ECON SAMPLE TEST 1

1) When an economist talks of scarcity, the economist is referring to the A) inability of society to satisfy all human wants because of limited resources. B) ability of society to continually make technological breakthroughs and increase production. C) ability of society to employ all of its resources. D) ability of society to consume all that it produces.

A

11) In economics, the term "capital" refers to A) buildings and equipment. B) the money in one's pocket. C) mineral resources. D) consumer goods.

A

11) The "law of demand" states that, other thing remaining the same, the higher A) the price of a good, the smaller is the quantity demanded. B) the price of a good, the higher is the quantity demanded. C) consumers' incomes, the greater is the demand. D) the price of a good, the lower is the demand for this good.

A

13) When an economy produces at its allocatively efficient production point, A) a society can increase the production of one good only by decreasing the production of some other good that is valued more highly. B) scarcity is not a problem. C) a society can increase the production of all goods. D) resources are not limited.

A

15) A natural resource, such as fishing territories, is considered an example of A) land only. B) only capital. C) land, labor, capital and entrepreneurship. D) both land and labor.

A

19) In the figure above, an economy would grow fastest if it produces at point A) A. B) B. C) C. D) D.

A

19) Which of the following decreases the supply of restaurant meals? A) Waiters get a pay raise. B) The price of movies, a complement to restaurant meals, falls. C) Consumers' incomes decrease and restaurant meals are a normal good. D) Consumers' incomes increase and restaurant meals are a normal good.

A

21) Because of increasing marginal cost, most supply curves A) have a positive slope. B) are horizontal. C) have a negative slope. D) are vertical.

A

21) In the figure above, what can be said about point B? A) It can be reached only after economic growth occurs. B) It represents all resources being devoted to the production of oranges. C) It can be attained only if some resources are left unused. D) It represents all resources being devoted to the production of apples.

A

23) An increase in the cost of producing video tape shifts the supply curve of video tape ________ and shifts the demand curve for video tape ________. A) leftward; not at all B) not at all; leftward C) rightward; leftward D) leftward; leftward

A

25) The above table gives the demand and supply schedules for Blu-ray discs. Based on the table, the equilibrium quantity and price of Blu-ray discs is A) 20,000 and $20. B) 16,000 and $24. C) 28,000 and $12. D) 16,000 and $16.

A

3) A society that is producing on its production possibilities frontier is A) fully utilizing all of its productive resources. B) producing too much output. C) not utilizing all of its resources. D) not being technologically efficient.

A

31) Suppose that a typical German factory can produce 20 cameras or 1 computer in an hour, and that a typical American factory can produce 10 cameras or one computer in an hour. If Germany produces one less computer and switches resources to cameras, and the United States produces one more computer and takes resources out of cameras, then the net change in camera production in both countries taken together is A) plus 10 cameras. B) plus 20 cameras. C) 0. D) minus 10 cameras.

A

33) In the above figure, in order for the equilibrium price to remain constant while the equilibrium quantity increases, the A) supply and demand curves both would have to shift rightward. B) supply curve would have to shift rightward and the demand curve would have to shift leftward. C) supply curve would have to shift leftward and the demand curve would have to shift rightward. D) supply and demand curves both would have to shift leftward.

A

35) A computer software program is most strongly an example of A) intellectual property. B) real property. C) vicarious property. D) fiat property.

A

11) Marginal benefit is the A) dollars sacrificed to purchase a good or service. B) benefit that a person receives from consuming one more unit of a good or service. C) amount of one good or service that a person gains when another good or service is consumed. D) minimum amount a person is willing to pay for one more unit of a good or service.

B

17) The price of jet fuel falls. This fall shifts the A) demand curve for airplane trips rightward. B) supply curve of airplane trips rightward. C) supply curve of airplane trips leftward. D) demand curve for airplane trips leftward.

