Name:   Class    Date: 

TolbertEcoCh5&6 TEST REVIEW

1. Describe the stages of production:

Stage I – increasing marginal returns

STAGE II - the concept of “diminishing returns” first becomes significant
Stage III – Negative marginal returns

2. What do price ceilings and price floors prevent?

Prices from reaching Equilibrium where Quantity Supplied equals Quantity Demanded

3. What do most economists believe is the most efficient way to allocate resources?

Utilizing competitive markets

4. What could a firm accomplish during a short-run production period? 

Hiring and Firing of Workers

5. How do high prices influence the behavior of producers? consumers?

High prices=producers make more, consumers buy less

Low Prices=producers make less, consumers buy more

6. What event sparked the most extensive rationing in United States history?

WWII

7. What is a major problem in the execution of a rationing system?

Expense

8. What tends to force the price of an item upward? Downward?

A shortage a Surplus

9. What are the causes of price changes most of the time??

Changes in supply and demand

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TolbertEcoCh5&6 TEST REVIEW

10. Price Ceilings and price floors are most likely to create what?

Price Ceilings – shortage

Price Floors – Surplus

11. Which of these is the best description of a normal supply and demand curve?
Supply – slopes up
Demand slopes down

12. Without prices, the three basic questions of WHAT, HOW, and FOR WHOM to produce are
answered by whom?

The Government

13. Describe the effects of price floors on the U.S. sugar industry?

Good for sugar growers but cost consumers.

14. A supply schedule lists:

various quantities of a specific product with all possible prices

15. Why does an increase in gas prices lead to less consumer spending on other items?

Demand for gas is inelastic so people will continue to buy but has less money to survive

16. Which type of cost is generally associated with labor and raw materials? 

Variable costs

Which type of cost is generally associated with expenses that do not change with output?

Fixed costs 

17. Which term denotes the change in total income when one additional unit of output is added?

Marginal revenue

18. Factors that can cause a change in supply is

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TolbertEcoCh5&6 TEST REVIEW

Technology, regulations, number of sellers, market expectations, and an increase or decrease in

government subsidies

19. What term refers to an economic process similar to “haggling”?

Compromise or negotiating

20. The level of production that generates just enough revenue to cover its total operating costs is
called the:

Break-even point

28. In a competitive market economy, prices are considered:

neutral

29. What do prices help buyers and sellers make?

Decisions

The following vocabulary terms will be on the test:

long run
short run
diminishing marginal returns
fixed costs
variable costs

e-commerce
Law of Supply
supply schedule
subsidy
marginal cost

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