Questions:
Question 1
The basic reason we study economics is because material wants and needs are:
A. limited but resources are not.
B. unlimited and so are resources.
C. unlimited but resources are not.
D. limited and so are resources.
Question 2
Economics is concerned with:
A. limiting individuals' wants so that our scarce resources will not be used up.
B. using scarce resources to satisfy virtually limitless material wants and needs.
C. earning as much money as possible.
D. using as many workers as possible to produce any given level of output.
Question 3
The cost of a purchase or decision measured by what is given up to make the purchase or carry out the decision is its:
A. opportunity cost.
B. sunk cost.
C. hidden cost.
D. overhead cost.
Question 4
The factor of production that organizes economic activity and bears the risk of success or failure in a business venture is:
A. labor.
B. capital.
C. entrepreneurship.
D. all of the above.
Question 5
The incomes received by the four factors of production are:
A. rents, profit sharing, dividends, and net income.
B. rents, wages, interest, and profits.
C. rents, salaries, dividends, and net income.
D. capital gains, wages, dividends, and net income.
Question 6
Wages are earned by:
A. entrepreneurs.
B. owners of capital.
C. owners of land.
D. suppliers of labor.
Question 7
Interest is earned by:
A. owners of capital.
B. suppliers of labor.
C. owners of land.
D. entrepreneurs.
Question 8
Rents are earned by:
A. owners of capital.
B. owners of land.
C. suppliers of labor.
D. entrepreneurs.
Question 9
Profits are earned by:
A. owners of capital.
B. owners of land.
C. entrepreneurs.
D. suppliers of labor.
Question 10
Economic theories are:
A. always expressed in terms of mathematical equations.
B. actions, such as tax cuts, to change economic conditions.
C. formal explanations of the relationships between economic variables.
D. all of the above.
Question 11
Economic policies:
A. are guides to change economic conditions.
B. have consequences that vary from policy to policy.
C. are based on the value judgments of the persons forming the policies.
D. all of the above.
Question 12
Which of the following can be used to express economic theories?
A. Words.
B. Graphs.
C. Mathematical equations.
D. All of the above.
Question 13
A line that slopes upward on a graph indicates that the variables measured on the graph are:
A. always increasing but never decreasing.
B. unrelated.
C. directly related.
D. inversely related.
Question 14
A line that slopes downward on a graph indicates that the variables measured on the graph are:
A. always decreasing but never increasing.
B. unrelated.
C. inversely related.
D. directly related.
Question 15
Two variables are directly related when:
A. one variable increases as the other decreases.
B. one variable does not change as the other decreases.
C. one variable decreases as the other decreases.
D. neither variable increases nor decreases.
Question 16
Two variables are inversely related when:
A. neither variable decreases nor increases.
B. one variable increases as the other increases.
C. one variable does not change as the other increases.
D. one variable decreases as the other increases.
Question 17
Conditions held to be true in developing an economic model are:
A. conclusions of the model.
B. assumptions.
C. economic theories.
D. variables of the model.
Question 18
Which of the following can lead to economic growth?
A. Improved technology.
B. An increase in the supply of labor.
C. An increase in the amount of available capital.
D. All of the above.
Question 19
Goods, such as corn chips, that are produced for final buyers are:
A. expenditure goods.
B. credit goods.
C. capital goods.
D. consumer goods.
Question 20
An increase in production costs at a Ford automobile plant, and an increase in the general level of prices in the U.S. economy are examples of:
A. microeconomic problems.
B. macroeconomic problems.
C. a microeconomic problem and a macroeconomic problem, respectively.
D. a macroeconomic problem and a microeconomic problem, respectively.
Question 21
The following points showing different price-quantity combinations are plotted on a graph: ($1.00 and 40 units), ($2.00 and 30 units), ($4.00 and 20 units). A line connecting these points would be:
A. perfectly horizontal.
B. downward sloping.
C. upward sloping.
D. perfectly vertical.
Question 22
Which of the following statements is FALSE?