B

17) Which of the following best defines capital as a factor of production? A) Financial assets used by businesses. B) Instruments, machines, and buildings used in production. C) The gifts of nature that businesses use to produce goods and services. D) The knowledge and skills that people obtain from education and use in production of goods and services.

B

23) Economic growth can be represented by A) a movement up the production possibilities frontier (PPF). B) an outward shift of the production possibilities frontier (PPF). C) an inward shift of the production possibilities frontier (PPF). D) a movement down the production possibilities frontier (PPF).

B

27) The opportunity cost of attending college includes the cost of A) tuition, books, and the lost wages for the hours spent studying. B) the highest valued alternative to attending college plus the cost of tuition. C) the highest valued alternative to attending college. D) the tuition but not the job at which you would otherwise have worked.

B

27) The table shows the demand and supply schedules for jeans. A) At $60 a pair, there is a surplus of jeans and the price will rise. B) At $40 a pair, there is a shortage of jeans and the price will rise. C) At $40 a pair, there is a shortage of jeans and the price will fall. D) At $60 a pair, there is a shortage of jeans and the price will fall.

B

29) The interaction of supply and demand explains A) neither the prices nor the quantities of goods and services. B) both the prices and the quantities of goods and services. C) the prices of goods and services but not their quantities. D) the quantities of goods and services but not their prices.

B

29) The marginal benefit is the A) additional gain from one more unit of an activity minus the additional cost from one more unit of the activity. B) additional gain from one more unit of an activity. C) loss of the highest-valued alternative. D) additional cost from one more unit of an activity.

B

3) Macroeconomics differs from microeconomics in that: A) macroeconomics studies the decisions of individuals. B) macroeconomics focuses on the national economy and the global economy. C) macroeconomics studies the behavior of government while microeconomics looks at private corporations. D) microeconomics looks at the economy as a whole.

B

39) Which of the following is a normative statement? A) Owners of apartment buildings are free to charge whatever rent they want. B) Low rents are good because they make apartments more affordable. C) Low rents will restrict the supply of housing. D) Housing costs are rising.

B

5) The study of the choices made by individuals is part of the definition of A) positive economics. B) microeconomics. C) macroeconomics. D) normative economics.

B

5) When the production possibilities frontier bows outward from the origin, A) some of society's resources are unemployed. B) opportunity costs are increasing. C) opportunity costs are decreasing. D) opportunity costs are constant.

B

7) The problem of "scarcity" applies A) only in underdeveloped countries because there are few productive resources in these countries. B) to all economic systems, regardless of their level of development. C) only in industrially developed countries because resources are scarce in these countries. D) only in economic systems that are just beginning to develop because specialized resources are scarce. 8) Which of the following is a microeconomic topic?

B

1) If the money price of hats rises and no other prices change, the I. relative price of a hat rises. II. opportunity cost of a hat rises. A) only II B) only I C) both I and II D) neither I nor II

C

10) Macroeconomic topics include A) studying what factors influence the price and quantity of automobiles. B) the impact of government regulation of markets. C) total, nationwide employment. D) studying the determination of wages and production costs in the software industry.

C

13) When the price of an inferior good falls, the substitution effect leads to ________ in the quantity purchased and the income effect leads to ________ in the quantity purchased. A) an increase; an increaseB) a decrease; an increase C) an increase; a decrease D) a decrease; a decrease

C

13) Which of the following statements is correct? A) The United States produces more goods than services. B) The percentage of people producing goods in the United States has steadily increased over the last 60 years. C) The United States produces more services than goods. D) The United States produces an equal amount of goods and services.

C

15) Jeep Cherokees are a normal good. If people's incomes increase, the direct result will be A) a decrease in the demand for the vehicles. B) an increase in the supply of the vehicles. C) an increase in the demand for the vehicles. D) Both answers A and C are correct

C

19) When a country decides to produce fewer bombers and more public housing projects, it is answering the ________ part of one of the two big economic questions. A) "for whom" B) "how" C) "what" D) "defense"

C

25) When the government chooses to use resources to build a dam, these sources are no longer available to build a highway. This choice illustrates the concept of A) macroeconomics. B) a market mechanism. C) opportunity cost. D) a fallacy of composition.

