Unit 1 Scarcity
Unit 2 Opportunity Cost & PPF
Unit 3 Demand & Supply
Unit 4 Market Equilibriums
Unit 5 Price
100
1. What do economists mean when they state that a good is scarce? a. There is a shortage or insufficient supply of the good at the existing price. b. It is impossible to expand the availability of the good. c. People will want to buy more of the good regardless of price. d. The amount of the good that people would like to have exceeds the supply that is freely available from nature.
What is d. The amount of the good that people would like to have exceeds the supply that is freely available from nature.
100
1. Which of the following sayings best reflects the concept of opportunity cost? a. "You can't teach an old dog new tricks." b. "Time is money." c. "I have a baker's dozen." d. "There's no business like show business."
What is b. "Time is money."
100
1. Which of the following would most likely increase the demand for peanut butter? a. a decrease in the price of bread, a good that is often used with peanut butter b. a discovery that the average daily consumption of peanut butter decreases one's life span by 15 years c. crop failures that raise the price of peanuts d. a decrease in the price of all substitute protein products
What is a. a decrease in the price of bread, a good that is often used with peanut butter
100
7. When a price floor is above the equilibrium price, a. quantity demanded will exceed quantity supplied. b. quantity supplied will exceed quantity demanded. c. the market will be in equilibrium. d. This is a trick question because price floors generally exist below the equilibrium price.
What is b. quantity supplied will exceed quantity demanded.
100
2. When a price floor is above the equilibrium price, a. quantity demanded will exceed quantity supplied. b. quantity supplied will exceed quantity demanded. c. the market will be in equilibrium. d. This is a trick question because price floors generally exist below the equilibrium price.
What is b. quantity supplied will exceed quantity demanded.
200
2. Economic choice and competitive behavior are the result of a. basic human greed. b. poverty. c. private ownership of resources. d. scarcity.
What is d. scarcity.
200
2. If an economy is operating at a point inside the production possibilities curve, a. its resources are being wasted. b. the curve will begin to shift inward. c. the curve will begin to shift outward. d. This is a trick question because an economy cannot produce at a point inside the curve.
What is a. its resources are being wasted.
200
2. Economic profit is best defined as a. a company's net income as indicated by its accounting statement. b. the difference between the price of a product and the monetary cost of the raw materials used to produce it. c. the difference between the revenue from the sale of a product and the opportunity cost of the resources used to produce it. d. income paid by a business to its owners.
What is c. the difference between the revenue from the sale of a product and the opportunity cost of the resources used to produce it.
200
8. If the market price of a good is less than the opportunity cost of producing it, a. the market price of the product will fall in the long run. b. producers will increase supply in the long run. c. resources will flow away from production of the good, causing supply to decline with the passage of time. d. the situation will remain unchanged as long as supply and demand remain in balance.
What is c. resources will flow away from production of the good, causing supply to decline with the passage of time.
200
3. Rent control applies to about two-thirds of the private rental housing in New York City. Economic theory suggests that the below-equilibrium prices established by rent controls would a. redistribute income from tenants to landlords. b. promote a rapid increase in the future supply of housing. c. result in poor service and quality deterioration of many rental units. d. lead to a reduction in housing discrimination against minorities.
What is c. result in poor service and quality deterioration of many rental units.
300
3. Rationing is a. the allocation of a limited supply of a good or resource among users who would like to have more of it. b. a function that can only be performed by market prices. c. a function that is unnecessary except in cases where markets are used to allocate goods and resources. d. essential only when the price of a product is set above market equilibrium.
What is a. the allocation of a limited supply of a good or resource among users who would like to have more of it.
300
3. The primary benefit that results when a nation employs its resources in accordance with the principle of comparative advantage is a. an expansion in capital investment resulting from a reallocation of resources away from consumption. b. a larger output resulting from a more efficient use of resources. c. greater equality of income resulting from an increase in the number of workers. d. an increase in the profitability of business enterprises resulting from an increase in capital formation.
What is b. a larger output resulting from a more efficient use of resources.
300
4. The number of persons wanting tickets to Super Bowl games is invariably greater than the number of tickets (and seats) available. This is evidence that the price of the tickets is a. higher than the competitive equilibrium price. b. equal to the competitive equilibrium price since the number of tickets bought equals the number sold. c. lower than the competitive equilibrium price. d. higher than the competitive equilibrium price when the demand is inelastic but lower when the demand is elastic.
What is c. lower than the competitive equilibrium price
300
9. The price of chicken increases as the result of higher beef prices. This indicates that a. chicken and beef are substitutes. b. chicken and beef are complements. c. the market demand for beef is inelastic. d. the market demand for chicken is elastic.