A. The study of economics is simplified because value judgments have no effect on the choices people make because of scarcity.
B. Scarcity is the basic reason for studying economics.
C. Scarcity forces people to make decisions about how to best satisfy their material wants and needs.
D. People must make tradeoffs, or give up one thing to get something else, because of scarcity.
Question 23
The opportunity cost of an item purchased is:
A. the time required to make a decision about the purchase.
B. the alternative purchase that is forgone to acquire the item.
C. the dissatisfaction experienced by the buyer when the item is no longer desired.
D. the tax paid on the item.
Question 24
Which of the following is an example of a capital good?
A. Food donated to flood victims.
B. Frozen yogurt.
C. In-line skates.
D. A cash register.
Question 25
The study of the U.S. economy as a whole, and how all households in the economy interact with all businesses and the government is:
A. macroeconomics.
B. microeconomics.
C. metaoeconomics.
D. megaeconomics.
Question 26
Which of the following is NOT a basic economic decision that must be made by every society?
A. Who will receive the goods and services that are produced.
B. What factors of production and methods will be used in producing goods and services.
C. What goods and services consumers will need most.
D. What goods and services will be produced.
Question 27
The way a society is organized to make the basic economic decisions is referred to as its:
A. output strategy.
B. social-economic structure.
C. production network.
D. economic system.
Question 28
The way in which a country makes the basic economic decisions depends on:
A. which basic economic decisions it must make.
B. whether or not it has solved the scarcity problem.
C. how the economic relationships among its households, businesses, and government are organized.
D. all of the above.
Question 29
The economic systems of people such as some early Native American tribes that were small, focused on agriculture, and operated with production methods not changed for generations are best characterized as:
A. traditional or agrarian economies.
B. mixed economies
C. command economies.
D. market economies.
Question 30
Which of the following statements describing a market economy is FALSE?
A. Households and businesses interact in markets to make economic decisions.
B. Price is the language through which buyers and sellers communicate.
C. Households only buy and businesses only sell.
D. The basic economic decisions are made by households and businesses.
Question 31
A "price system" is most closely associated with:
A. socialism.
B. a market economy.
C. a command economy.
D. all of the above.
Question 32
According to the circular flow model, money flows from households to businesses in:
A. both input and output markets.
B. output markets.
C. neither input nor output markets.
D. input markets.
Question 33
An example of a transaction in an output market is:
A. the purchase of labor services by a business.
B. the purchase of a new home by an individual.
C. the purchase of a building by an auto dealership.
D. all of the above.
Question 34
A good is produced efficiently when it is produced:
A. with equal amounts of the four factors of production.
B. with the smallest number of resources.
C. at the lowest possible quality.
D. at the lowest possible cost.
Question 35
In a pure market economy, who receives goods and services is determined by the:
A. availability of government income support payments.
B. sellers who have produced those goods and services.
C. value judgments of those administering each particular market.
D. ability to pay for those goods and services from income earned in resource markets.
Question 36
When a market system causes a problem or cannot achieve a goal set by society there is:
A. no alternative but to go to a purely planned economy.
B. mercantilism.
C. market failure.
D. market socialism.
Question 37
Cost-minimizing efforts by businesses that lead to pollution or inferior products are examples of:
A. project risk.
B. market failure.
C. command breakdown.
D. all of the above.
Question 38
The economic system in which the basic economic questions are answered through markets with some government intervention is a:
A. planned economy.
B. market economy.
C. mixed economy.
D. centralized economy.
Question 39
An example of government intervention in output markets would be:
A. antidiscrimination laws.
B. consumer protection laws.
C. corporate income taxation.
D. none of the above.
Question 40
In a planned economy:
A. free enterprise is the prevailing philosophy.
B. value judgments of individual buyers and sellers are more important than value judgments of planners.
C. how goods and services are produced is determined by what resources planners make available to producers.
D. goods and services are usually produced more efficiently than in a market system.
Question 41
An economic system where many of the factors of production are collectively owned and there is an attempt to equalize incomes is:
A. mixed capitalism.
B. capitalism.
C. absolutism.
D. socialism.
Question 42
Which of the following countries would rely most on a market based decision-making process?
