1. A substitute good is a determinant of supply. True False 2. As globalization

Question

1. A substitute good is a determinant of supply.

True

False

2. As globalization and world trade proliferates, individual markets within countries' economies become more competitive.

True

False

3. If the spot oil price in petroleum markets is rising, then we can expect the supply curves of products using petroleum as an input to shift rightward.

True

False

4. Government actions, such as price floors and ceilings, can actually reduce employment and raise market inefficiency

True

False

5. A change in quantity demanded is a movement along the same demand curve.

True

False

6. "As the price of gasoline rises, consumer demand decreases. In addition, the quantity demanded of compact cars increased, causing their price to rise." This statement contains two errors: demand and quantity demanded are confused twice.

True

False

7. In the circular flow model, firms own economic resources, and households buy the manufactured products and services.

True

False

8. Equilibrium is a state of balance between supply and demand.

True

False

9. A supply curve is negatively sloped, while a demand curve is positively sloped. If given a graph of them both, that will be evidenced by computing each curve's X axis divided by its Y axis when devising a 90-degree angle.

True

False

10. For economies that rely on decentralized decision making, the most important decisions are made by the government.

True

False

Explanation / Answer

1) True - Substitute goods are goods that could be used for the same purpose. Price of substitute good afftects the demand and supply of the other goods. If price of substitute increases, supply of that subsitute good will increase, which will result in supply of other goods (whose prices are same) to decrease.

2) True - Globalization makes domestic players compete with international players who has advantages of economies of scale. As big players enters domestic markets and are now competiting with domestic players, competition increases between domestic markets as well.

3) False - Supply curve will remain unchanged as oil is a natural resource. Any change in price of oil, will not affect its or any other related product's demand or supply.

4) True - If these two mechanisms are not followed properly, it can lead to unemployment and market inefficiency. For eg: if minimum wage is set above the equilibrium market price for unskilled labor, unemployment will increase.

5) True - Assuming that change is caused to change in price, then the movement will be along the same demand curve.

6) False - Gasoline has inelastic demand. So any change in price will neither affect its demand or demand of related goods.

7) False - Firms do not own economic resources. They buy it from households (Land, labor, capital etc) and manufactures products which households buys from them. First part of statement is wrong, second part is right.

8) True - At any given price level, the point where demand is equal to supply is called equilibrium.

9) False - Supply curve is positively sloped and demand curve is negatively sloped

10) False - There might be other bodies too who can take decisions to whom the government only have assigned powers to take decisions.

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