Question 1

The development of monopoly power that provides a seller with pricemaking
Power is an example of:

Accepted Answer

A)   a market imperfection
B)   a market failure
C)   dynamic instability
D)   an ethical contradiction
E)   none of the above

Question 2

In the long run the supply of any particular product tends to be increasingly inelastic.

Accepted Answer

A) True 
 B)False

Question 3

List and explain the fundamental assumptions about individual and business behaviors that are central to the economic analyses set out by Adam Smith and other defenders of Classical Economics Ideology.

Accepted Answer

The fundamental assumptions about individual and business behaviors central to the economic analyses set out by Adam Smith and other defenders of Classical Economics Ideology include:

1. Rational self-interest: Individuals and businesses are assumed to act in their own self-interest, seeking to maximize their own utility or profit. This assumption forms the basis for the concept of the invisible hand, where individual pursuit of self-interest leads to overall economic prosperity.

2. Rational decision-making: Individuals and businesses are assumed to make rational decisions based on a careful consideration of costs and benefits. This assumption underpins the idea that markets will naturally reach equilibrium as supply and demand adjust to reflect rational decision-making.

3. Competition: Classical economists assume that markets are characterized by competition, with many buyers and sellers. This assumption leads to the belief that competition will lead to efficient allocation of resources and optimal outcomes for society as a whole.

4. Laissez-faire: Classical economists assume that minimal government intervention in the economy is necessary, as they believe that markets will naturally self-regulate and achieve optimal outcomes. This assumption is based on the idea that individuals and businesses are best equipped to make decisions for themselves without government interference.

These fundamental assumptions about individual and business behaviors form the basis for the economic analyses put forth by Adam Smith and other defenders of Classical Economics Ideology. They provide the theoretical framework for understanding how markets work and how individuals and businesses interact within them.

Question 4

The law of demand holds that:

Accepted Answer

A)   prices and quantity demanded are directly related
B)   price and quantity demanded have no relationship
C)   the demand curve is upward sloping to the right
D)   quantity demanded will rise if price falls
E)   none of the above

Question 5

Tennis balls and tennis racquets are a good example of:

Accepted Answer

A)   inferior goods
B)   capital goods
C)   substitute goods
D)   complementary goods
E)   none of the above

Question 6

Use the supply and demand curves in the following diagram to answer the next five questions.
 1 B)  P2 C)  P3 D)  none of the above" class="answers-bank-image d-inline" rel="preload" >
-A ceiling price that causes a shortage is best represented by:

Accepted Answer

A)   P1
B)   P2
C)   P3
D)   none of the above

Question 7

Diminishing marginal utility means:

Accepted Answer

A)   a consumer realizes less additional satisfaction as additional units are consumed
B)   a consumer realizes more satisfaction as additional units are consumed
C)   the product becomes less useful when bought in large quantities
D)   a market equilibrium may be in doubt

Question 8

Summarize the logic of those who argue that a market economy will provide better results than those obtained through efforts at intervention in the working of the market.

Accepted Answer

Those who argue that a market economy will provide better results than intervention believe that the free market is the most efficient allocator of resources. They argue that when left to operate without government interference, market forces of supply and demand will naturally lead to optimal outcomes. They believe that competition in the market will drive innovation, lower prices, and increase consumer choice. They also argue that government intervention, such as regulations and subsidies, can distort market signals and lead to inefficiencies. Additionally, they believe that individuals and businesses are best equipped to make decisions about their own economic activities, and that government intervention can stifle individual freedom and entrepreneurship. Overall, proponents of a market economy argue that it will lead to greater economic growth, prosperity, and overall welfare compared to efforts at intervention in the working of the market.

Question 9

Consider the various factors that determine the demand for and supply of "normal good" X. How would the price and equilibrium output of that good be affected by the following developments (be sure to explain the reasoning you have used):
a. The economy seems to be entering an inflationary period.
b. Consumer incomes are rising.
c. Labor productivity is increasing.
d. The price of substitute goods is falling.

