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Microeconomics — Test Answers

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Natural monopolies occur when one producer

A
creates unique products.
B
can meet the market’s entire demand.
C
is the only one authorized to produce a given product.
D
controls the method of production.
2
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Which best describes how specialized producers decrease their opportunity costs?

A
by increasing production of certain items
B
by reducing production costs
C
by focusing on target markets
D
by limiting the types of goods produced
3

Which best describes how the government sanctions technological monopolies?

A
by issuing a patent for the technology
B
by creating the technology itself
C
by prohibiting others from entering the market
D
by authorizing one producer
4

On a graph, an equilibrium point is where

A
a supply curve is higher than a demand curve.
B
a supply curve and a demand curve meet.
C
the supply and demand curves head down.
D
the supply and demand curves head up.
5

Which is the best measurement to use to determine who might have the absolute advantage?

A
low opportunity cost
B
high opportunity cost
C
low efficiency
D
high efficiency
6

Excess supply is created when price or [Dropdown 1] move away from the equilibrium point.

Answer:

quantity

7

Why is pure competition considered an unsustainable system?

A
Price differentiation is often too minimal to matter.
B
Producers cannot make a profit if they keep dropping their prices.
C
Consumers cannot distinguish between products.
D
Few barriers exist to entry, meaning that the market inevitably floods.
8

Brenda’s Boards manufactures skateboards. Each skateboard sells for $45 and includes the following expenses: $3 for the wheels and mounts, $1 for the plastic board, $1 for the paint, and $10 for the labor. What is the total profit the company earns after selling 100 boards?

A
$300
B
$3,000
C
$3,500
D
$350
9

A market supply schedule shows

A
how prices affect a single producer.
B
how prices affect a group of consumers.
C
the products of two companies only.
D
the prices and quantity in an entire market.
10

Goods that are considered to be needs tend to be

A
elastic when the price changes.
B
elastic when the supply changes.
C
inelastic when the supply changes.
D
inelastic when the price changes.
11

Which best describes the availability of substitutes in a monopoly?

A
Price points vary.
B
There are no substitutes.
C
There are different brands.
D
Products have different features.
12

Which is an example of a product that is considered a need?

A
video game
B
sports equipment
C
breakfast food
D
music player
13

According to the law of supply, price and quantity move

A
along a track in opposite directions.
B
from different points toward one another.
C
along a track in the same direction.
D
from the same point away from one another.
14

Which calculation helps determine which producer has the absolute advantage?

A
Amount produced minus resources used
B
Amount produced divided by resources used
C
Resources used divided by amount produced
D
Resources used multiplied by amount produced
15

In economics, if a good is inelastic,

A
its supply or demand is not sensitive to price changes.
B
consumers have lost an interest in purchasing it.
C
producers have lost an interest in manufacturing it.
D
its supply or demand is too sensitive to price changes.
16

Brenda’s Boards manufactures skateboards. Each skateboard sells for $45 and includes the following expenses: $3 for the wheels and mounts, $1 for the plastic board, $1 for the paint, and $10 for the labor. What is the total revenue the company makes after selling 10 boards?

A
$350
B
$450
C
$300
D
$400
17

The total amount of a product available in a market at a given price is called the

A
number.
B
demand.
C
count.
D
supply.
18

When supply is higher than demand, prices will

A
fall until the demand rises.
B
rise until the demand falls.
C
rise until the supply falls.
D
fall until the supply rises.
19

Which statements correctly explain price floors and price ceilings? Choose four correct answers.

A
Price floors help producers by raising prices.
B
Ineffective price ceilings tend to be too low.
C
Effective price floors are set above equilibrium.
D
Effective price ceilings are set below equilibrium.
E
Price ceilings help consumers by lowering prices.
F
Ineffective price floors tend to be too high.
20

Supply and demand coordinate to determine prices by working

A
together.
B
with other factors.
C
competitively.
D
separately.

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