A. England.
B. Cuba.
C. China.
D. United States.
Question 43
Beginning in the mid-1980s, the Soviet Union, China, and other planned economies:
A. turned their decision-making authority over to public officials in successful western economies.
B. increased their dependence on centralized decision making.
C. moved toward greater use of free markets and individual decision making.
D. formed into a single super-economy to reduce the scarcity problem.
Question 44
The idea of individual decision making popularized by Adam Smith in the late 1700s provided the foundation for:
A. U.S. capitalism.
B. Chinese socialism.
C. the economy of the former Soviet Union.
D. mercantilism.
Question 45
The economic system where the interests of the state are placed ahead of the interests of individual is:
A. mercantilism.
B. radical individualism.
C. pure capitalism.
D. mixed capitalism.
Question 46
Laissez-faire capitalism:
A. is concerned with placing the interests of the state above the interests of individuals.
B. holds that, for the sake of fairness, the state should decide how much income people will receive.
C. holds that individual decision making with minimal government intervention will maximize the interests of society.
D. all of the above.
Question 47
Adam Smith, in his book, The Wealth of Nations, advocated:
A. mercantilism.
B. laissez-faire capitalism.
C. government intervention into the economy to control people's self-interest.
D. socialism.
Question 48
The invisible hand doctrine is most closely associated with:
A. managed capitalism.
B. mercantilism.
C. laissez-faire capitalism.
D. socialism.
Question 49
Which of the following developments brought about by the industrial boom in the U.S. led to calls for greater government intervention in the marketplace?
A. the advent of large, powerful monopolies.
B. low wages for workers and the use of child labor.
C. long hours and poor working conditions for workers.
D. all of the above.
Question 50
The government programs and legislative reforms initiated during the 1930s to reduce the problems of the Great Depression were termed:
A. Reaganomics.
B. the Employment Act proposals.
C. laissez-faire intervention.
D. the New Deal.
Question 51
A buyer's demand for a product refers to the amounts of the product the buyer would purchase at different:
A. prices.
B. income levels.
C. points in time.
D. all of the above.
Question 52
The Law of Demand focuses on changes in the amount of a good or service demanded that are caused by changes in:
A. the price of the good or service.
B. nonprice factors, such as buyer's income, or substitute products.
C. the time period under consideration; for example, a week versus a month.
D. all of the above.
Question 53
One reason buyers demand less of a product as its price increases is:
A. buyers must save more of their incomes as prices increase.
B. substitute goods are usually available.
C. sellers offer less of the product for sale as its price increases.
D. high-priced goods place buyers in higher tax brackets.
Question 54
The different amounts of a product that a seller would make available at different prices in a defined time period when all nonprice factors are held constant is:
A. the Law of Demand.
B. supply.
C. demand.
D. the Law of Supply.
Question 55
The Law of Supply states that as the price of a product increases:
A. new buyers will enter the market because the product appears popular.
B. sellers will offer less of the product for sale.
C. consumers will buy less of the product.
D. sellers will offer more of the product for sale.
Question 56
The reason sellers offer more goods or services for sale when price increases is:
A. greater ability to cover costs.
B. greater ability to earn a profit.
C. both of the above.
D. none of the above.
Question 57
Because of the Law of Supply, supply curves:
A. slope upward.
B. slope downward.
C. are perfectly vertical.
D. are perfectly horizontal.
Question 58
A shortage occurs in a market when quantity demanded is:
