Test Bank for The Economy Today Bradley Schiller 15th edition

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Test Bank for The Economy Today Bradley Schiller 15th edition

The Economy Today, 15e (Schiller) Chapter 3   Supply and Demand 

1) Who participates in markets?

A) Business firms.

B) Business firms and consumers.

C) Consumers and government agencies.

D) All of the choices are correct.

Answer:  D

Explanation:  Consumers, business firms, government agencies, and foreigners participate in the marketplace.

Difficulty: 2 Medium

Topic:  Market Participants

Learning Objective:  03-03 How market prices and quantities are established.

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

2) The goal of the consumer in a market economy is to use his or her limited income to buy

A) The greatest number of goods and services possible.

B) The goods and services that maximize profits for businesses.

C) Those goods and services with the lowest prices.

D) The set of goods and services that maximizes the consumer’s total utility.

Answer:  D

Explanation:  Consumers are motivated by their desire to maximize utility.

Difficulty: 2 Medium

Topic:  Market Participants

Learning Objective:  03-03 How market prices and quantities are established.

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

3) The goal of the business firms in a market economy is to maximize

A) Total profits.

B) Total sales.

C) Total utility.

D) Total welfare.

Answer:  A

Explanation:  Businesses are motivated by profit.

Difficulty: 2 Medium

Topic:  Market Participants

Learning Objective:  03-03 How market prices and quantities are established.

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

4) People benefit by participating in the market because

A) Resources are no longer limited.

B) There are always participants in the market that are more efficient than you are in production.

C) Market participation allows individuals to specialize and, with trade, ultimately consume more.

D) Participants in the market do not have to make choices.

Answer:  C

Explanation:  Consumers’ limited time, energy, resources, and ability to produce all things lead us to specialize and exchange goods with others who can produce a good at a lower opportunity cost. This ultimately increases how much we can consume.

Difficulty: 2 Medium

Topic:  Market Participants

Learning Objective:  03-03 How market prices and quantities are established.

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

5) Which of the following is a market transaction?

A) A stock increases in value over the 30 years that it is owned.

B) A college student purchases a laptop computer.

C) Weather destroys a farmer’s crops, leaving the farmer unable to buy groceries.

D) A radio station changes its programming from classical to rock.

Answer:  B

Explanation:  A market transaction involves an exchange of either barter or currency for goods or resources.

Difficulty: 3 Hard

Topic:  The Circular Flow

Learning Objective:  03-03 How market prices and quantities are established.

Bloom’s:  Analyze

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

6) A factor market is any place or process where

A) Finished goods are bought and sold.

B) Land, labor, or capital is bought and sold.

C) Finished services are bought and sold.

D) None of the choices are correct.

Answer:  B

Explanation:  A factor market is where the factors of production (land, labor, or capital) are bought and sold.

Difficulty: 1 Easy

Topic:  The Circular Flow

Learning Objective:  03-03 How market prices and quantities are established.

Bloom’s:  Remember

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

7) Which of the following is purchased in a product market?

A) Cell phone service.

B) Undeveloped farmland in Texas.

C) Crude oil.

D) The skills of an X-ray technician.

Answer:  A

Explanation:  A product market is where finished goods and services are bought and sold. Cell phone service is a finished product.

Difficulty: 3 Hard

Topic:  The Circular Flow

Learning Objective:  03-03 How market prices and quantities are established.

Bloom’s:  Apply

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

8) Which of the following is purchased in a factor market?

A) A bag of jellybeans.

B) National defense.

C) The labor of a state university professor.

D) A motorized scooter used for commuting by a student.

Answer:  C

Explanation:  A factor market is where the factors of production, in this case labor, are bought and sold.

Difficulty: 3 Hard

Topic:  The Circular Flow

Learning Objective:  03-03 How market prices and quantities are established.

Bloom’s:  Apply

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

9) Business firms supply goods and services to ________ and purchase factors of production in ________.

A) factor markets; product markets

B) national markets; factor markets

C) product markets; factor markets

D) factor markets; national markets

Answer:  C

Explanation:  A factor market is where the factors of production (land, labor, or capital) are bought and sold. A product market is where finished goods and services are bought and sold. A pair of shoes is a finished good.

Difficulty: 2 Medium

Topic:  The Circular Flow

Learning Objective:  03-03 How market prices and quantities are established.

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

10) Individual consumers supply ________ and purchase ________.

A) factors of production; final goods and services

B) intermediate goods; final goods and services

C) final goods and services; factors of production

D) national goods and services; factors of production

Answer:  A

Explanation:  Individual consumers supply factors of production such as their own labor and purchase final goods and services such as groceries.

Difficulty: 2 Medium

Topic:  The Circular Flow

Learning Objective:  03-03 How market prices and quantities are established.

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

11) International participants

A) Take no part in American markets.

B) Participate only in American product markets.

C) Participate only in American factor markets.

D) Participate in both American factor markets and American product markets.

Answer:  D

Explanation:  International participants take part in the U.S. market by supplying imports, purchasing exports, and buying and selling factors of production.

Difficulty: 2 Medium

Topic:  The Circular Flow

Learning Objective:  03-03 How market prices and quantities are established.

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation