c




Economics is primarily the study of:


 

    
 
A. how
scarcity can
be
eliminated
B. how firms
manipulate
prices
C. how
government
influences
resource
allocation
decisions
D. the problem 100% The fundamental economic problem is one of scarce
of scarce resources relative to human wants. Such scarcity can
resources never be eliminated; it implies we must make choices.
relative to
human
wants
Score: 1/1



Suppose you have a $20 iTunes gift card with which you can buy (download) songs or videos. Songs cost
$1.00 each and videos cost $2.00 each. The opportunity cost of one video:


 

    
 
A. increases as
more
videos are
purchased
B. is $1.00
C. is constant
and equal
 to ½ song
D. is constant 100% The purchase of an additional video requires $2.00. At a
and equal price of $1.00 each, two songs would have to be given up
to 2 songs to obtain the required amount for one video.
Score: 1/1



You should decide to study an extra hour tonight


 

    
 
A. if the
marginal
cost of
studying an
extra hour
exceeds its
marginal
benefit
B. if the 100% Purposeful behavior in the face of scarcity entails
marginal comparing marginal benefit to marginal cost. Any activity
benefit of whose marginal benefit exceeds its marginal cost should
studying an be expanded.
extra hour
exceeds its
marginal
cost
C. if you got a
lower than
expected
grade on
your last
exam
D. because
studying
harder will
improve
your test
scores
Score: 1/1


Consider the problem Marsha faces of how to allocate her weekly allowance between books and CDs. An
increase in Marsha's income will:


 

    
 
A. shift her 100% Increased income allows Marsha to purchase additional
budget line books, additional CDs, or both but does not change the
to the right opportunity cost of one in terms of the other. Her budget
line shifts out parallel to itself.
B. shift her
budget line
to the left
C. rotate her
budget line,
allowing
her to buy
more books
but not
more CDs
D. rotate her
budget line,
allowing
her to buy
more CDs
but not
more books
Score: 1/1



The negative slope of the production possibilities curve illustrates that:


 

    
 
A. some
resources
are always
unemployed
B. when 100% Each point on the production possibilities curve represents
resources some maximum output of the two goods???the economy
are fully has achieved maximum production of one good for a
employed, given amount of the other. Increased production of any
an economy good requires sacrificing some of the other; the production
can produce possibilities curve will exhibit an inverse relationship
more of one between the two goods.
thing only
 by
producing
less of
something
else
C. opportunity
costs are
constant
D. business
can sell
more when
prices are
low
Score: 1/1

M

A microeconomist would most likely study:


 

    
 
A. how 100% Microeconomics is concerned with specific economic
consumers units and the operation of individual markets.
respond to a Macroeconomics, on the other hand, is concerned with the
change in economy as a whole or with basic aggregates such as the
gasoline money supply or consumer spending.
prices
B. the effects
of an
income tax
reduction on
the size of
the national
budget
deficit
C. the effects
of aggregate
consumer
debt on
overall
consumption
spending
D. the
relationship
between the
size of the
 money
supply and
the rate of
inflation
Score: 1/1

w

The fundamental problem of economics implies that:


 

    
 
A. governments
must be relied
upon to supply
essential
goods and
services
B. inflation and
unemployment
are
unavoidable
C. growing
populations
will deplete
natural
resources
D. individuals 100% The fundamental economic problem is one of scarce
and resources relative to human wants. Such scarcity can
communities never be eliminated; it implies we must make choices.
must make
choices among
competing
alternatives
Score: 1/1



If the economy is initially at a point on its long-run aggregate supply curve, a decrease in aggregate demand
will:


 

    
 
 A. permanently
increase
unemployment
B. temporarily 100% A fall in aggregate demand will temporarily reduce the
increase rate of inflation and increase unemployment.
unemployment
C. permanently
increase
inflation
D. temporarily
increase
inflation
Score: 1/1

Õ

The two general types of economic systems that exist today are:


 

    
 
A. market
systems and
capitalism.
B. socialism
and central
planning.
C. market 100% A higher price level will increase firms' profits; firms
systems and respond by increasing output in the short run.
command
systems.
D. laissez faire
systems and
pure
command
systems.
Score: 1/1

 

Examples of command Economies are:


 

    
 
 A. The United
States and
Japan
B. Cuba and 100% Deflation is an actual drop in the price level; disinflation
North is a slowdown in the rate of inflation.
Korea
C. Sweden and
Norway
D. Mexico and
Brazil
Score: 1/1



Economic Scarcity


 

    
 
A. is peculiar
to the
United
States
economy.
B. is peculiar
to
command
systems.
C. is peculiar
to market
systems.
D. applies to 100% A leftward shift of aggregate supply, such as that caused
all by higher oil prices or a decline in productivity, will
economies. reduce GDP and raise the price level, worsening
unemployment and the inflation rate.
Score: 1/1



A firm can produce a single unit of output by combining labor and capital in any of the combinations shown
in the following table. Labor costs $2 per unit and capital costs $4 per unit.
Technique
A B C D
 Labor 10 8 6 9
Capital 6 8 10 7
Refer to the table. Which is the most efficient technique for producing the output?


