Foundations Terms
Which of the following contributes to the economic problem of scarcity?
A) Humans are insufficient
B) Resources are unlimited
C) Resources are efficient
D) Resources are expensive
E) Resources have alternative uses
E) Resources have alternative uses.
Correct. When a resource has an alternative use, there are multiple needs for the resource and so it is scarce.
What does the Businesses do in the Factor Market?
A) Sells
B) Buys
C) Nothing
D) Gain Labor, Land, Capital
E) Gain Wages, Profit, Interest
If the government imposes a tax on a specific good, what is the likely impact on its demand?
a) The demand for the good will increase.
b) The demand for the good will decrease.
c) There will be no change in the demand for the good.
d) The demand for substitutes will decrease.
e) Both the taxed good and its substitutes will experience an increase in demand.
b) The demand for the good will decrease.
If there is an increase in production costs for a specific good, what is the likely impact on the supply of that good?
a) The supply will increase.
b) The supply will decrease.
c) There will be no change in the supply.
d) The supply will decrease, and the price will increase.
e) Both the supply and price will increase.
b) The supply will decrease.
Which of the following illustrates the effect of a decrease in an economy's resources using a production possibilities curve (PPC)
A) The economy's PPC will shift inward
B) The Economy's PPC will shift outward and to the right
C) The economy's PPC will become steeper
D) The Economy's PPC will become flatter
E) The economy's PPC will remain the same
A) The economy's PPC will shift inward
Correct. The PPC will shift inward and to the left to indicate a reduction in capacity as a result of the decrease in resources.
What is not a Resources?
A) Land
B) Labor
C) Rent
D) Capital
E) Entrepreneurship
C) Rent
What does the Households do in the Factor Market?
A) Sells
B) Buys
C) Nothing
D) Gain Labor, Land, Capital
E) Gain Wages, Profit, Interest
A) Sells
If there is a sudden trend favoring healthier lifestyles and diets, what is the likely impact on the demand for organic fruits and vegetables?
a) The demand for organic fruits and vegetables will decrease.
b) The demand for organic fruits and vegetables will increase.
c) There will be no change in the demand for organic fruits and vegetables.
d) The demand for conventionally grown fruits and vegetables will increase.
e) Both organic and conventionally grown products will experience a decrease in demand.
b) The demand for organic fruits and vegetables will increase.
How does technological advancement affect the supply of goods?
a) It increases the supply by reducing production costs.
b) It decreases the supply by increasing production costs.
c) There is no impact on the supply.
d) It decreases the supply by making production less efficient.
e) It increases the supply by increasing labor costs.
a) It increases the supply by reducing production costs.
A country produces only two goods, X and Y. If the country is operating on the PPC and decides to increase the production of good X, what is the likely impact on the production of good Y?
a) Production of Y will increase.
b) Production of Y will decrease.
c) Production of Y will stay the same.
d) Production of Y is uncertain and depends on other factors.
e) There is not enough information to determine the impact on Y.
b) Production of Y will decrease.
What is Growth?
A) Labor
B) Land
C) Production
D) GDP/Population
E) Capital
C) Production
Which component of the Circular Flow Model represents the total value of goods and services produced by an economy over a specific time period?
a) Government spending
b) Consumption expenditure
c) Gross Domestic Product (GDP)
d) Savings
e) Imports
c) Gross Domestic Product (GDP
If there is an increase in consumer incomes, what is the likely impact on the demand for normal goods?
a) The demand for normal goods will increase.
b) The demand for normal goods will decrease.
c) There will be no change in the demand for normal goods.
d) The demand for normal goods will decrease, and the demand for inferior goods will increase.
e) Both normal and inferior goods will experience an increase in demand.
a) The demand for normal goods will increase.
If the government provides subsidies to farmers growing a specific crop, what is the likely effect on the supply of that crop?
a) The supply will increase.
b) The supply will decrease.
c) There will be no change in the supply.
d) The supply will decrease, but the price will increase.
e) Both the supply and price will increase.
a) The supply will increase.
