ECON 202 – Quiz 2 - Key
1. If two countries are producing the same two products it is mutually beneficial if the countries specialize then trade. How is it
determined who specializes in the production of which product?
by the lowest opportunity cost of production, comparative advantage.
2. A decrease in demand would result from:
an expectation of a lower price for the good in the future.
3. When a market is in equilibrium,
there is no shortage and no surplus at the equilibrium price.
4. The law of supply indicates that
producers will offer more of a product at high prices than they will at low prices.
5. From Figure 2, at $6 the surplus equals
200 units.
6. What do supply and demand curves have in common?
They both show a relationship between quantity and price.
7. Due to the law of increasing opportunity costs
the slope of the supply curve is positive.
8. In a market-based economy, the government
enforces property rights.
9. The law of demand implies that when people are asked to conserve water during a drought,
they will be more likely to cooperate if the rates charged for water rise.
10. Comparative advantage is determined by the
opportunity costs of producing a good in two different countries
11. Suppose that a product benefits from a successful advertising campaign. The result is that
the demand for the product increases.
12. A change in the quantity demanded of a product is the result of a change in
the price of related goods.
13. In a market system, what provides individuals the information needed to make decisions?
prices
14. While intuitively it makes sense that a demand curve is downward sloping, the technical rationale for the consumer’s inverse
relationship between price and quantity demand is
the law of decreasing marginal benefits.
15. Specialization and trade exploit differences in productivity across workers and
make everyone better off.
16. Orange juice and cranberry juice are consumer substitutes. An increase in the price of orange juice will increase the demand
of cranberry juice. One can reasonable expect that in the cranberry market
prices will increase and the quantity sold will increase
17. What happens if the price of a product is below the equilibrium price?
There will be an excess demand for the product.
18. Given the following supply and demand schedules, the market equilibrium is achieved at what price?
£4
19. A response to a price change would be described as a:
movement along an existing demand curve.