Chapter 4 /The Market Forces of Supply and Demand ? 217
Sec01 - The Market Forces of Supply and Demand - Markets and Competition
MULTIPLE CHOICE1.
A group of buyers and sellers of a particular good or service is called a(n)
a. coalition. b. economy. c. market. d. competition.
DIF: 1 REF: 4-1
LOC: Markets, market failure, and externalities MSC: Definitional
ANS: C
NAT: Analytic TOP: Markets 2.
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.
DIF: 1 REF: 4-1 LOC: Supply and demand
ANS: B
NAT: Analytic MSC: Definitional3.
TOP: Demand | Supply
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.
DIF: 1 REF: 4-1 LOC: Supply and demand
ANS: A
NAT: Analytic MSC: Definitional4.
TOP: Demand
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.
DIF: 1 REF: 4-1 LOC: Supply and demand
ANS: C
NAT: Analytic MSC: Definitional5.
TOP: Supply
For a market for a good or service to exist, a. there must be a group of buyers and sellers.
b. there must be a specific time and place at which the good or service is traded. c. there must be a high degree of organization present. d. All of the above are correct.
DIF: 1 REF: 4-1
LOC: Markets, market failure, and externalities MSC: Definitional
ANS: A
NAT: Analytic TOP: Markets 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.
DIF: 2 REF: 4-1
LOC: Markets, market failure, and externalities MSC: Applicative
ANS: D
NAT: Analytic TOP: Markets
218 ? Chapter 4 /The Market Forces of Supply and Demand 7.
The market for ice cream is
a. a monopolistic market.
b. a highly competitive market. c. a highly organized market. d. both (b) and (c) are correct.
DIF: 1 REF: 4-1
LOC: Markets, market failure, and externalities MSC: Definitional
ANS: B
NAT: Analytic TOP: Markets 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.
DIF: 1 REF: 4-1
LOC: Markets, market failure, and externalities MSC: Definitional
ANS: D
NAT: Analytic TOP: Markets 9.
In a competitive market, the price of a product
a. is determined by buyers and the quantity of the product produced is determined by sellers. b. is determined by sellers and the quantity of the product produced is determined by buyers. c. and the quantity of the product produced are both determined by sellers. d. None of the above is correct.
ANS: D DIF: 2 REF: 4-1 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Competitive markets MSC: Interpretive
10. In a competitive market, the quantity of a product produced and the price of the product are determined by
a. buyers. b. sellers.
c. both buyers and sellers. d. None of the above is correct.
ANS: C DIF: 2 REF: 4-1 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Competitive markets MSC: Interpretive
11. In a competitive market, the quantity of a product produced and the price of the product are determined by
a. a single buyer. b. a single seller.
c. one buyer and one seller working together. d. all buyers and all sellers.
ANS: D DIF: 2 REF: 4-1 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Competitive markets MSC: Interpretive
12. A competitive market is a market in which
a. an auctioneer helps set prices and arrange sales. b. there are only a few sellers.
c. the forces of supply and demand do not apply.
d. no individual buyer or seller has any significant impact on the market price.
ANS: D DIF: 1 REF: 4-1 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Competitive markets MSC: Definitional
Chapter 4 /The Market Forces of Supply and Demand ? 219
13. A competitive market is one in which
a. there is only one seller, but there are many buyers.
b. there are many sellers and each seller has the ability to set the price of his product.
c. there are many sellers and they compete with one another in such a way that some sellers are
always being forced out of the market.
d. there are so many buyers and so many sellers that each has a negligible impact on the price of the
product.
ANS: D DIF: 1 REF: 4-1 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Competitive markets MSC: Definitional
14. Assume Tibana buys computers in a competitive market. It follows that
a. Tibana has a limited number of sellers to turn to when she buys a computer. b. Tibana will find herself negotiating with sellers whenever she buys a computer.
c. if Tibana buys a large number of computers, the price of computers will rise noticeably. d. None of the above is correct.
ANS: D DIF: 2 REF: 4-1 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Competitive markets MSC: Applicative
15. In a competitive market, each seller has limited control over the price of his product because
a. other sellers are offering similar products.
b. buyers exert more control over the price than do sellers. c. these markets are highly regulated by the government.
d. sellers usually agree to set a common price that will allow each seller to earn a comfortable profit.
ANS: A DIF: 1 REF: 4-1 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Competitive markets MSC: Definitional
16. For a competitive market, which of the following statements is correct?
a. A seller can always increase her profit by raising the price of her product.
b. If a seller charges more than the going price, buyers will go elsewhere to make their purchases. c. A seller often charges less than the going price to increase sales and profit.
d. A single buyer can influence the price of the product, but only when purchasing from several sellers
in a short period of time.
ANS: B DIF: 1 REF: 4-1 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Competitive markets MSC: Definitional
17. If a seller in a competitive market chooses to charge more than the going price, then
a. the sellers’ profits definitely would increase.
b. the owners of the raw materials used in production would raise the prices for the raw materials. c. other sellers would also raise their prices. d. buyers will make purchases from other sellers.