Accepted Answer

The demand for and supply of a "normal g...

Question 10

Mr. McConnell observes that when his publisher raises the price of his textbook
The publisher's revenue goes up and he receives a larger royalty check. He may safely conclude that:

Accepted Answer

A)   the demand for the textbook is falling
B)   the demand for the textbook is elastic
C)   the demand for the textbook is unit elastic
D)   the demand for the textbook is inelastic

Question 11

Inferior goods differ from normal goods in that as our income rises we are more
 likely to increase inferior goods consumption and lower normal goods consumption.

Accepted Answer

A) True 
 B)False

Question 12

Ordinarily, the expectation that prices will fall in the future should spur current
 consumer spending.

Accepted Answer

A) True 
 B)False

Question 13

A good way to raise revenue is to raise the price of goods that have elastic
 demand.

Accepted Answer

A) True 
 B)False

Question 14

Changes in demand may be accounted for by changes in a number of nonprice
 determinants of demand (such as consumer tastes, number of consumers,
 expectations, etc.), but changes in quantity demanded are only the result of price changes.

Accepted Answer

A) True 
 B)False

Question 15

Those goods whose demand tends to be more inelastic over a given price range
 are probably goods for which there are few substitutes.

Accepted Answer

A) True 
 B)False  True

Question 16

Which of the following events could be expected to produce an increase, ceteris
Paribus, in the sales of college economics textbooks?

Accepted Answer

A)   an increase in the number of economic textbook companies
B)   a decrease in the price of textbook publication costs
C)   an increase in economics majors
D)   all of the above
E)   none of the above

Question 17

Explain the concept of "elasticity of demand." Of the following items, which would you expect to have a more elastic demand and which a more inelastic demand? Why?
Salt
Sugar
New Ford Focuses
Restaurant meals
Cigarettes
Shoes
On-demand movies
Mobile phones

Accepted Answer

The concept of "elasticity of demand" re...

Question 18

The law of supply states that the relationship between price and quantity supplied
In a given time period is

Accepted Answer

A)   negative
B)   inverse
C)   direct
D)   indeterminate

Question 19

Adam Smith maintained that all of the following were essential to a market
Economic system except:

Accepted Answer

A)   private property
B)   freedom of choice
C)   a large and powerful national government
D)   the exercise of rational, maximizing behavior by all market participants
E)   competition

Question 20

The principal determinant of the elasticity of supply of a particular good is time.

Accepted Answer

A) True 
 B)False

Exam 2: The Market Economy: Pure and Simple

The development of monopoly power that provides a seller with pricemaking Power is an example of:

Correct Answer
verified

In the long run the supply of any particular product tends to be increasingly inelastic.

Correct Answer
verified

List and explain the fundamental assumptions about individual and business behaviors that are central to the economic analyses set out by Adam Smith and other defenders of Classical Economics Ideology.

The law of demand holds that:

Correct Answer
verified

Tennis balls and tennis racquets are a good example of:

Correct Answer
verified

Use the supply and demand curves in the following diagram to answer the next five questions. -A ceiling price that causes a shortage is best represented by:

Correct Answer
verified

Diminishing marginal utility means:

Correct Answer
verified

Summarize the logic of those who argue that a market economy will provide better results than those obtained through efforts at intervention in the working of the market.

Correct Answer
Answered by ExamLex AI
The demand for and supply of a "normal g...
View Answer

Mr. McConnell observes that when his publisher raises the price of his textbook The publisher's revenue goes up and he receives a larger royalty check. He may safely conclude that:

Correct Answer
verified

Inferior goods differ from normal goods in that as our income rises we are more likely to increase inferior goods consumption and lower normal goods consumption.

Correct Answer
verified

Ordinarily, the expectation that prices will fall in the future should spur current consumer spending.

Correct Answer
verified

A good way to raise revenue is to raise the price of goods that have elastic demand.

Correct Answer
verified

Changes in demand may be accounted for by changes in a number of nonprice determinants of demand (such as consumer tastes, number of consumers, expectations, etc.), but changes in quantity demanded are only the result of price changes.

