Semester Practice Test

1. Semester Practice Test

2. 1. What can cause a production possibilities curve to move to the right? a. Thousands of people move out of the country. b. A new invention lowers the cost of production. c. An epidemic kills thousands of young men and women. d. The population is growing increasingly old. B 2. You are an entrepreneur would have better success in which type of economy? a. market economy c. traditional economy b. command economy d. economy of scale A 3. Any resources that are made by humans and used to create other goods and services are called a. services. c. capital. b. production. d. labor. C

3. 4. In what kind of an economy does the government make all the decisions? a. socialist c. centrally planned b. laissez faire d. free enterprise  C 5. Which of the following is the best example of the law of supply? a. A sandwich shop increases the number of sandwiches they supply every day when the price is increased. b. A food producer increases the number of acres of wheat he grows to supply a milling company. c. A catering company buys a new dishwasher to make their work easier. d. A milling company builds a new factory to process flour to export. A 6. When the selling price of a good goes up, what is the relationship to the quantity supplied? a. The cost of production goes down. b. The profit made on each item goes down. c. It becomes practical to produce more goods. d. There is no relationship between the two. C

4. 7. What is the struggle among various producers for the consumer’s business called? a. socialism c. incentive b. competition d. self-regulation B 8. When prices rise, which of the following happens to income? a. It goes down. c. It rises to meet prices. b. It buys less. d. It is used to buy different things. B 9. What determines the price and the quantity produced of most goods? a. the consumer’s perception of necessity b. the interaction of supply and demand c. the availability of substitutes for the goods d. the quality of the goods that are produced B

5. 10. What happens when wages are set above the equilibrium level by law? a. Firms tend to try to break the law and hire people at the equilibrium level. b. Firms employ more workers than they would at the equilibrium wage. c. Firms employ fewer workers than they would at the equilibrium wage. d. Firms hire more workers but for fewer hours than they would at the equilibrium wage. C 11. What is the major difference between a corporation and other kinds of businesses? a. A corporation is much larger than other kinds of businesses. b. A corporation is not responsible for its debts if it fails. c. A corporation has a separate entity apart from that of the owners and workers. d. A corporation has officers who are responsible for the business. C 12. When a consumer is able and willing to buy a good or service, he or she creates which of the following? a. consumption c. elasticity b. demand d. allocation B

6. 13. According to Figure 6.2, at the equilibrium price, how many slices of pizza will be sold? a. 150 c. 250 b. 200 d. 300 B 14. According to Figure 6.2, in this market, a price of $1.50 would be a. the equilibrium price. c. a price ceiling. b. a price floor. d. a subsidy. A 15. According to Figure 6.2, in this market, a price of $1.00 would be a. the equilibrium price. c. a price ceiling. b. a price floor. d. a subsidy. C

7. 16. Which of the following is an example of scarcity, rather than shortage? a. A popular toy is sold out during the busy holiday season. b. You have spent your last penny and payday is a week away. c. A person wants an endless supply of everything but cannot have it. d. Gasoline was rationed in America during World War II. C

8. 17. According to Figure 4.4, how many slices of pizza will Ashley buy if the price is $1.00 per slice? a. one b. two c. three d. four D 18. According to Figure 4.4, at what price will Ashley’s quantity demanded of pizza be three slices? a. $ .50 b. $1.00 c. $1.50 d. $3.00 C

9. 19. How is future price related to current demand? a. If the price is expected to rise, current demand will drop. b. If the price is expected to fall, current demand will rise. c. If the price is expected to rise, current demand will rise. d. Future price is not related to current demand. C 20. Human capital includes a. the salary paid to an accountant. b. a taxi driver’s knowledge of the city streets. c. the machinery used to weave cloth. d. the equipment used by a doctor to cure a patient. B 21. What happens to the market for tuna if sushi bars became more popular? a. the demand of tuna would increase, the price of tuna would increase, the quantity of tuna would increase b. the demand of tuna would increase, the price of tuna would decrease, the quantity of tuna would decrease c. the demand of tuna would decrease, the price of tuna would decrease, the quantity of tuna would increase d. the demand of tuna would decrease, the price of tuna would increase, the quantity of tuna would increase A

10. 22. What shows the quantities of products demanded at each price by all consumers in a market? a. an elasticity and consumption list c. a market pricing list b. a schedule of consumer prices d. a market demand schedule D 23. What is the name of the smallest amount that can legally be paid to most workers for an hour of work? a. equilibrium price c. price floor b. supply cost d. minimum wage D 24. What are inferior goods? a. goods that are not well produced b. goods that no one wants to buy c. goods for which the demand falls when income falls d. goods for which the demand falls when income rises D