What is a. chicken and beef are substitutes.
300
4. Which of the following is the most likely result of an increase in the minimum wage? a. an increase in the employment of unskilled workers b. a decrease in the unemployment rate of unskilled workers c. an increase in the demand for unskilled workers d. a decrease in the employment of unskilled workers
What is d. a decrease in the employment of unskilled workers
400
4. The expression, "There's no such thing as a free lunch" implies that a. everyone has to pay for his own lunch. b. the person consuming a good must always pay for it. c. costs are incurred when resources are used to produce goods and services. d. no one has time for a good lunch anymore.
What is c. costs are incurred when resources are used to produce goods and services.
400
7. Which of the following will most likely occur under a system of clearly defined and enforced private property rights? a. Resource owners will fail to conserve vital resources, even if they expect their scarcity to increase. b. Resource owners will ignore the wishes of others, including others who would like to use the resource that is privately owned. c. Resource owners will fail to consider the wishes of potential future buyers when they decide how to employ privately owned resources. d. Resource owners will gain by discovering and employing their resources in ways that are highly valued by others.
What is d. Resource owners will gain by discovering and employing their resources in ways that are highly valued by others.
400
5. "A reduction in gasoline prices caused the demand to increase. The lower prices led to an increase in demand for large cars, causing their prices to rise." These statements a. are essentially correct. b. the lower gasoline prices would cause a reduction in demand for large cars, not an increase. c. the lower gasoline prices would increase the quantity of gasoline demanded by consumers, not the demand for large cars. d. the lower gasoline prices would cause the quantity of gasoline demanded (rather than demand for large cars) to increase, and the lower gasoline price would reduce (rather than increase) the demand for large cars.
What is c. the lower gasoline prices would increase the quantity of gasoline demanded by consumers, not the demand for large cars.
400
10. The invisible hand principle indicates that competitive markets can help promote the efficient use of resources a. only if buyers and sellers really care, personally, about economic efficiency. b. even when each market participant cares only about getting a "bigger slice of the pie" rather than about the overall efficiency of resource use. c. even if business firms fail to produce goods efficiently. d. if, and only if, businesses recognize their social obligation to keep costs low and use resources wisely.
What is b. even when each market participant cares only about getting a "bigger slice of the pie" rather than about the overall efficiency of resource use.
400
1. Which of the following is legally permitted to use coercive force to modify the actions of adults? a. banks b. corporations c. governments d. all of the above
What is c. governments
500
5. Which one of the following states a central element of the economic way of thinking? a. Scarce goods are priceless. b. Incentives matter--if the personal cost of a choice increases, individuals will be less likely to choose it. c. The realism of the assumptions is the best test of an economic theory. d. When deciding how to allocate time, the concept of opportunity cost is meaningless.
What is b. Incentives matter--if the personal cost of a choice increases, individuals will be less likely to choose it.
500
8. Three basic decisions must be made by all economies. What are they? a. how much will be produced; when it will be produced; how much it will cost b. what the price of each good will be; who will produce each good; who will consume each good c. what will be produced; how goods will be produced; for whom goods will be produced d. how the opportunity cost principle will be applied; if and how the law of comparative advantage will be utilized; whether the production possibilities constraint will apply
What is c. what will be produced; how goods will be produced; for whom goods will be produced
500
6. A cold spell in Florida extensively reduced the orange crop, and, as a result, California oranges commanded a higher price. Which of the following statements best explains the situation? a. The supply of Florida oranges fell, causing the supply of California oranges to increase as well as their price. b. The supply of Florida oranges fell, causing the supply of California oranges to decrease and their price to increase. c. The supply of Florida oranges fell, causing their price to increase and the demand for California oranges to increase. d. The demand for Florida oranges was reduced by the freeze, causing an increase in the price of California oranges and a greater demand for them.
What is c. The supply of Florida oranges fell, causing their price to increase and the demand for California oranges to increase.
500
1. If the United Auto Workers union can obtain a substantial wage increase for auto workers, the price of automobiles will rise. The rise can be attributed to a. a shift to the right in the supply curve for automobiles. b. a shift to the left in the supply curve for automobiles. c. a shift to the right in the demand curve for automobiles. d. a shift to the left in the demand curve for automobiles.
What is b. a shift to the left in the supply curve for automobiles.
500
2. As methods of economic organization, the market and the public sector are similar in which of the following ways? a. Income is distributed equally in and by both sectors. b. In both sectors, economic activity is undertaken only when it will result in social gain. c. In both sectors, economic exchange is completely voluntary. d. Someone must cover the cost associated with the provision of scarce goods in both sectors.
What is b. In both sectors, economic activity is undertaken only when it will result in social gain.
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