Correct Answer
verified

Those goods whose demand tends to be more inelastic over a given price range are probably goods for which there are few substitutes.

Correct Answer
verified
True

Which of the following events could be expected to produce an increase, ceteris Paribus, in the sales of college economics textbooks?

Correct Answer
verified

Explain the concept of "elasticity of demand." Of the following items, which would you expect to have a more elastic demand and which a more inelastic demand? Why? Salt Sugar New Ford Focuses Restaurant meals Cigarettes Shoes On-demand movies Mobile phones

Correct Answer
Answered by ExamLex AI
The concept of "elasticity of demand" re...
View Answer

The law of supply states that the relationship between price and quantity supplied In a given time period is

Correct Answer
verified

Adam Smith maintained that all of the following were essential to a market Economic system except:

Correct Answer
verified

The principal determinant of the elasticity of supply of a particular good is time.

Correct Answer
verified

Exam 2: The Market Economy: Pure and Simple

The development of monopoly power that provides a seller with pricemaking Power is an example of:

Correct AnswerverifiedShow Answer

In the long run the supply of any particular product tends to be increasingly inelastic.

Correct AnswerverifiedShow Answer

List and explain the fundamental assumptions about individual and business behaviors that are central to the economic analyses set out by Adam Smith and other defenders of Classical Economics Ideology.

The law of demand holds that:

Correct AnswerverifiedShow Answer

Tennis balls and tennis racquets are a good example of:

Correct AnswerverifiedShow Answer

Use the supply and demand curves in the following diagram to answer the next five questions. -A ceiling price that causes a shortage is best represented by:

Correct AnswerverifiedShow Answer

Diminishing marginal utility means:

Correct AnswerverifiedShow Answer

Summarize the logic of those who argue that a market economy will provide better results than those obtained through efforts at intervention in the working of the market.

Correct AnswerAnswered by ExamLex AIThe demand for and supply of a "normal g...View AnswerShow Answer

Mr. McConnell observes that when his publisher raises the price of his textbook The publisher's revenue goes up and he receives a larger royalty check. He may safely conclude that:

Correct AnswerverifiedShow Answer

Inferior goods differ from normal goods in that as our income rises we are more likely to increase inferior goods consumption and lower normal goods consumption.

Correct AnswerverifiedShow Answer

Ordinarily, the expectation that prices will fall in the future should spur current consumer spending.

Correct AnswerverifiedShow Answer

A good way to raise revenue is to raise the price of goods that have elastic demand.

Correct AnswerverifiedShow Answer

Changes in demand may be accounted for by changes in a number of nonprice determinants of demand (such as consumer tastes, number of consumers, expectations, etc.), but changes in quantity demanded are only the result of price changes.

Correct AnswerverifiedShow Answer

Those goods whose demand tends to be more inelastic over a given price range are probably goods for which there are few substitutes.

Correct AnswerverifiedTrue

Which of the following events could be expected to produce an increase, ceteris Paribus, in the sales of college economics textbooks?

Correct AnswerverifiedShow Answer

Explain the concept of "elasticity of demand." Of the following items, which would you expect to have a more elastic demand and which a more inelastic demand? Why? Salt Sugar New Ford Focuses Restaurant meals Cigarettes Shoes On-demand movies Mobile phones

Correct AnswerAnswered by ExamLex AIThe concept of "elasticity of demand" re...View AnswerShow Answer

The law of supply states that the relationship between price and quantity supplied In a given time period is

Correct AnswerverifiedShow Answer

Adam Smith maintained that all of the following were essential to a market Economic system except:

Correct AnswerverifiedShow Answer

The principal determinant of the elasticity of supply of a particular good is time.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
Answered by ExamLex AI
The demand for and supply of a "normal g...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
True

Correct Answer
verified

Correct Answer
Answered by ExamLex AI
The concept of "elasticity of demand" re...
View Answer

Correct Answer
verified

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Correct Answer
verified