ANS: D DIF: 1 REF: 4-1 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Competitive markets MSC: Definitional
18. The highest form of competition is called
a. absolute competition. b. cutthroat competition. c. perfect competition. d. market competition.
ANS: C
NAT: Analytic MSC: Definitional
DIF: 1 REF: 4-1 LOC: Perfect competition
TOP: Perfect competition
220 ? Chapter 4 /The Market Forces of Supply and Demand
19. Which of the following is not a characteristic of a perfectly competitive market?
a. Different sellers sell identical products. b. There are many sellers.
c. Sellers must accept the price the market determines.
d. All of the above are characteristics of a perfectly competitive market.
ANS: D
NAT: Analytic MSC: Interpretive
DIF: 2 REF: 4-1 LOC: Perfect competition
TOP: Perfect competition
20. Which of the following is not a characteristic of a perfectly competitive market?
a. Sellers set the price of the product. b. There are many sellers.
c. Buyers must accept the price the market determines.
d. All of the above are characteristics of a perfectly competitive market.
ANS: A
NAT: Analytic MSC: Interpretive
DIF: 2 REF: 4-1 LOC: Perfect competition
TOP: Perfect competition
21. The term price takers refers to buyers and sellers in
a. perfectly competitive markets. b. monopolistic markets.
c. markets that are regulated by the government.
d. markets in which buyers cannot buy all they want and/or sellers cannot sell all they want.
ANS: A
NAT: Analytic MSC: Interpretive
DIF: 2 REF: 4-1 LOC: Perfect competition
TOP: Perfect competition
22. Buyers and sellers who have no influence on market price are referred to as
a. market pawns. b. monopolists. c. price takers. d. price makers.
ANS: C
NAT: Analytic MSC: Definitional
DIF: 1 REF: 4-1 LOC: Perfect competition
TOP: Perfect competition
23. All market participants are price takers that have no influence over prices in markets that feature
a. only a few buyers and a few sellers. b. numerous sellers but only a few buyers. c. numerous buyers but only a few sellers. d. numerous buyers and numerous sellers.
ANS: D
NAT: Analytic MSC: Interpretive
DIF: 2 REF: 4-1 LOC: Perfect competition
TOP: Perfect competition
24. If buyers and sellers in a certain market are price takers, then individually
a. they have no influence on market price.
b. they have some influence on market price, but that influence is limited. c. buyers will be able to find prices lower than those determined in the market. d. sellers will find it difficult to sell all they want to sell at the market price.
ANS: A
NAT: Analytic MSC: Interpretive
DIF: 2 REF: 4-1 LOC: Perfect competition
TOP: Perfect competition
Chapter 4 /The Market Forces of Supply and Demand ? 221
25. In a perfectly competitive market, at the market price,
a. buyers cannot buy all they want and sellers cannot sell all they want. b. buyers cannot buy all they want, but sellers can sell all they want. c. buyers can buy all they want, but sellers cannot sell all they want. d. buyers can buy all they want and sellers can sell all they want.
ANS: D
NAT: Analytic MSC: Definitional
DIF: 1 REF: 4-1 LOC: Perfect competition
TOP: Perfect competition
26. An example of a perfectly competitive market would be the
a. cable TV market. b. soybean market.
c. breakfast cereal market. d. shampoo market.
ANS: B
NAT: Analytic MSC: Applicative
DIF: 2 REF: 4-1 LOC: Perfect competition
TOP: Perfect competition
27. Assume the market for tennis balls is perfectly competitive. When one tennis ball producer exits the market,
a. the price of tennis balls increases. b. the price of tennis balls decreases.
c. the price of tennis balls does not change. d. there is no longer a market for tennis balls.
ANS: C
NAT: Analytic MSC: Applicative
DIF: 2 REF: 4-1 LOC: Perfect competition
TOP: Perfect competition
28. Assume the market for pork is perfectly competitive. When one pork buyer exits the market,
a. the price of pork increases. b. the price of pork decreases.
c. the price of pork does not change. d. there is no longer a market for pork.
ANS: C
NAT: Analytic MSC: Applicative
DIF: 2 REF: 4-1 LOC: Perfect competition
TOP: Perfect competition
29. A monopoly is a market
a. with one seller, and that seller is a price taker. b. with one seller, and that seller sets the price. c. with one buyer, and that buyer is a price taker. d. with one buyer, and that buyer sets the price.
ANS: B
NAT: Analytic DIF: 1
LOC: Monopoly REF: 4-1
TOP: Monopoly
MSC: Definitional
30. Which of the following would most likely serve as an example of a monopoly?
a. a bakery in a large city b. a bank in a large city
c. a local cable television company d. a small group of corn farmers
ANS: C
NAT: Analytic DIF: 2
LOC: Monopoly REF: 4-1
TOP: Monopoly
MSC: Applicative
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