Download Econ Chapter 4-6 Study Guide

Econ Chapter 4-6 Study Guide
Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
____
1. For most products and services, increased price results in
____
2. An increase in the price of milk causes a decrease in the demand for cereal. The two products are
____
3. Because a modest price increase has little or no effect, the demand for the product is
____
4. Consumers' willingness to replace a costly item with a less costly item is an example of
____
5. An increase in the price of cameras results in a decrease in the demand for film. The two products are
____
6. When a customer's need for a product is not urgent, demand tends to be
____
7. Total cost is the sum of the
____
8. When producers offer fewer products for sale at each and every price,
____
9. Rent payments and property taxes would be counted as
____ 10. Many businesses are engaging in e-commerce because
____ 11. Profits will be maximized when marginal revenue
____ 12. Which of the following is NOT a reason why prices effectively perform the allocation function?
____ 13. In a market economy, a high price is a signal for
____ 14. At a given price, a surplus occurs when
____ 15. The federal minimum wage law demonstrates
____ 16. When economic or political conditions are unstable,
____ 17. Prices enable a market economy to adjust to unexpected events by
____ 18. All of the following are characteristics of allocation by rationing EXCEPT
____ 19. If a competitive market is at equilibrium, and if there is a sudden increase in demand, then a temporary
____ 20. The theory of competitive pricing
____ 21. Deficiency payments are part of a federal program to assist
Completion
Complete each sentence or statement.
22. The income effect and ____________________ effect can cause a change in the quantity demanded.
23. A successful advertising campaign can cause a change in ____________________ which in turn causes a
shift in the demand curve.
24. When demand decreases, the demand curve shifts to the ____________________.
25. Computers and software are examples of ____________________ goods.
26. The ____________________ demand curve is the sum of all individual demand curves.
27. When a consumer's need for a product is urgent and cannot be put off, demand for the product is usually
____________________.
28. The ____________________ test can be used to estimate demand elasticity.
29. Demand ____________________ relates changes in the quantity demanded to changes in price.
30. When a purchase requires a large portion of income, demand for the product is usually
____________________.
31. Demand is unit elastic if a change in price causes a ____________________ change in quantity
demanded.
32. Because of the ____________________, you'll feel wealthier if the price of entertainment drops.
33. Liters of soda are ____________________ because a small change in price causes a large change in the
quantity demanded.
34. The study of how prices are determined and how individual economic decisions are made is
____________________.
35. The ____________________ states that the quantity demanded for a good or service varies inversely with
its price.
36. After you've had a certain amount of your favorite food, your enjoyment lessens. This is an example of
______________________________.
37. Hot dogs and buns are ____________________ because they are used together.
38. The ____________________ shifts to the left if demand for a product decreases.
39. Beef and pork are ____________________ because they can be used in place of each other.
40. The demand for prescription medicine is generally ____________________ because people must have it,
and they will purchase it in the same amount whether the price goes up or down.
41. You create ____________________ for a product when you wish to purchase it and have the money to do
so.
42. The ____________________ is a period of production in which producers can adjust the quantities of
their resources, including capital.
43. The Law of Variable Proportions states that in the ____________________, output will change as one
input is varied while the others are held constant.
44. The three stages of production are: increasing returns, ____________________ returns, and negative
returns.
45. A production function describes the relationship between changes in output to different amounts of a
single input while other inputs are held ____________________.
46. The theory of production deals with the relationship between _________________________ and the
output of goods and services.
47. ____________________ serve as signals to both producers and consumers.
48. Prices have the advantages of neutrality, ____________________, efficiency, and clarity.
49. ____________________ prices are signals for businesses to produce more and for consumers to buy less.
50. Problems with ____________________ include fairness, high administrative costs, and diminished
incentives to work and produce.
51. A change in price affects the allocation of resources between ____________________.
52. Some economists argue that the ____________________ actually increases the number of people who do
not have jobs.
53. Target prices, or ____________________, can create surpluses of agricultural crops.
54. A price ____________________ is the maximum legal price that can be charged for a product.
55. In the 1930s the U.S. government sought to solve the problem of agricultural surpluses by giving farmers
a ____________________ to cover the difference between the market price and target price.
56. Governments interfere in the market economy to help achieve the social goals of ____________________
and security.
57. During times of emergency, the government may establish ____________________ in order to ensure the
fair distribution of certain products.
58. A shortage or surplus signals producers to adjust their output until the _________________________ is
reached, the point at which the quantity supplied equals the quantity demanded.
59. The ____________________, or monetary value of an item, is determined by supply and demand.
60. To ensure the economic stability of the nation's farms, the Commodity Credit Corporation will sometimes
establish a ____________________.
61. Sometimes governments impose a ____________________ to artificially control how high prices will go.
62. When producers are left with a ____________________ of products, they may reduce prices.
63. A ____________________ makes up the difference between the actual market price and the target price.
64. Producers do not like to see a ____________________ in the market because that means they could have
sold more product if they had supplied more.
65. The minimum wage is the ____________________ for wages in the United States.
66. To stimulate sales, a manufacturer may offer a temporary price reduction by providing a
____________________.
Matching
____
____
____
____
____
____
____
____
____
____
67.
68.
69.
70.
71.
72.
73.
74.
75.
76.
demand
marginal utility
demand schedule
elasticity
substitutes
elastic
microeconomics
unit elastic
change in quantity demanded
substitution effect
____
____
____
____
____
____
____
____
____
____
77.
78.
79.
80.
81.
82.
83.
84.
85.
86.
demand curve
change in demand
Law of Demand
complements
market demand curve
demand elasticity
microeconomics
inelastic
diminishing marginal utility
income effect
____
____
____
____
____
____
____
____
____
____
87.
88.
89.
90.
91.
92.
93.
94.
95.
96.
supply
fixed cost
supply curve
variable cost
total revenue
quantity supplied
raw materials
break-even point
subsidy
long run
____
____
____
____
____
____
____
____
____
____
97.
98.
99.
100.
101.
102.
103.
104.
105.
106.
Law of Supply
short run
overhead
market supply curve
Law of Variable Proportions
change in supply
total cost
supply elasticity
marginal cost
total product
____
____
____
____
____
____
____
____
____
____
107.
108.
109.
110.
111.
112.
113.
114.
115.
116.
price
price ceiling
ration coupon
target price
economic model
deficiency payment
market equilibrium
shortage
surplus
equilibrium price
Short Answer
117.
Synthesizing Information Explain how changes in consumer tastes and consumer
incomes affect demand.
118.
Analyzing Information What are three reasons that consumer demand changes?
119.
Analyzing Information What are three determinants of demand elasticity? Give an
example of each.
120.
Making Predictions A farmer purchases a new type of seed corn that will reduce her
need for pesticides by two-thirds. The new seed is only slightly more expensive than
the type she has planted in the past. What effect might this new technology have on
her production? Explain.
121.
Analyzing Information Jon opens a video rental store. What factors should he
consider in making his decision on what hours to operate each day? What hours would
you recommend? Why?
122.
Making Predictions The producer of a popular computer game believes that a chief
competitor will introduce a new, more appealing game within the next six months.
What is likely to happen to the price and popularity of the game? What might be an
effective immediate response to this expectation?
Essay
123.
Understanding Cause and Effect Explain how an understanding of elasticity can
help business owners determine the most profitable prices to set for their products.
124.
Synthesizing Information Explain the income effect and how it is related to the Law
of Demand.
125.
Determining Cause and Effect What are two examples of how the government
has set prices? Describe the results of each.