11. 25. An example of a shortage is limited amounts of a. water available for irrigating a crop because it is used for other crops. b. labor available because the workers have other jobs. c. food available because the trucks carrying it are on strike. d. food available because few people want to buy it. C 26. Assume that Top Raman is an inferior good, what happens to the market for Top Raman when there is a sudden increase of consumers income? a. the demand for Top Raman decreases, price of Top Raman increases, quantity of Top Raman decreases b. the demand for Top Raman increases, price of Top Raman decreases, quantity of Top Raman increases c. the demand for Top Raman increases, price of Top Raman increases, quantity of Top Raman decreases d. the demand for Top Raman decreases, price of Top Raman decreases, quantity of Top Raman decreases D

12. 28. What is a factory building an example of? a. human capital c. an economic trade-off b. physical capital d. technology B 29. What incentive motivates a manufacturer to sell a product? a. making profits on sales c. pleasing the consumer b. putting others out of business d. popularity of the product A 30. When buyers will purchase exactly as much as sellers are willing to sell, what is the condition that has been reached? a. supply and demand c. equilibrium b. excess demand d. price floor C

13. 31. If the market price for pizza is $2.00 a slice, how many slices will be supplied by all producers in the market, according to Figure 5.4? a. 200 c. 250 b. 2,000 d. 2,500 D 32. According to Figure 5.4, what term describes elasticity of supply in this market as the price increases from $1.00 to $2.00 a slice? a. Elastic c. Unitary elastic b. Inelastic d. Extremely elastic B 33. According to Figure 5.4, how many slices of pizza will one pizzeria be willing to supply at a market price of $1.50 a slice? a. 100 c. 300 b. 200 d. 1,000 B

14. 34. The government of a country must make a decision between increasing military spending and subsidizing wheat farmers. This kind of decision is a a. guns or butter issue. c. global trade-off. b. decision at the margin. d. basic economic decision. A 35. In a publicly held corporation a. stockholders rarely trade their stocks. b. a large number of stockholders can buy and sell stock. c. stocks are not usually traded at stock exchanges. d. family members are excluded from holding stock. B 36. What is monopolistic competition? a. one company selling the identical product under different names b. one company selling several different products under different names c. a very few companies selling identical products d. many companies selling similar but not identical products D

15. 37. Which is FALSE about a sole proprietorship? a. easy to form b. flexible in decision making c. no corporation tax d. have little or no liability D 38. What does it mean when the demand for a product is inelastic? a. People will not buy any of the product when the price goes up. b. A price increase does not have a significant impact on buying habits. c. Customers are sensitive to the price of the product. d. There are very few satisfactory substitutes for the product. B 39. If a general partnership fails, who is responsible for the debts? a. anyone who works for the partnership b. all of the partners c. only the most senior general partner d. no one B

16. 40. What would happen to the orange juice market if there was a destructive hurricane in Florida during the growing season? a. the demand of orange juice would decrease, the price of orange juice would increase, the quantity of orange juice would decrease b. the demand of orange juice would increase, the price of orange juice would decrease, the quantity of orange juice would increase c. the supply of orange juice would increase, the price of orange juice would decrease, the quantity of orange juice would increase d. the supply of orange juice would decrease, the price of orange juice would increase, the quantity of orange juice would decrease D 41. Which of the following lists would an economist consider to be land? a. factories, office buildings, assembly lines, workers b. farm fields, tractors, pesticides, fertilizers c. dams, bridges, rock quarries, oil wells d. iron ore, natural gas, fertile soil, water D 42. What could cause a production possibilities curve to move down and to the left? a. A nation loses land after being defeated in a war. b. A baby boom 20 years ago resulted in a large number of young adults in the population today. c. An increase in the use of computer technology speeds up production. d. Thousands of investors from overseas invest money in a nation’s economy. A

17. 43. Which of the following makes someone an entrepreneur? a. earning a lot of money as a computer programmer b. becoming a highly paid dancer c. running a service that hires people to install sprinkler systems in lawns d. inventing and selling the rights to manufacture a computer game C 44. Who was the leader that introduced communism and central planning to the former Soviet Union? a. Karl Marx c. Vladimir Lenin b. Joseph Stalin d. Friedrich Engels A 45. Which of the following was a free market philosopher? a. Karl Marx c. Vladimir Lenin b. Adam Smith d. Friedrich Engels B

18. 46. Which of the following is NOT characteristic of a centrally planned economy? a. The central government owns all land and capital. b. The central government makes all economic decisions. c. Each collective or factory sets its own goals. d. Each person is assigned a job. C 47. What is the opportunity cost of a decision? a. the series of alternative decisions that could have been made b. the best possible way the question could have been decided c. the different ways that a different person might have made the decision d. the most desirable alternative given up for the decision D 48. The natural guide in the market economy “the market will right itself” a. invisible hand c. supply b. demand d. equilibrium A

