1. )The price system is an important component of the market because it _____.(1 point)

a. ensures that producers are able to profit

b. coordinates the activities of producers, consumers, and owners of resource

c. prevents spillover effects from occurring

d. guarantees that consumers get the goods that they want

2.) A recent diet trend has made snack cakes far less popular than they once were. As such, demand for snack cakes is expected to fall. As demand falls, _____.(1 point)

a. producers make lower profits, and some will exit the market

b. consumers face higher prices, and are encouraged to consume less

c. consumers face lower prices, and are encouraged to consume more

d. producers make higher profits, and more will enter the market

3.) In a free market economy, what signal do high prices send?(1 point)

a. Producers should supply more and consumers should buy less.

b. The government should intervene to protect consumers.

c. Producers should supply less and consumers should buy less.

d. Producers should supply less and consumers should buy more.

4.) Falling oil prices would significantly lower the cost of production for many goods. Producers of plastic kayaks, for instance, would be able to produce larger quantities of their product given the decrease in input costs. Which of the following illustrates how consumers respond to the price incentive brought about by the subsequent increase in supply?(1 point)

a. Rising prices lead consumers to purchase more kayaks.

b. Rising prices lead consumers to purchase fewer kayaks.

c. Falling prices lead consumers to purchase fewer kayaks.

d. Falling prices lead consumers to purchase more kayaks.

5.) Forest fires have inflicted significant damage to a region, leaving several paper mills destroyed in their wake. As such, the supply of paper in the region has been significantly reduced. Without government intervention, which of the following is likely to occur?(1 point)

a. A surplus of paper will persist unless government action is taken to decrease paper production in the region.

b. A shortage of paper will persist indefinitely unless government action is taken to increase paper production in the region.

c. A temporary surplus of paper will be remedied as consumers bid down prices, and paper production decreases due to the loss of profits associated with falling prices.

d. A temporary shortage of paper will be remedied as consumers bid up prices, and paper production increases due to the rising profits associated with higher prices.