lead to an increase in quality.Rate this question:
-
- 7.
Which of the following is not a type of input?
- A.
Labor
- B.
Capital
- C.
Natural resources
- D.
Entrepreneurship
- E.
Economic resources
- F.
Goods and services
- G.
Production
Correct Answer
F. Goods and servicesExplanation
The given options consist of various types of inputs that are commonly used in the production process. Labor, capital, natural resources, and entrepreneurship are all considered types of inputs as they contribute to the production of goods and services. However, goods and services are not inputs but rather the output of the production process. Therefore, goods and services are not a type of input.Rate this question:
-
- 8.
Which of the following is a type of output?
- A.
Labor
- B.
Capital
- C.
Natural resources
- D.
Entrepreneurship
- E.
Economic resources
- F.
Goods and services
- G.
Production
Correct Answer
F. Goods and servicesExplanation
Goods and services are considered as types of output because they are the final products or results of the production process. Goods refer to tangible items that can be seen and touched, such as cars or clothes. Services, on the other hand, refer to intangible activities or tasks that are performed for others, such as haircuts or legal advice. Both goods and services are produced to satisfy the needs and wants of consumers and are exchanged in the market in return for money or other forms of payment.Rate this question:
-
- 9.
An increase in the availability of substitutes __________ the price elasticity of demand.
- A.
Increases
- B.
Decreases
- C.
Has no effect on
- D.
Has a indeterminate effect on
Correct Answer
A. IncreasesExplanation
An increase in the availability of substitutes increases the price elasticity of demand. This means that when there are more substitutes available for a particular product, consumers have more options to choose from. As a result, they become more sensitive to changes in price and are more likely to switch to a substitute if the price of the original product increases. This increased sensitivity to price changes leads to a higher price elasticity of demand.Rate this question:
-
- 10.
A decrease in supply of a good increases price and ________quantity.
- A.
Increases
- B.
Decreases
- C.
Has no effect on
- D.
Has a indeterminate effect on
Correct Answer
B. DecreasesExplanation
When the supply of a good decreases, there is less of the good available in the market. As a result, the demand for the good remains the same, but the supply is lower. This creates a shortage, and in order to obtain the good, buyers are willing to pay a higher price. Therefore, the price of the good increases. Additionally, since there is less supply available, the quantity of the good that is bought and sold also decreases.Rate this question:
-
- 11.
A decrease in supply of a good _________________ price and decreases quantity.
- A.
Increases
- B.
Decreases
- C.
Has no effect on
- D.
Has a indeterminate effect on
Correct Answer
A. IncreasesExplanation
A decrease in supply of a good leads to an increase in price and a decrease in quantity. This is because when the supply of a good decreases, there is less of it available in the market, creating a scarcity. As a result, buyers are willing to pay a higher price to obtain the limited supply, leading to an increase in price. Additionally, with less supply available, the quantity demanded by buyers also decreases. Therefore, both price and quantity are affected by a decrease in supply.Rate this question:
-
- 12.
____________ in supply of a good increases price and decreases quantity.
- A.
Increases
- B.
Decreases
- C.
No effect on
- D.
An indeterminate effect
Correct Answer
B. DecreasesExplanation
An increase in supply of a good leads to a decrease in price and a decrease in the quantity demanded. This is because when the supply of a good increases, there is a larger quantity available in the market, which creates more competition among sellers. As a result, sellers lower their prices in order to attract buyers and sell their goods. Additionally, with more supply available, buyers have more options to choose from, which puts downward pressure on the price. Consequently, the decrease in price and quantity is a direct result of the increase in supply.Rate this question:
-
- 13.
Price ceilings cause
- A.
Shortage
- B.
Surplus
Correct Answer
B. SurplusExplanation
Price ceilings set a maximum limit on the price that can be charged for a particular good or service. When the ceiling is set below the equilibrium price, it creates a surplus. This is because the quantity supplied exceeds the quantity demanded at the artificially low price. Suppliers are not willing to supply as much at the lower price, while consumers are willing to buy more at the lower price. As a result, there is an excess supply, leading to a surplus in the market.Rate this question:
-
- 14.
Price below the market equilibrium price results in
- A.
Shortage
- B.
Surplus
Correct Answer
A. ShortageExplanation
When the price of a good is set below the market equilibrium price, it creates a shortage. This means that the quantity demanded by consumers exceeds the quantity supplied by producers. As a result, there is not enough of the good available to meet the demand, leading to a shortage.Rate this question:
-
- 15.
Two goods that are complements in consumption have a __________cross-elasticity of demand.
- A.
Negative
- B.
Positive
Correct Answer
A. NegativeExplanation
Complementary goods are those that are typically consumed together, such as peanut butter and jelly or coffee and cream. When the price of one complementary good increases, the demand for the other complementary good decreases. This is because consumers are less likely to purchase one without the other. Therefore, the cross-elasticity of demand between complementary goods is negative, indicating an inverse relationship between the two goods.Rate this question:
-
- 16.
Decreased price causes inncreased revenue
- A.
Elastic
- B.
Inelastic
Correct Answer
A. ElasticExplanation
When the price of a product decreases, it leads to an increase in revenue because the demand for the product is elastic. This means that consumers are highly responsive to changes in price, and a decrease in price encourages them to buy more of the product. As a result, the increase in sales volume compensates for the lower price, resulting in higher total revenue.Rate this question:
-
- 17.
Decreased price causes decreased revenue
- A.
Elastic
- B.
Inelastic
Correct Answer
B. InelasticExplanation
When the price of a product decreases, the demand for it may not increase proportionally. In an inelastic market, the demand for the product is relatively insensitive to changes in price. Therefore, even if the price decreases, the decrease in revenue will not be significant because the demand remains relatively constant. This suggests that the product has a loyal customer base or is a necessity, and consumers are not highly responsive to price changes.Rate this question:
-
Quiz Review Timeline +
Our quizzes are rigorously reviewed, monitored and continuously updated by our expert board to maintain accuracy, relevance, and timeliness.
-
Current Version
-
Mar 20, 2023Quiz Edited by
ProProfs Editorial Team -
Sep 22, 2011Quiz Created by
Ammassoglia
- Cartography Quizzes
- Civics Quizzes
- El112 Quizzes
- English Quizzes
- Geography Quizzes
- History Quizzes
- Humanities Quizzes
- Law Quizzes
- Linguistics Quizzes
- Logic Quizzes
- Math Quizzes
- Philosophy Quizzes
- Political Science Quizzes
- Politics Quizzes
- Science Quizzes
- Social Science Quizzes
- Sociology Quizzes