AnswersEconomicsThe American Market Economy

The American Market Economy — Test Answers

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21
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In economics, if a good is inelastic,

A
its supply or demand is too sensitive to price changes.
B
its supply or demand is not sensitive to price changes.
C
consumers have lost an interest in purchasing it.
D
producers have lost an interest in manufacturing it.
22
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Profit equals the total amount of money made minus

A
revenue.
B
prices.
C
supply.
D
expenses.
23

Natural monopolies occur when one producer

A
can meet the market’s entire demand.
B
creates unique products.
C
controls the method of production.
D
is the only one authorized to produce a given product.
24

According to the law of supply, price and quantity move

A
from different points toward one another.
B
along a track in the same direction.
C
from the same point away from one another.
D
along a track in opposite directions.
25

Which best describes how the government sanctions technological monopolies?

A
by creating the technology itself
B
by issuing a patent for the technology
C
by authorizing one producer
D
by prohibiting others from entering the market
26

Banks make the most money and take the most risk with an interest rate of

A
5 percent.
B
10 percent.
C
15 percent
D
18 percent.
27

In what year did consumers get the best deal on a mortgage?

A
1978
B
1980
C
1982
D
1983
28

According to the chart, the marginal revenue

A
remains the same as production increases.
B
falls to zero dollars as production increases.
C
increases by ten dollars as production increases.
D
decreases by ten dollars as production increases.
29

A conclusion that can be drawn from both graphs by looking at 1983 is that interest rates

A
bottomed out, while home starts peaked.
B
peaked, while home starts bottomed out.
C
climbed, which led to fewer home starts.
D
dropped, which led to more home starts.
30

How many goods must be supplied to achieve equilibrium?

A
20
B
30
C
15
D
25
31

This graph demonstrates how

A
the amount consumed slightly changes with the price.
B
the amount produced greatly changes with the price.
C
the amount produced slightly changes with the price.
D
the amount consumed greatly changes with the price.
32

Based on the graph, which event could cause the change shown?

A
A product becomes more popular and more customers purchase it.
B
A product is restocked on store shelves and is ready for customer purchase.
C
A product becomes less popular and fewer customers purchase it.
D
A product sells out of stores and customers can no longer purchase it.
33

This chart shows the link between

A
amount of a product and the price a producer pays.
B
interest in a product and the price a consumer pays.
C
amount of a product and the price a consumer pays.
D
interest in a product and the price a producer pays.
34

What does "P" represent on the graph?

A
the price at the equilibrium point
B
the point where supply and demand drop
C
the point where equilibrium is achieved
D
the average price of goods sold
35

On this graph, what does the green arrow represent?

A
an effective price ceiling set below equilibrium causing a shortage
B
an effective price floor set below equilibrium causing a shortage
C
an ineffective price ceiling set above equilibrium causing a surplus
D
an ineffective price floor set above equilibrium causing a surplus
36

What does "Q” represent on the graph?

A
the quantity at the equilibrium point
B
the point where equilibrium is achieved
C
the point where supply and demand drop
D
the average cost of goods sold
37

The point of maximum profit is the point at which the marginal cost equals the

A
production cost.
B
marginal revenue.
C
market price.
D
total revenue.
38

Which aspect of monopolistic competition gives consumers more choice?

A
Few barriers to market entry exist.
B
Price is not an important factor.
C
Producers are more concerned about selection than profits.
D
Producers rely on consumer decisions to succeed.
39

How can producers maximize their profit? Choose three correct answers.

A
They can work to increase their marginal cost.
B
They can raise prices to increase marginal revenue.
C
They can lower prices to decrease marginal revenue.
D
They can keep marginal revenues below marginal costs.
E
They can keep marginal costs below marginal revenues.
F
They can work to decrease their marginal cost.
40

Why is pure competition considered an unsustainable system?

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

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