Principles_of_Economics_Robert_Frank_7th_Edition__Test_Bank

Principles of Economics Robert Frank 7th Edition- Test Bank Chapter 3 Supply and Demand 1) If a country’s economic decisions are made by an individual or small number of individuals, then it has a: 1. A) centralized economy. 2. B) free-market economy. 3. C) capitalist economy. 4. D) open economy. Accessibility: Keyboard Navigation 2) A good example of central planning at work in the U.S. is: 1. A) car manufacturers establishing suggested retail prices. 2. B) McDonald’s fries being the same everywhere. 3. C) unions working with businesses to establish wages. 4. D) New York City’s rent control program. 3) The entire group of buyers and sellers of a particular good or service makes up: 1. A) the demand curve. 2. B) the supply curve. 3. C) a market. 4. D) the equilibrium price and quantity. 4) Suppose you bought three tickets to a concert in advance at the University ticket window. At the last minute one friend cancelled, so you could use only two of the tickets. You sold the third ticket just outside the entrance to the concert for more than the price you had originally paid. Which transaction occurred in a market? 1. A) The advance purchase at the University was the only market transaction. 2. B) The sale that occurred at the concert entrance was the only market transaction. 3. C) Both the purchase at the University ticket window and the sale at the concert entrance were market transactions. 4. D) Neither the purchase at the University ticket window nor the sale at the concert entrance was a market transaction. 5) Suppose you camped out in front of an electronics store to be one of the 200 lucky people able to purchase the latest gaming system. You bought the system for $350. Two weeks later you see that the same system can be sold on e-Bay for $600, so you sell your system. Your market role was as a: 1. A) consumer in both markets. 2. B) consumer at the electronics store and a seller on e-Bay. 3. C) consumer at the electronics store; the e-Bay transaction did not occur in a market. 4. D) seller in both markets. 6) To understand how the price of a good is determined in a free market, one must account for the desires of: 1. A) buyers. 2. B) sellers. 3. C) governmental agencies. 4. D) buyers and sellers. 7) Buyers and sellers of a particular good make up the: 1. A) market for the good. 2. B) demand for the good. 3. C) supply for the good. 4. D) production possibilities curve for the good. 8) “All else constant, consumers will purchase more of a good as the price falls.” This statement reflects the behavior underlying: 1. A) the demand curve. 2. B) a change in demand. 3. C) the supply curve. 4. D) a change in supply. 9) The demand curve illustrates the fact that consumers tend to purchase: 1. A) more of a good as it becomes more popular. 2. B) name-brand products more frequently than generic products. 3. C) more of a good as its price falls. 4. D) more of a good as their incomes rise. 10) Which of the following is NOT true of a demand curve? 1. A) It has negative slope. 2. B) It shows the amount consumers want to buy at various prices. 3. C) It relates the price of an item to the quantity demanded of that item. 4. D) It reflects sellers’ reservations prices. 11) A demand curve is sloping because . 1. A) downward; of increasing opportunity costs 2. B) upward; people prefer to purchase high-quality consumer goods 3. C) downward; reservation prices tend to fall over time 4. D) downward; fewer people are willing to buy an item at higher prices 12) As coffee becomes more expensive, Joe starts drinking tea instead of coffee. This is called: 1. A) the income effect of a price change. 2. B) a decrease in reservation price. 3. C) the substitution effect of a price change. 4. D) a decrease in demand. 13) Suppose that as the price of apples rises, people switch from eating apples to eating oranges. This is known as: 1. A) the normal effect of a price change. 2. B) the income effect of a price change. 3. C) a decrease in the demand for apples. 4. D) the substitution effect of a price change. 14) You can spend $10 for lunch and you would like to purchase two cheeseburgers. When you get to the restaurant, you find out the price for cheeseburger has increased from $5 to $6, so you decide to purchase just one cheeseburger. This is best described as: 1. A) the substitution effect of a price change. 2. B) the income effect of a price change. 3. C) a decrease in the buyer’s reservation price. 4. D) an increase in the buyer’s reservation price. 15) After the price of Revlon nail polish increased, Jen stopped buying Revlon nail polish and started buying a cheaper brand of nail polish instead. This is called: 1. A) the substitution effect of a price change. 2. B) the income effect of a price change. 3. C) a decrease in the buyer’s reservation price. 4. D) a decrease in the seller’s reservation price. 16) When the price of a good changes, the amount of that good that buyers wish to buy changes: 1. A) solely because of the substitution effect. 2. B) solely because of the income effect. 3. C) because of both the substitution and the income effects. 4. D) only if the substitution effect and the income effect do not cancel out each other. ...................................................continued.....................................................