 

    
 
A. A 100% The cost of technique A is $44: 10 workers at $2 each plus
6 machines at $4 each. Similarly, the costs of techniques
B, C, and D are found to be $48, $52, and $46,
respectively.
B. B
C. C
D. D
Score: 1/1



Which of the following is a capital good?


 

    
 
A. A steel 100% "Capital goods" includes tools, machinery, productive
fabrication equipment, and buildings. Purely financial instruments
facility such as stocks and bonds are not capital goods.
B. A state
highway
construction
bond
C. A share of
Microsoft
stock
D. A gallon of
milk
Score: 1/1



The command systems of the Soviet Union and eastern Europe failed in part because:


 

    
 
A. previously
 abundant
economic
resources
became
scarce
B. central 100% Centrally planned economies face a coordination
planners problem???aligning all the millions of individual
found it decisions by consumers, resource suppliers, and
increasingly businesses???so that production does not entail too much
difficult to of one item but too little of another.
coordinate
the economic
decisions of
consumers,
resource
suppliers,
and
businesses
C. firms
manufactured
more output
than
consumers
could afford
to buy,
resulting in a
general glut
D. prices were
set too low in
all markets
Score: 1/1



The competitive market system encourages innovation and technological advance, primarily through:


 

    
 
A. the
government's
tax code
B. the process
of "dollar
voting"
C. the guiding
function of
 consumer
needs and
preferences
D. profitable 100% Firms that successfully innovate will be rewarded with
returns to higher profits in a market system. Self-interest and
innovative pursuit of profits assures that rival firms will spread any
firms new technology.
Score: 1/1

M

Human specialization, or the division of labor:


 

    
 
A. reduces
output by
dehumanizing
workers
B. reduces
output by
discouraging
workers from
learning a
wide variety
of tasks
C. increases 100% Specialization can increase output by allowing workers
output by to learn specific tasks very well (learning by doing), by
enabling enabling individuals to best utilize their own individual
workers to skills and abilities, and by avoiding the time cost of
take switching jobs.
advantage of
differences in
their skills
D. increases
output by
allowing
workers to
each perform
a wide variety
of tasks
Score: 1/1

w
Economic profits and losses:


 

    
 
A. answer the
question
"Who will
get the
output?"
B. answer the
question
"How will
the goods
and
services be
produced?"
C. help 100% Economic profits and losses provide the signal to firms
determine either to enter or leave an industry. Industries that sustain
which losses will tend to decline while profitable ones will
industries expand.
survive or
fail
D. are the
expected
outcomes
of a
decrease in
dollar votes
and an
increase in
dollar
votes,
respectively
Score: 1/1



Market economies use capital goods because they improve productive efficiency.


   
   
True 100% True
Score: 1/1

Õ
Money functions as a medium of exchange by eliminating the need for a coincidence of wants.


   
   
True 100% True
Score: 1/1

 

The production possibilities curve is basically a straight line showing price and production


   
   
False 100% False
Score: 1/1


c



When an economist says that the demand for a product has increased, this means that:


 

    
 
A. quantity 100% Demand is defined as the relationship between price and
demanded quantity demanded, all else equal. An "increase in
is greater at demand" occurs if this relationship exhibits greater
each quantity demanded at each possible price.
possible
price
B. firms make
less of the
product
available
for sale
C. consumers
respond to
a lower
price by
buying
more
D. the demand
 curve
becomes
steeper
Score: 1/1



When movie ticket prices increase, families tend to spend less time watching movies and more time at home
watching videos instead. This best reflects:


 

    
 
A. diminishing
marginal
utility
B. the income
effect
C. the
rationing
function of
markets
D. the 100% The substitution effect is reflected in consumer responses
substitution to higher prices as they shift purchases away from the
effect good or service whose price has risen, purchasing other
alternatives instead.
Score: 1/1



If consumer incomes increase, the demand for product Y:


 

    
 
A. will
necessarily
remain
unchanged
B. will shift to the
right if Y is a
complementary
good
C. will shift to the 100% The definition of a normal good is one for which
right if Y is a demand increases (shifts to the right) when income
 normal good increases.
D. will shift to the
right if Y is an
inferior good
Score: 1/1



