1.What is the relationship between start-up costs and a competitive market?

a. High start-up costs are likely to make a market less competitive.

b. High start-up costs are likely to make a market more competitive.

c. Low start-up costs are likely to make a market less competitive.

d. There is no relationship between start-up costs and competitiveness.

2. In general, what happens to the price of a good or service when a shortage of that good or service occurs?

a. It remains unchanged while quantity demanded drops.

b. It increases until quantity demanded equals quantity supplied.

c. A price ceiling is imposed, lowering the price to meet the demand.

d. It decreases until quantity demanded equals quantity supplied.

3. When the price of a product goes down, what happens?

a. Existing producers expand, and new producers enter the market.

b. Some producers produce less, and others drop out of the market.

c. Existing firms continue their usual output but earn less.

d. New firms enter the market as older ones drop out.

4. A supply schedule is characterized by which of the following?

a. It shows the quantity supplied at only one price.

b. It shows the factors that could influence supply.

c. It is sensitive to changes in the costs of labor and parts.

d. It lists supply for a specific good at various prices.

5. Why does an economist make a market demand schedule?

a. to learn what demands the market will make under unusual conditions

b. to have an idea of how a market would act under different conditions

c. to predict how people will change their buying habits when prices change

d. to show how various conditions can change the demand for a good

6. Which of the following are ways the government controls markets?

a. price ceilings and price floors

b. equilibrium price and equilibrium point

c. shortages and surpluses

d. subsidies and disequilibrium

7. One way that firms in a monopolistic competition engage in nonprice competition is through

a. advertising.

b. production.

c. fixed costs.

d. variable costs.

8. What does it mean when you have demand for a good or service?

a. You can afford the good but may be unwilling to buy it.

b. You want the good but may not have the money for it.

c. You are able to buy the good but not at the given price.

d. You are willing and able to buy the good at the given price.

9. What can cause an entire demand curve to shift?

a. a decrease in price

b. an increase in price

c. uncertainty about the future price

d. a change in demographics

10. How did an improvement in the technology for producing digital cameras affect supply?

a. The supply curve moved to the left.

b. The supply curve moved to the right.

c. The demand curve moved to the right.

d. The demand curve moved to the left.

11. Which of the following will happen if the price of butter goes up?

a. The demand for butter increases.

b. The demand for margarine increases.

c. The demand curve for butter moves to the right.

d. The demand curve for margarine moves to the left.

12. Why is perfect competition among businesses rare?

a. Most businesses are small.

b. Most businesses produce commodities.

c. Most businesses face barriers to entry.

d. Most businesses require government control.

13. How does elasticity affect a company's pricing policy?

a. If demand is inelastic, the company knows that an increase in price would reduce total revenues.

b. If demand is elastic at the current price, the company knows that an increase in price would reduce total revenues.

c. If demand is unitary elastic, the company knows that a decrease in price would decrease total revenues.

d. If demand is unitary elastic, the company knows that an increase price would increase total revenues.

14. What does a company generally do when demand for its goods goes up?

a. It rations goods.

b. It raises prices.

c. It cuts prices.

d. There is no set response.

15. During World War II, the United States used rationing to

a. limit production.

b. meet tremendous shortages.

c. give away goods.

d. stop the black market.

16. If a firm raises the price of a product with elastic demand, what will happen to total revenue?

a. It increases.

b. It decreases.

c. It is unitary.

d. It stays the same