1.Which of the following is not a characteristic of a perfectly competitive market?

a.Sellers set the price of the product.

b. There are many sellers.

c.Buyers must accept the price the market determines.

d. All of the above are characteristics of a perfectly competitive market.

1.If a study by medical researchers finds that eating brown rice causes weight loss while eating white rice causes weight gain, then we likely would see

a.an increase in demand for brown rice and a decrease in demand for white rice.

b.a decrease in demand for brown rice and an increase in demand for white rice.

c.an increase in demand for both brown and white rice.

d.no change in demand for either type of rice because weight loss is not a determinant of demand.

2.Workers at a bicycle assembly plant currently earn the mandatory minimum wage. If the federal government increases the minimum wage by $1.00 per hour, then it is likely that the

a.demand for bicycle assembly workers will increase.

b.supply of bicycles will shift to the right.

c.supply of bicycles will shift to the left.

d.firm must increase output to maintain profit levels.

3.Equilibrium price must increase when demand

a.increases and supply does not change, when demand does not change and supply decreases, and when demand decreases and supply increases simultaneously.

b.increases and supply does not change, when demand does not change and supply decreases, and when demand increases and supply decreases simultaneously.

c.decreases and supply does not change, when demand does not change and supply increases, and when demand decreases and supply increases simultaneously.

d.decreases and supply does not change, when demand does not change and supply increases, and when demand increases and supply decreases simultaneously.

4.If a surplus exists in a market, then we know that the actual price is

a.above the equilibrium price, and quantity supplied is greater than quantity demanded.

b.above the equilibrium price, and quantity demanded is greater than quantity supplied.

c.below the equilibrium price, and quantity demanded is greater than quantity supplied.

d.below the equilibrium price, and quantity supplied is greater than quantity demanded.

5.What would happen to the equilibrium price and quantity of latts if the cost of producing steamed milk, which is used to make latts, rises?

a.Both the equilibrium price and quantity would increase.

b.Both the equilibrium price and quantity would decrease.

c.The equilibrium price would increase, and the equilibrium quantity would decrease.

d.The equilibrium price would decrease, and the equilibrium quantity would increase.

6.Saddle shoes are not popular right now, so very few are being produced. If saddle shoes become popular, then how will this affect the market for saddle shoes?

a.The supply curve for saddle shoes will shift right, which will create a shortage at the current price. Price will increase, which will decrease quantity demanded and increase quantity supplied. The new market equilibrium will be at a higher price and higher quantity.

b.The supply curve for saddle shoes will shift right, which will create a surplus at the current price. Price will decrease, which will increase quantity demanded and decrease quantity supplied. The new market equilibrium will be at a lower price and higher quantity.

c.The demand curve for saddle shoes will shift right, which will create a shortage at the current price. Price will increase, which will decrease quantity demanded and increase quantity supplied. The new market equilibrium will be at a higher price and higher quantity.

d.The demand curve for saddle shoes will shift right, which will create a surplus at the current price. Price will decrease, which will increase quantity demanded and decrease quantity supplied. The new market equilibrium will be at a lower price and higher quantity.

7.The market for diamond rings is closely linked to the market for high-quality diamonds. If a large quantity of high- quality diamonds enters the market, then the

a.supply curve for diamond rings will shift right, which will create a shortage at the current price. Price will increase, which will decrease quantity demanded and increase quantity supplied. The new market equilibrium will be at a higher price and higher quantity.

b.supply curve for diamond rings will shift right, which will create a surplus at the current price. Price will decrease, which will increase quantity demanded and decrease quantity supplied. The new market equilibrium will be at a lower price and higher quantity.

c.demand curve for diamond rings will shift right, which will create a shortage at the current price. Price will increase, which will decrease quantity demanded and increase quantity supplied. The new market equilibrium will be at a higher price and higher quantity.

d.demand curve for diamond rings will shift right, which will create a surplus at the current price. Price will decrease, which will increase quantity demanded and decrease quantity supplied. The new market equilibrium will be at a lower price and higher quantity.