If a country is currently operating inside its PPC, what does this imply about its resource allocation?
a) Resources are overutilized.
b) Resources are underutilized.
c) Resources are efficiently utilized.
d) The country is experiencing economic growth.
e) The country is facing an economic downturn.
b) Resources are underutilized
What is Diminishing Marginal Returns (DMR)
A) As we consume more, utility's increase
B)As we consume more, utility's decrease
C)As we consume less, utility's decrease
D)s we consume less, utility's increase
E)None
B)As we consume more, utility's decrease
What does Businesses gain from the Product Market?
A) Profit
B) Revenue
C) Cost
D) Production
E) Product
B) Revenue
What happens to the demand for a good if there is a decrease in the price of a complementary good?
a) The demand for the good will increase.
b) The demand for the good will decrease.
c) There will be no change in the demand for the good.
d) The demand for the good will decrease, and the demand for substitutes will increase.
e) Both complements and substitutes will experience an increase in demand.
a) The demand for the good will increase
Which of the following will increase the market supply for new automobiles?
A)An increase in the price of steel, an input in the production of automobiles
B) An increase in taxes on automobile manufacturers
C) An increase in subsidies to automobile manufacturers
D) An increase in consumers' income
E) An increase in the price of gasoline, a complementary good
C)An increase in subsidies to automobile manufacturers
Correct. Subsidies are a determinant of the market supply. An increase in subsidies encourages manufacturers to produce more automobiles at the same prices. Therefore, there will be an increase in the quantity supplied at all prices, which results in an increase in the supply or a rightward shift in the supply curve.
During an economic recession, what is likely to happen to a country's position on the PPC?
a) It will move inside the PPC.
b) It will move outside the PPC.
c) It will stay on the PPC.
d) The PPC will shift outward.
e) The PPC will shift inward.
a) It will move inside the PPC.
What is rational Decision Making?
A) Examine cost and Benefit in Short and Long Term
B)Examine profit and Benefit in Short and Long Term
C)Examine rent and Benefit in Short and Long Term
D)Examine wages and Benefit in Short and Long Term
E)Examine interest and Benefit in Short and Long Term
A) Examine cost and Benefit in Short and Long Term
What does Businesses Pay in Factor Market
A) Production
B) Cost
C) Labor
D) Wages
E) Rent
B) Cost
Which of the following changes will increase the demand for bicycles?
A) An increase in the price of bicycle helmet, a complementary good
B) An increase in the price of scooters, a substitute good
C) A decrease in the price of the bicycles
D) A decrease in consumers' income
E) A decrease in the number of buyers
B) An increase in the price of scooters, a substitute good
Correct, an increase in the price of scooters (a substitute good) increases the demand for bicycles and shifts the demand curve to the right.
Which of the following describes the relationship between price and quantity supplied according to the law of supply?
A) Positive relationship, illustrated by an upward-sloping supply curve
B) Positive relationship, illustrated by a downward-sloping curve
C) Positive relationship, illustrated by a horizontal supply curve
D) Negative relationship, illustrated by an upward sloping curve
E) Negative relationship illustrated by a downward-sloping supply curve
A) Positive relationship, illustrated by an upward-sloping supply curve
Correct. According to the law of supply, price and quantity supplied have a positive relationship, illustrated by an upward-sloping supply curve. With all else being constant, as the price increases, the quantity supplied increases, which leads to an upward-sloping supply curve.
A country's PPC is concave, indicating increasing opportunity costs. The country is currently producing a combination of goods X and Y. If the country decides to specialize and produce only good Y, what is the likely consequence on the opportunity cost of producing good X?
a) The opportunity cost of producing X will decrease.
b) The opportunity cost of producing X will increase.
c) The opportunity cost of producing X will remain the same.
d) The PPC will shift inward.
e) The country will achieve allocative efficiency.
b) The opportunity cost of producing X will increase