Principles of Microeconomics 6th Edition By N. Gregory Mankiw – Test Bank

Chapter 4 The Market Forces of Supply and Demand

Multiple Choice

1.The two words most often used by economists are

a.	prices and quantities.
b.	resources and allocation.
c.	supply and demand.
d.	efficiency and equity.

ANS: C PTS: 1 DIF: 1 REF: 4-0

NAT: Analytic LOC: Supply and demand TOP: Economists

MSC: Definitional

2.The two words economists use most often are

a.	inflation and trade.
b.	supply and demand.
c.	competition and prices.
d.	markets and equilibrium.

ANS: B PTS: 1 DIF: 1 REF: 4-0

NAT: Analytic LOC: Supply and demand TOP: Markets

MSC: Interpretive

3.The forces that make market economies work are

a.	work and leisure.
b.	politics and religion.
c.	supply and demand.
d.	taxes and government spending.

ANS: C PTS: 1 DIF: 1 REF: 4-0

NAT: Analytic LOC: Supply and demand TOP: Market economies

MSC: Definitional

4.In a market economy, supply and demand determine

a.	both the quantity of each good produced and the price at which it is sold.
b.	the quantity of each good produced but not the price at which it is sold.
c.	the price at which each good is sold but not the quantity of each good produced.
d.	neither the quantity of each good produced nor the price at which it is sold.

ANS: A PTS: 1 DIF: 1 REF: 4-0

NAT: Analytic LOC: Supply and demand TOP: Market economies

MSC: Definitional

5.In a market economy, supply and demand are important because they

a.	play a critical role in the allocation of the economy’s scarce resources.
b.	determine how much of each good gets produced.
c.	can be used to predict the impact on the economy of various events and policies.
d.	All of the above are correct.

ANS: D PTS: 1 DIF: 1 REF: 4-0

NAT: Analytic LOC: Supply and demand TOP: Market economies

MSC: Definitional

6.In a market economy, supply and demand are important because they

a.	are direct policy tools used by government agencies to regulate the economy.
b.	illustrate when an market is in equilibrium, but they are not helpful when a market is out of equilibrium.
c.	can be used to predict the impact on the economy of various events and policies.
d.	All of the above are correct.

ANS: C PTS: 1 DIF: 1 REF: 4-0

NAT: Analytic LOC: Supply and demand TOP: Market economies

MSC: Definitional

7.In a market economy,

a.	supply determines demand and demand, in turn, determines prices.
b.	demand determines supply and supply, in turn, determines prices.
c.	the allocation of scarce resources determines prices and prices, in turn, determine supply and demand.
d.	supply and demand determine prices and prices, in turn, allocate the economy’s scarce resources.

ANS: D PTS: 1 DIF: 1 REF: 4-0

NAT: Analytic LOC: Supply and demand TOP: Market economies

MSC: Definitional

Markets and Competition

1.Which of the following statements is correct?

a.	Buyers determine supply, and sellers determine demand.
b.	Buyers determine demand, and sellers determine supply.
c.	Buyers determine both demand and supply.
d.	Sellers determine both demand and supply.

ANS: B PTS: 1 DIF: 1 REF: 4-1

NAT: Analytic LOC: Supply and demand TOP: Demand | Supply

MSC: Definitional

2.The demand for a good or service is determined by

a.	those who buy the good or service.
b.	the government.
c.	those who sell the good or service.
d.	both those who buy and those who sell the good or service.

ANS: A PTS: 1 DIF: 1 REF: 4-1

NAT: Analytic LOC: Supply and demand TOP: Demand

MSC: Definitional

3.The supply of a good or service is determined by

a.	those who buy the good or service.
b.	the government.
c.	those who sell the good or service.
d.	both those who buy and those who sell the good or service.

ANS: C PTS: 1 DIF: 1 REF: 4-1

NAT: Analytic LOC: Supply and demand TOP: Supply

MSC: Definitional

4.A group of buyers and sellers of a particular good or service is called a(n)

a.	coalition.
b.	economy.
c.	market.
d.	competition.

ANS: C PTS: 1 DIF: 1 REF: 4-1

NAT: Analytic LOC: Supply and demand TOP: Markets

MSC: Definitional

5.For a market for a good or service to exist, there must be a

a.	group of buyers and sellers.
b.	specific time and place at which the good or service is traded.
c.	high degree of organization present.
d.	All of the above are correct.

ANS: A PTS: 1 DIF: 1 REF: 4-1

NAT: Analytic LOC: Supply and demand TOP: Markets

MSC: Definitional

6.Which of the following is an example of a market?

a.	a gas station
b.	a garage sale
c.	a barber shop
d.	All of the above are examples of markets.

ANS: D PTS: 1 DIF: 2 REF: 4-1

NAT: Analytic LOC: Supply and demand TOP: Markets

MSC: Applicative

7.The market for ice cream is a

a.	monopolistic market.
b.	highly competitive market.
c.	highly organized market.
d.	Both b) and c) are correct.

ANS: B PTS: 1 DIF: 1 REF: 4-1

NAT: Analytic LOC: Supply and demand TOP: Markets

MSC: Definitional

8.Most markets in the economy are

a.	markets in which sellers, rather than buyers, control the price of the product.
b.	markets in which buyers, rather than sellers, control the price of the product.
c.	perfectly competitive.
d.	highly competitive.

ANS: D PTS: 1 DIF: 1 REF: 4-1

NAT: Analytic LOC: Supply and demand TOP: Markets

MSC: Definitional

9.A market includes

a.	buyers only.
b.	sellers only.
c.	both buyers and sellers.
d.	the place where transactions occur but not the people involved.

ANS: C PTS: 1 DIF: 1 REF: 4-1

NAT: Analytic LOC: Supply and demand TOP: Markets

MSC: Definitional

MAECENAS IACULIS

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ADIPISCING CONVALLIS BULUM

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