19. 49. Which of the following is a good that might not be bought when prices rise? a. complement c. inferior good b. substitute d. luxury D 50. What is the effect of import restrictions on prices? a. They cause prices to drop. b. They cause prices to rise. c. They often cause prices to rise steeply and then drop. d. They usually do not have any lasting effect on price. B 51. Which of the following is a fixed cost for a store? a. short-term workers c. advertising b. rent d. inventory B

20. 52. Technological process has reduced the cost of manufacturing MP3 players. If demand is unchanged, a. more MP3 players will be sold at a higher price. b. fewer MP3 players will be sold at a higher price. c. more MP3 players will be sold at a lower price. d. fewer MP3 players will be sold at a lower price. C 53. An efficient economy is one that a. has very few people who do not work for a living. b. makes the best use of all its goods and services. c. uses its resources to make the most goods and services. d. makes the least costly use of its resources. C 54. What is a basic principle of the law of demand? a. The higher the price, the more people will want the good. b. Everyone has a limited income that they will spend. c. When a good’s price is lower, people will buy more of it. d. Services are of interest in the same way that goods are. C

21. 55. Which of the following is TRUE about scarcity? a. Some goods cost more than others. b. All resources are scarce. c. Some things are needs and others are wants. d. Some people want to have more goods than others. B 56. The resources used to make all goods and services are the a. production possibilities. c. production trade-offs. b. factors of production. d. opportunity costs. B

22. 57. Government actions and policies that restrict or restrain international trade. a. supply and demand c. protectionism b. tarrifs d. factors of production. C 58. An agreement between the United States, Canada and Mexico that will eliminate all trade barriers a. CUSI c. NCIS b. EU d. NAFTA D 59. A tax on imported goods a. progressive b. flat c. tariff d. regressive C

23. 60. A good that is sent to another country for sale a. export b. import c. inferior d. substitute A 61. The types of financial institutions are commercial banks, savings and loans and a. united banks b. unions c. credit unions d. financial unions C 62. The two functions of a bank are making loans and a. providing ATMs b. keeping deposits c. buying stocks d. making budgets B 63. The price for the use of borrowed money or money earned from deposited funds is called a. collateral b. profit c. interest d. a tariff C

24. 64. Property used to secure a loan is called a. interest b. profit c. tax d. collateral D 65. A plan for saving and spending a. CIG plan b. budget c. IRS plan d. spending chart B 66.Which of the following pools the savings of many individuals and invests this money in a variety of stocks, bonds and other financial assets. a. mutual funds b. union funds c. credit funds d. dividends A 67. Consumers buying more of a good when its price decreases and less when increases is the law of a. supply b. demand c. dividends d. sherrer B 68.The tendency of firms offering more of a good at a higher price is called the law of a. supply and demand b. sherrer c. supply d. demand C

25. 69. Laissez faire refers to which type of economy a. Mixed b. Command c. Market d. Unitary C 70. Which of the following regulates banking institutions. a. WAC b. FED c. SCC d. SEC B 71. Banks make their money by a. charging interest on deposits b. paying interest on deposits c. paying interest on loans d. charging interest on loans. D 72. A Bear Market occurs when the business cycle a. A market condition in which the prices of securities are falling b. A market condition in which the prices of securities are rising c. A market condition in which the prices of securities are at their lowest d. A market condition in which the prices of securities are at their highest A 73. Which of the following is NOT a function of money a. unit of account b. medium of exchange c. store of value d. supply security of collateral D

26. 74. Which is NOT a characteristic of money. a. scarcity b. acceptability c. portability d. exchange D 75. Money that has value because the government says it is an acceptable way to pay debts. a. reserved b. fiat c. regulated d. representative B 76. The 3 tools that the FED uses to regulate the money supply are, setting the discount rate, setting the reserve requirements and a. charging interest b. state taxes c. open-market operations d. federal taxes C 77. The body the regulates the stock market is a. FTC b.PAC SEC d. NFL C

27. Circular Flow Diagram 78. What does Figure 2.1 as a whole represent? a. a circular flow in a command economy b. a circular flow in a mixed market economy c. a circular flow in a free market economy d. a circular flow in a black market economy C 79. According to Figure 2.1, what does the lower line of monetary flow, marked “2,” show? a. Households pay firms for goods and services b. Households supply firms with land, labor, and capital c. Firms pay households for goods and services d. Firms pay households for land, labor, and capital D 80. What does the upper half of Figure 2.1, marked “1,” represent? a. Factor Market b. Product Market c. Command Market d. Mixed Market B