Economics and Contemporary Issues

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Economics and Contemporary Issues 8th Edition Moomaw Test Bank

Chapter 2—An Introduction to Economic Systems and the Workings of the Price
System

TRUE/FALSE

1. In order for the price system to work well, it must be based upon voluntary exchange between
informed people.

ANS: T PTS: 1

2. Relative price measures what must be given up in order to purchase an item.

ANS: T PTS: 1

3. The division of labor increases output because workers experience a feeling of accomplishment when
performing the same task a number of times.

ANS: F PTS: 1

4. One of the economic outcomes determined by the choices people make in an economic system is the
quantities of various goods and services to be produced.

ANS: T PTS: 1

5. Division of labor implies specialization of economic activity.

ANS: T PTS: 1

6. Voluntary exchange occurs if at least one party expects to benefit.

ANS: F PTS: 1

7. The demand curve shows the quantity demanded of a good for each possible price, holding other
factors that affect demand constant.

ANS: T PTS: 1

8. The law of demand states that the quantity demanded of a good is negatively related to the good's
price.

ANS: T PTS: 1

9. As the price of a good increases, the quantity of the good supplied will decrease.

ANS: F PTS: 1

10. If there is an excess demand for N'Sync CDs, the price of N'Sync CDs would rise.

ANS: T PTS: 1

11. The market price of Sheryl Crow concert tickets is $40 per ticket. Excess supply would exist if the
market price was $30 per ticket.

15

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 ANS: F PTS: 1

12. The market for housing is in equilibrium when the quantity of housing demanded is equal to the
quantity of housing supplied.

ANS: T PTS: 1

13. Producers are assumed to maximize output.

ANS: F PTS: 1

14. In a market economy, prices inform, motivate, and ration.

ANS: T PTS: 1

15. An increase in the supply of rollerblades will result in a higher equilibrium price for rollerblades.

ANS: F PTS: 1

16. Prices in a command economy do not change very often, and thus do not inform consumers about the
relative scarcity of goods.

ANS: T PTS: 1

17. Transition economies are making uneven progress in the transformation of their economic systems.

ANS: T PTS: 1

18. Demand and supply framework explains how prices are formed in a competitive markets.

ANS: T PTS: 1

19. Demand and supply framework explains prices are formed in a command economy.

ANS: F PTS: 1

20. In a competitive market demanders and suppliers are price takers.

ANS: T PTS: 1

MULTIPLE CHOICE

1. The relative price of a good is:

a. the price of one good in terms of another.
b. the money price of a good.
c. identical to the absolute price of the good.
d. not a very good measure of how much must be given up in order to purchase an item.
ANS: A PTS: 1

2. Suppose the price of an automobile is $20,000. The opportunity cost of the automobile is:
a. $20,000.

16
 b. the best alternative use of the $20,000.
c. all alternative uses of the $20,000.
d. measured by the purchasing power of the $20,000.
ANS: B PTS: 1

3. Suppose all prices double. As a result:

a. there will be no change in the opportunity cost of goods.
b. the opportunity cost of goods will increase.
c. the opportunity cost of goods will decrease.
d. the opportunity cost of some goods will increase while the opportunity cost of other goods
will decrease.
ANS: A PTS: 1

4. In a market system:
a. people do not have to generally agree and obey laws.
b. no informal rules of conduct are required.
c. private property rights are defined, established, and protected by law.
d. very few ownership structures must be created.
ANS: C PTS: 1

5. An economic system determines:

a. how a government will be established
b. the culture of a society.
c. the methods that will be used to determine property rights.
d. the methods that will be used to produce goods and services.
ANS: D PTS: 1

6. Division of labor increases the production of goods and services because:

a. it allows people to become highly skilled in particular tasks.
b. it reduces the time wasted as people shift from one task to another.
c. it increases inventions and innovations.
d. all of the above.
ANS: D PTS: 1

7. Voluntary exchange will occur when:

a. only one individual involved in the exchange benefits.
b. all individuals involved in the exchange benefit.
c. only one individual involved in the exchange has access to all pertinent information.
d. there are no alternatives to the exchange.
ANS: B PTS: 1

8. A schedule showing the amount of a good people are willing and able to purchase at various prices is:
a. a production possibilities schedule.
b. a demand schedule.
c. a supply schedule.
d. an efficiency production schedule.
ANS: B PTS: 1

9. The demand price is:

17
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Hicks, Granville, 619, 836
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Jonason, Olov, 12, 65
Jones, Howard Mumford, 68, 87, 642, 839
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Kalantzi, B., 16
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Kit Brandon, 55-58, 741, 784, 839
Klein, Alexander, 844
Komroff, Manuel, 649
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Kovalenskaya, M., 24
Kozlenko, William, 95
Kranendonk, Anthonius, 650
Kreymborg, Alfred, 70, 74
Kronenberger, Louis, 837
Krutch, Joseph W., 651, 829
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Kunitz, Stanley, 652-53

Lalou, René, 42, 823

Lanfeld, William R., 829
Lange, Per, 36
Lankes, Julius J., 49, 198
Lardner, Ring, 166, 230
Larsen, Henrik, 12
Lavretski, V., 6
Lawrence, D. H., 213, 225-26, 509, 617, 632
Lawry, Jon S., 654
Legouis, Émile, 829
Leitich, Albert, 655
Lennartz, Franz, 656
Lerbs, Karl, 16, 20, 32
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Letters of Sherwood Anderson, 68, 845
LeVerrier, Charles, 658, 752
Levidov, M., 12
Levinson, Andrei I., 659
Lewis, Sinclair, 166, 640, 660, 676, 782
Lewis, Wyndham, 661
Lewisohn, Ludwig, 662, 827
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Lindsay, Vachel, 207, 555
Littell, Robert, 826-27
Llona, Victor, 32, 568
Loggins, Vernon, 666
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McNicol, Elinore C., 680
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Mahoney, John J., 681
Maillard, Denyse, 682
Mainsard, Joseph, 683
Mais, Stuart P., 684
Mallea, Eduardo, 535
Maltz, Albert, 81, 84
Many marriages, 25-27, 490, 531, 658, 802, 827
Marble, Annie R., 685
Marching men, 4-6, 821
Marion Democrat, 393
Markey, Gene, 813
Marsh, F. T., 837
Marshall, Margaret, 683, 842
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Masters, Edgar Lee, 207
Mather, Frank J., 688
Matthews, T. S., 837
Matthiessen, Francis O., 689
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Mitchell, Tennessee, see Anderson, Tennessee Mitchell
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Modern writer, The, 37, 830
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