Answers26-27 Ignite Economics-KY-EconomicsCase Study: Starting a Business

Case Study: Starting a Business — Unit test Answers

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1
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When supply is higher than demand, prices will

A
rise until the demand falls.
B
rise until the supply falls.
C
fall until the demand rises.
D
fall until the supply rises.
2
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Why is pure competition considered an unsustainable system?

A
Price differentiation is often too minimal to matter.
B
Few barriers exist to entry, meaning that the market inevitably floods.
C
Consumers cannot distinguish between products.
D
Producers cannot make a profit if they keep dropping their prices.
3

most likely

Question illustration
T
The marginal costs will continue to rise, increasing the total cost, while the marginal revenue remains the same, decreasing the profit earned for each pie.
T
The marginal costs will continue to fall, decreasing the total cost, while the marginal revenue remains the same, increasing the profit earned for each pie.
T
The marginal costs will continue to rise, increasing the total cost, while the marginal revenue remains the same, increasing the profit earned for each pie.
T
The marginal costs will continue to fall, decreasing the total cost, while the marginal revenue remains the same, decreasing the profit earned for each pie.
4

What is the difference between marginal cost and marginal revenue?

A
Marginal cost is the money a producer earns from selling one more unit, while marginal revenue is the money a producer pays for making one more unit.
B
Marginal cost is the money a producer pays for making one more unit, while marginal revenue is the money a producer earns from selling one more unit.
C
Marginal cost is the money a producer actually earns from selling more units, while marginal revenue is the money a producer might earn from one more unit.
D
Marginal cost is the money a producer might earn from one more unit sold, while marginal revenue is the money a producer will earn from one more unit.
5

Motherboards, Inc., manufactures computer parts. The company’s total revenue is

t
the money the company earns after paying all of its production costs.
t
the total wages the company pays workers in its factories and stores.
t
the amount of money the company earns from selling an individual part.
t
the amount the company receives from the sale of all of its computer parts.
6

The graph is a marginal cost curve that compares expenses for producing apple pies.According to the graph, the marginal cost begins to increase when the producer makes

Question illustration
t
two pies.
t
three pies.
f
four pies.
f
five pies.
7

Which statements correctly explain price floors and price ceilings? Choose four answers.Ineffective price floors tend to be too high.Ineffective price ceilings tend to be too low.Price floors help producers by raising prices.Price ceilings help consumers by lowering prices.Effective price floors are set above equilibrium.Effective price ceilings are set below equilibrium.

I
Ineffective price floors tend to be too high.
I
Ineffective price ceilings tend to be too low.
P
Price floors help producers by raising prices.
P
Price ceilings help consumers by lowering prices.
E
Effective price floors are set above equilibrium.
E
Effective price ceilings are set below equilibrium.
8

The graph shows a point of equilibrium.If quantity demanded exceeds quantity supplied, what most likely needs to happen to achieve equilibrium?

Question illustration
T
The supply needs to increase
T
The price needs to decrease
T
The price needs to increase
T
The demand needs to increase
9

This table shows the number of employees needed to fill lunch orders at several food trucks.Food Truck Number of Lunch Orders Number of Employees Frank’s Falafels 20 per hour 2 Kimchi Kim’s 25 per hour 3 Deli Delight 30 per hour 3 Lunch on the Go 25 per hour 2 Which food truck has the absolute advantage?

A
Frank’s Falafels
B
Kimchi Kim’s
C
Deli Delight
D
Lunch on the Go
10

When prices drop below the point where supply and demand meet, it results in

A
coordination.
B
disequilibrium.
C
equilibrium.
D
production.
11

best

b
by reducing production costs
b
by focusing on target markets
b
by increasing production of certain items
b
by limiting the types of goods produced
12

most likely

Question illustration
T
The marginal cost will most likely decrease to $1.00
T
The marginal cost will most likely increase to $2.00
T
The marginal revenue will most likely decrease to $8.00.
T
The marginal revenue will most likely increase to $12.00.
13

Look at the chart comparing the price of graphic T-shirts to the quantity supplied.

Question illustration
d
demand curve.
d
demand schedule.
s
supply curve.
s
supply schedule.
14

The highest amount a landlord can charge for rent is an example of

a
an incentive.
a
a price floor.
a
a price ceiling.
a
an elastic service.
15

This table shows the production possibility schedule for several major manufacturing companies in the automobile industry. Manufacturing CompanyTruck Parts Car PartsCompany A10 per hr.20 per hr.Company B10 per hr.25 per hr.Company C15 per hr.15 per hr.Company D20 per hr.25 per hr. Which manufacturing company has the comparative advantage for car parts?

A
Company A
B
Company B
C
Company C
D
Company D

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