When drawing demand and supply curves, economists are assuming that the primary influence on production
and purchasing decisions is:


 

    
 
A. price 100% Although there are many determinants of quantity
demanded and quantity supplied, the demand and supply
curves show the relationship between price and quantity,
all other factors held constant. The primary factor is
assumed to be the price.
B. the cost of
production
C. the overall
state of the
economy
D. consumer
incomes
Score: 1/1



A decrease in the price of a product will increase the amount of it demanded because:


 

    
 
A. supply
curves are
upsloping
B. the lower
price will
decrease
real
incomes
C. the lower 100% A lower price makes this product a more desirable
 price alternative relative to other similar products whose prices
induces have not changed. This is the "substitution effect."
consumers
to use this
product
instead of
similar
products
D. firms
produce
more at
lower
prices
Score: 1/1

M

"Because of unusually good growing conditions, the supply of strawberries has substantially increased." This
statement indicates that:


 

    
 
A. the demand
for
strawberries
will
necessarily
rise
B. the
equilibrium
quantity of
strawberries
will fall
C. the amount 100% An increase in supply occurs when more is made available
of at each price. All else equal, the price of strawberries will
strawberries fall.
that will be
available at
various
prices has
increased
D. the price of
strawberries
will rise
Score: 1/1
w

Goods X and Y are complements while goods X and Z are substitutes. If the supply of good X increases:


 

    
 
A. the demand
for both Y
and Z will
increase
B. the demand 100% The increased supply of X will decrease its price,
for Y will increasing the demand for complementary good Y and
increase decreasing the demand for substitute good Z.
while the
demand for
Z will
decrease
C. the demand
for Y will
decrease
while the
demand for
Z will
increase
D. the demand
for both Y
and Z will
decrease
Score: 1/1



An improvement in production technology for a specific good will cause a(n):


 

    
 
A. increase in
demand and
an increase
in price
B. increase in
demand and
a drop in
price
C. drop in 100% The improved technology will increase the supply of the
 price and product, thereby lowering the price and increasing the
increase in quantity demanded.
quantity
demanded
D. increase in
supply and
an increase
in price
Score: 1/1

Õ

Answer the next question(s) on the basis of the given supply and demand data for wheat:

Refer to the above data. Equilibrium price will be:


 

    
 
A. $4.
B. $3.
C. $2. 100%
D. $1.
Score: 1/1

 
Refer to the above diagram. The equilibrium price and quantity in this market will be:


 

    
 
A. $1.00 and 100%
200.
B. $1.60 and
130.
C. $.50 and
130.
D. $1.60 and
290.
Score: 1/1


c


!  " 

The personal distribution of income refers to the:


 

    
 
A. division of
income
between
personal
taxes,
consumption
 expenditures,
and saving.
B. division of
income on the
basis of
industry
sources, for
example,
agriculture,
transportation,
and mining.
C. distribution of
income to
basic resource
classes, that
is, wages,
rents, interest,
and profits.
D. way income is 100%
distributed
among
specific
households or
spending
units.
Score: 1/1


!  " 

The functional distribution of income refers to the:


 

    
 
A. division of
income
between
personal
taxes,
consumption
expenditures,
and saving.
B. division of
income on the
basis of
 industry
sources, for
example,
agriculture,
transportation,
mining, etc.
C. distribution of 100%
income to
basic resource
classes, that
is, wages,
rents, interest,
and profits.
D. way income is
distributed
among
specific
households or
spending
units.
Score: 1/1


!  " w

In the above diagrams for a hypothetical economy, Figure 1 shows the:


 

    
 
A. personal
distribution of
income.
 B. functional 100%
distribution of
income.
C. microeconomic
distribution of
income.
D. international
distribution of
income.
Score: 1/1


!  " 

Listed in descending order of total numbers, the business population is comprised of:


 

    
 
A. sole 100%
proprietorships,
corporations,
and
partnerships.
B. sole
proprietorships,
partnerships,
and
corporations.
C. partnerships,
corporations,
and sole
proprietorships.
D. corporations,
partnerships,
and sole
proprietorships.
Score: 1/1


!  " 
Limited liability applies to:


 

    
 
A. partnerships.
B. proprietorships.
C. all 100%
corporations.
D. financial
corporations
but not to
manufacturing
corporations.
Score: 1/1

M
!  " 

Most output in the United States is produced by:


 

    
 
A. cooperatives.
B. partnerships.
C. sole
proprietorships.
D. corporations. 100%
Score: 1/1

w
!  " 

