Economics Unit 3: The American Market Economy

Almost a summary of the Third Unit within Economics Edgenuity

Consider this situation:

• A factory Makes Blue and Green widgets.

• The cost of making both types of widgets is the same.

• Both types of widgets sell for $5 apiece.

• The factory can make 20 widgets of either color in a day.

• The factory has been making 10 Blue and 10 Green widgets a day.

The price of Blue widgets rises to $6

Assuming that all other factors remain the same, how should the factory respond to this increase of price?

1. By decreasing the number of Blue widgets supplied.

2. By increasing the number of Blue widgets supplied.

3. By increasing the number of Green widgets supplied.

By increasing the number of Blue widgets supplied.

Which events could cause the change in supply shown on this graph? Check all that apply:

• A producer goes out of business.

• A new company joins the marketplace.

• A natural disaster causes production to drop.

• A company begins to produce more goods.

A producer goes out of business.

A natural disaster causes production to drop.

Which statement best explains the law of supply?

The quantity supplied by producers increases as prices rise and decreases as prices fall.

Which statement best explains the law of demand?

The quantity demanded by consumers decreases as prices rise, then increases as prices fall.

How might a drop in price for washing machines affect the demand for dryers?

The demand for dryers would most likely increases as the price for washing machines dropped.

Which factor most directly affects a furniture company’s supply?

The availability of raw materials and natural resources.

How do changing prices affect supply and demand?

As prices decreases, supply decreases, but demand increases.

How do lower prices tend to affect demand?

They tend to increase the interest in a product.

Which statement best compares the laws of supply and demand?

The two economic laws exist in theory. They work in practice, but real-world factors can have an effect.

How might a drop in price for washing machines affect the demand for dryers?

The demand would most likely increase as the price for washing machines dropped.

Which factor most directly affects a furniture company’s supply?

the availability of raw materials and natural resources.

According to the law of supply, price and quantity move…

along a track in the same direction.

The total amount of a product available in a market at a given price is called the…

supply.

According to the law of demand, price and quantity move…

along a track in opposite dirtrections.

On a supply and demand graph, equilibrium is the point where…

the two curves meet.

A market supply schedule shows…

how prices affect a single producer.

Th total amount of a product available in a market at a given price is called the…

supply.

The point where supply and demand meet and prices are set is called…

equilibrium.

The vertical axis of a demand curve shows…

the price of a product.

This chart shows the link between…

Interest in a product and the price a consumer pays.

On a graph, an equilibrium point is where…

a supply curve and a demand curve meet.

Disequilibrium occurs when...

quantity supplied does not equal quantity demanded.

Which occurs during market equilibrium? Select two options.

• Supply and demand meet at a specific price.

• Supply is slightly greater than demand.

• Supply and demand meet at a specific quantity.

• Supply and demand meet at a demand point.

• Supply and demand meet at a supply point.

Which occurs during market equilibrium? Select two options.

• Supply and demand meet at a specific price.

• Supply is slightly greater than demand.

• Supply and demand meet at a specific quantity.

• Supply and demand meet at a demand point.

• Supply and demand meet at a supply point.

Both excess supply and excess demand are a result of…

disequilibrium.

On a graph, a(n) __________ shows the demand portion of equilibrium.

• demand curve

• supply curve

• equilibrium point

• excess supply

demand curve

Which statement best explains how elasticity and incentives work together?

An elastic good, such as a game, is more likely to respond to incentives.

In the market, actions known as incentives affect…

consumers or producers.

In economics, if a good is inelastic,

its supply or demand is not sensitive to price changes.

What is the difference between a price floor and a price ceiling?

A price floor is the minimum price allowed for a good.

A price ceiling is the maximum price allowed for a good.

A pair of stylish sneakers could be considered a _____ because it is not a necessity.

want

Price controls on goods can be set by…

governments.

Which statements best describes incentives?

Incentives can be positive or negative.

What is the best definition of marginal cost?

The price of producing one additional unit of a good.

In order to calculate marginal cost, producers must compare the difference in the cost of producing one unit to the cost of…

producing the next unit.

The Davis family grows organic vegetables to sell at a local farmer’s market. Which are factors that directly affect their profit?

Check all that apply.

• An increase in the cost of farm equipment.

• A rise in demand for organic produce.

• An increase in customers at the market.

• A change in the market price for non-organic fruit.

• A sale on organic meats at the market.

The Davis family grows organic vegetables to sell at a local farmer’s market. Which are factors that directly affect their profit?

Check all that apply.

• An increase in the cost of farm equipment.

• A rise in demand for organic produce.

• An increase in customers at the market.

• A change in the market price for non-organic fruit.

• A sale on organic meats at the market.

What is the best definition of marginal benefit?

The possible income from producing an additional item.

Producers must understand the marginal benefit of making an additional unit, which shows the…

possible gain.

Brenda’s Boards manufactures skateboards. Each skateboard sells for $45 and includes the following expenses:

$3 for the wheels & mounts, $1 for the paint, and $10 for the labor. What is the total revenue the company makes after selling 10 boards?

$450

Clark’s Cleaners is a housekeeping service. The company’s expenses include the…

cleaning supplies and any equipment the company purchases.

To calculate profit, producers subtract their total production cost from their _____.

• total revenue

• marginal revenue

• marginal cost

• total units produced

total revenue

The point of maximum profit is the point at which the marginal cost equals the…

marginal revenue.

According to the chart, the marginal revenue…

remains the same as production increases.

Which helps enable an oligopoly to form within a market?

Costs of starting a business are too high.

Which best describes how the government enables government monopolies to exist?

By creating and running a monopoly.

_____ is the type of competition that occurs in a competitive market without identical producers.

• Monopolistic

• Pure competition

• An oligopoly

Monopolistic

Which best describes the availability of substitutes in a monopoly?

There are no substitutes.

Why is competition limited in an oligopoly?

High entry costs prevent new producers from entering the market.

_____ is the term used to describe the amount of control of influence that consumers have on a market.

• Sovereignty

• Competition

• Oligopoly

Sovereignty

In pure competition, producers compete exclusively on the basis of…

selling identical items

Which aspect of monopolistic competition gives consumers more choice?

Few barriers to market entry cost.

When an oligopoly exists, how many producers dominate the market?

A few.

Which best describes how the government sanctions technological monopolies?

By issuing a patent for the technology.

Which is an example of a government monopoly in the United States?

• The US Postal Service

• The International Revenue Service (IRS)

• The US Environmental Protection Agency (EPA)

• The National Park Service.

Which is an example of a government monopoly in the United States?

• The US Postal Service

• The International Revenue Service (IRS)

• The US Environmental Protection Agency (EPA)

• The National Park Service.

Natural monopolies occur when one producer…

can meet the market’s entire demand.

Wellness Pharmaceuticals has releases a new antidepressant, Lexabuzac. Which type of monopoly does the company most likely have on this medication?

Technological monopoly.

The lack of competition within a monopoly means that…

monopolies set their own price.