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

Case Study: Starting a Business — Unit test Answers

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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.
2
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A clothing store has ordered a new supply of jeans for the fall season and wants to sell off the remaining items from the previous spring. What action would the store owner most likely take?

A
The store owner would most likely raise the price of the spring jeans to encourage producers.
B
The store owner would most likely lower the price of the spring jeans to encourage producers.
C
The store owner would most likely raise the price of the spring jeans to encourage consumers.
D
The store owner would most likely lower the price of the spring jeans to encourage consumers.
3

Equilibrium occurs when supply and demand coordinate to

A
set excess demand.
B
set prices and production.
C
maintain excess supply.
D
raise prices and production.
4

What are the factors of production in business?

A
land, labor, and capital
B
land, capital, and interest
C
land, labor, and customer base
D
capital, customer base, and interest
5

In which way do producers try to differentiate themselves in monopolistic competition?

p
price
a
advertising
p
product features
i
image
6

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.
7

Which is likely to occur if there is a price increase for a good which exhibits elastic demand?

A
People might buy a more expensive substitute good.
B
People might buy a less expensive complementary good.
C
People might buy a less expensive substitute good.
D
People might buy a more expensive complementary good.
8

elasticityqualitytimequantity

A
elasticity
B
quality
C
time
D
quantity
9

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.
10

A monopoly is a market that has

A
few competing businesses.
B
many sellers of the same item.
C
many sellers of a variety of products.
D
a single supplier of a good or service.
11

Which best describes the relationship between consumers and producers?

A
They usually ignore each other.
B
They interact with each other.
C
They agree on prices.
D
They dislike each other.
12

What does elasticity measure in economics?

h
how the amount of a good changes when the producer hires more employees
h
how the amount of a good changes when the producer uses new materials
h
how the amount of a good changes when its price goes up or down
h
how the amount of a good changes when its distribution expands
13

A possible result of disequilibrium is

e
excess demand.
l
lower demand.
f
fixed prices.
s
stable availability.
14

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.
15

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.

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