A. equal to quantity supplied.
B. less than quantity supplied.
C. more than quantity supplied.
D. none of the above.
Question 59
A surplus occurs in a market when quantity demanded is:
A. equal to quantity supplied.
B. less than quantity supplied.
C. more than quantity supplied.
D. none of the above.
Question 60
Equilibrium price and equilibrium quantity are the price and quantity:
A. where demand equals supply in a market.
B. toward which a free market automatically moves.
C. both of the above.
D. none of the above.
Question 61
A shortage will develop when a product's price is:
A. equal to the equilibrium price.
B. less than the equilibrium price.
C. greater than the equilibrium price.
D. none of the above.
Question 62
A surplus occurs when the price charged in a market is:
A. above the equilibrium price.
B. below the equilibrium price.
C. the equilibrium price.
D. zero.
Question 63
In the table, P = price, Qs = quantity supplied, and Qd equals quantity demanded.
P Qs Qd
$9 10 4
8 9 5
7 8 6
6 7 7
5 6 8
4 5 9
Reference: Ref 3-1
A surplus will develop in this market when price is:
A. $5.
B. $7.
C. $6.
D. $4.
Question 64
In the table, P = price, Qs = quantity supplied, and Qd equals quantity demanded.
P Qs Qd
$9 10 4
8 9 5
7 8 6
6 7 7
5 6 8
4 5 9
Reference: Ref 3-1
A shortage will develop in this market when price is:
A. $8.
B. $6.
C. $7.
D. $5.
Question 65
Changes in the quantity supplied of a good or service are caused by changes in the:
A. cost of inputs, i.e. wages, rents, and interest.
B. number of sellers in the market.
C. price of the good or service.
D. time period under consideration, i.e. a week versus a month.
Question 66
A decrease in demand means that:
A. buyers have moved downward along a stable demand curve.
B. the demand curve for a product has shifted to the right.
C. the demand curve for a product has shifted to the left.
D. buyers have moved upward along a stable demand curve.
Question 67
The effect on sellers of a change in a product's price would be shown by a movement from point A to point B in figure:
A. C.
B. D.
C. A.
D. B.
Question 68
A usury law on interest rates is an example of a:
A. price floor.
B. price ceiling.
C. policy to allow the free market to determine the level of interest rates.
D. none of the above.
Question 69
The minimum wage law is an example of:
A. economic decision making based solely on individualism.
B. a law that ensures there are no shortages or surpluses.
C. a price floor.
D. a price ceiling.
Question 70
The supply of a product is price elastic if a 10 percent increase in price leads to:
A. a 10 percent increase in quantity supplied.
B. no change in quantity supplied.
C. a 12 percent increase in quantity supplied.
D. a 4 percent increase in quantity supplied.
Question 71
The measure of a buyer's sensitivity to a change in the price of a product is referred to as:
A. elasticity of demand.
B. demand reaction.
C. the Law of Demand.
D. the demand recovery index.
Question 72
The supply of a product is price elastic when:
A. prices increase, but not when they decrease.
B. a given percentage change in price leads to a larger percentage change in quantity supplied.
C. sellers produce goods that buyers see as luxuries, but not when they produce goods that buyers see as necessities.
D. none of the above.
Question 73
If a given percentage change in the price of a product is greater than the resulting percentage change in quantity demanded, the price elasticity of demand for the product is:
A. not enough information to answer the question.
B. greater than 1.
C. 1.
D. less than 1.
Question 74
A change in the quantity supplied of a product:
A. is caused by a change in the number of sellers in the market.
B. causes the product's supply curve to shift to the right or left.
C. is caused by a change in the price of the product.
D. means the entire supply schedule changes.
Question 75
Good A is a luxury and Good B is a necessity. Good C competes with many substitute products while Good D has few substitutes. You would expect the demands for goods:
A. A and B to be price elastic, and C and D to be price inelastic.
B. A and C to be price elastic, and B and D to be price inelastic.
C. B and D to be price elastic, and A and C to be price inelastic.
D. C and D to be price elastic, and A and B to be price inelastic.