The economic policies and programs of government affect all of the following á
á:


 

    
 
A. the
distribution
 of income.
B. the
allocation
of
resources.
C. the
composition
of output.
D. the 100%
underlying
motives of
consumers,
workers,
and firms.
Score: 1/1


!  " Õ

Market failure occurs when:


 

    
 
A. not every
consumer
can buy as
much of a
good as
they want at
the price
they want
it.
B. the 100%
competitive
market
system
produces
too much or
too little of
a good.
C. competitive
market
forces
produce
incomes
 that are
unequal.
D. government
interferes
with
competitive
market
forces.
Score: 1/1

Õ
!  "

Refer to the above diagram. The movement from point  to point
suggests that more:


 

    
 
A. private
goods are
being
produced at
the expense
of fewer
public
goods.
B. public 100%
goods are
being
produced at
the expense
of fewer
 private
goods.
C. public
goods are
being
produced
by
employing
currently
idle
resources.
D. private
goods are
being
produced
by
employing
currently
idle
resources.
Score: 1/1

 
!  "

Refer to the above diagram. The movement from point  to point
can be achieved by:


 

    
 
A. increasing 100%
taxes and
 increasing
government
spending.
B. increasing
taxes and
decreasing
government
spending.
C. decreasing
taxes and
increasing
government
spending.
D. decreasing
taxes and
decreasing
government
spending.
Score: 1/1


!  "

Macroeconomic stability is said to exist in an economy whenever:


 

    
 
A. there is no
inflation.
B. total spending
exceeds
production
capacity.
C. output matches 100%
production
capacity, labor
is fully
employed, and
inflation is low
and stable.
D. the rates of
output growth,
unemployment,
and inflation
are all zero.
Score: 1/1


!  "Õ

In determining one's personal income tax, taxable income is:


 

    
 
A. total 100%
income less
deductions
and
exemptions.
B. earned
income less
property
income.
C. all income
other than
wages and
salaries.
D. wage and
salary
income
only.
Score: 1/1


!  " 

Trade flows measure the:


 

    
 
A. movement
of resources
between
nations.
B. exports and 100%
 imports of
goods and
services.
C. transfer of
information
from one
nation to
another.
D. transfer of
money
between
nations.
Score: 1/1


!  " 

In terms of absolute volume of imports and exports, the world's leading trading nation is:


 

    
 
A. France.
B. Japan.
C. the United 100%
States.
D. South
Korea.
Score: 1/1


!  " Õ

According to the concept of comparative advantage, a good should be produced in that nation where:


 

    
 
A. its domestic
opportunity
cost is
greatest.
 B. money is
used as a
medium of
exchange.
C. its domestic 100%
opportunity
cost is least.
D. the terms of
trade are
maximized.
Score: 1/1

M
!  " 

Answer the next question(s) on the basis of the following production possibilities tables for countries Alpha
and Beta:

Refer to the above tables. The domestic opportunity cost of one unit of X in Alpha is:


 

    
 
A. 2 units of
Y.
B. 4 units of 100%
Y.
C. 1 unit of Y.
D. 3 units of
Y.
Score: 1/1

w
!  " 

Refer to the above domestic production possibilities curve for Karalex. The gain to Karalex from
specialization and international trade is represented by a move from:


 

    
 
A. A to B.
B. C to A.
C. C to D.
D. B to E. 100%
Score: 1/1


!  " w
Refer to the above diagram. If U.S. consumers increase their travel to Euro Zone nations, we would expect:


 

    
 
A. the demand 100%
for euros to
increase,
and the
euro to
appreciate.
B. the demand
for euros to
increase,
and the
dollar to
appreciate.
C. the supply
of euros to
increase,
and the
euro to
depreciate.
D. the supply
of euros to
decrease,
and the
dollar to
depreciate.
Score: 1/1

Õ
#$%
Economic Growth in the United States has been:


 

    
 
A. Decreasing
every
quarter for
the last two
years.
B. Has been
increasing
until the
last six
months.
C. Has been
increasing
rapidly
since 1950
D. Has been 100%
gradually
increasing
for the last
year.
Score: 1/1

 
!  " 

The "most-favored-nation" clause of reciprocal trade agreements:


 

    
 
A. outlaws
tariffs on
products for
which an
exporting
nation has a
comparative
advantage.
B. singles out a
particular
nation for
exemption
 from an
import quota.
C. means that 100%
any tariff
reductions
the United
States
negotiates
with a
specific
nation will
automatically
apply to
many other
nations.
D. confers
special trade
privileges to
nations in
which the
United States
has military
bases.
Score: 1/1