Micro-Economics Test Review

Kenneth needed a new shirt for the football game this Friday. He went to the mall and purchased a shirt from H&M. Which market does Kenneth receive his wages to purchase the shirt?

• product market
• factor market 
• firms 
• household

How do individuals contribute to the circular flow of economic activity? 

• Businesses buy goods and services from individuals
• Businesses purchase productive resources in product markets
• Individuals provide labor for factor markets and buy goods in product markets
• Individuals buy productive resources from factor markets and provide labor for product markets

The principle that consumers tend to buy less of a good or service when its price increases, all else held equal, is called

• a.  the law of supply
• a.  the law of demand
• a.  the law of increasing cost
• a.  the law of maximum satisfaction

What is the relationship between quantity supplied and price?

• a.  They are not related.
• a.  They are directly related.
• They are inversely related
• They are related through demand.

How do supply and demand influence market price?

• Supply determines market price because the seller sets the price.
• The price is determined by the highest price consumers are willing to pay.
• The price is determined by the lowest price producers are willing to accept.
• The market clearing price is where quantity demanded is equal to quantity supplied.

According to the graph, what is the quantity at equilibrium?

• 14
• 400
• 600
• 1200

If OPEC decided to cut oil production for the coming year, what would be the MOST LIKELY effect?

• a.  prices would not change
• a.  oil prices would probably rise
• a.  oil prices would probably decline
• a.  the price for substitute products would decline

Which factor might cause an increase in the supply of a product?

• a.  A decrease in productivity 
• a.  Fewer sellers in the marketplace 
• a.  A decrease in government regulations
• a.  An increase in the cost of raw materials

Consumers are told that the consumption of cauliflower will significantly reduce the risk of cancer. Which of these scenarios is likely to happen in the cauliflower market? 

• The demand curve will shift to the left and the price of cauliflower will fall
• a.   The supply curve will shift to the right and the price of cauliflower will rise
• a.   The supply curve will shift to the right and the price of cauliflower will fall
• a.  The demand curve will shift to the right and the price of cauliflower will rise

If a local government sets an apartment rent control price below the equilibrium, what is the MOST LIKELY outcome?

• a.  The demand and supply will increase.
• a.  The increased supply will create a surplus.
• a.  The increased demand will create a shortage.
• a.  The demand will decrease and the supply will increase.