C

29) Suppose that in an hour Joe can prepare 10 sandwiches or 5 pizzas. The opportunity cost of Joe producing one sandwich is A) 5 pizzas. B) 1 pizza. C) 1/2 pizza. D) 2 pizzas. 30) A person has a comparative advantage in producing a particular good if that person

C

31) "Government should act to reduce poverty levels." A) This statement is a positive statement. B) This statement is an example of the fallacy of composition. C) This statement is a normative statement. D) This statement is an example of the post hoc fallacy.

C

31) If the price is above the equilibrium price, then there is a A) shortage, and market forces will operate to lower price. B) shortage, and market forces will operate to raise price. C) surplus, and market forces will operate to lower price. D) surplus, and market forces will operate to raise price.

C

35) The statement that ________ is a positive statement. A) too many people in the United States have no health care insurance B) more students should study economics C) the price of sugar in the United States is higher than the price in Australia D) the price of gasoline is too high

C

9) If the marginal benefit from another computer exceeds the marginal cost of the computer, then to use resources allocatively efficiently, A) fewer resources should be used to produce computers. B) if the marginal benefit exceeds the marginal cost by as much as possible, the efficient amount of resources are being used to produce computers. C) more resources should be used to produce computers. D) None of the above is correct because marginal benefit and marginal cost have nothing to do with using resources allocatively efficiently.

C

15) An efficient allocation of resources occurs when we A) cannot produce more of a good or service without giving up some other good or service that we need. B) produce the goods and services that people need. C) produce the goods and services that people want. D) cannot produce more of a good or service without giving up some other good or service that we value more highly.

D

17) In the figure above, point D is A) production efficient and point B is not production efficient. B) less production efficient than point C. C) not production efficient and point B is production efficient. D) production efficient and point A is not production efficient.

D

21) A cost due to an increase in activity is called A) an incentive loss. B) a negative marginal benefit. C) the total cost. D) a marginal cost.

D

3) The opportunity cost of good A in terms of good B is equal to the A) money price of good A minus the money price of good B. B) money price of good B minus the money price of good A. C) ratio of the money price of good B to the money price of good A. D) ratio of the money price of good A to the money price of good B.

D

33) In markets, people's decisions are coordinated by A) changes in property rights. B) specialization according to absolute advantage. C) learning-by-doing. D) adjustments in prices.

D

7) If the money price of wheat increases and no other prices change, the A) relative price of wheat falls. B) relative price of wheat is unaffected. C) demand for wheat increases. D) opportunity cost of wheat rises.

D

35) In 2011, the price of peanuts was rising, which lead peanut butter buyers to expect the price of peanut butter would rise in the future. Consequently, in the current market for peanut butter there was ________ which resulted in ________ in the price of peanut butter and ________ in the quantity of peanut butter. A) a decrease in demand for peanut butter; a decrease; a decrease B) an increase in supply of peanut butter; a decrease; an increase C) a decrease in supply of peanut butter; an increase; a decrease D) an increase in demand for peanut butter; an increase; an increase

D

37) If both the demand and supply increase, the equilibrium quantity ________ and the equilibrium price ________. A) decreases; rises B) increases; falls C) decreases; might rise, fall, or not change D) increases; might rise, fall, or not change

D

37) Positive economic statements A) are related only to microeconomics. B) cannot be tested against the facts. C) prescribe what should be. D) can be tested against the facts.

D

37) The rights of an owner to use and exchange property are A) money rights. B) capitalist rights. C) socialist rights. D) property rights.

D

39) A factor market is a market in which A) firms sell goods and services. B) households buy goods and services. C) firms sell the services of the factors of production. D) households sell the services of the factors of production they control.

D

39) The above figures show the market for hamburger meat. Which figure shows the effect when more farmers decide to raise cows that are processed into hamburger meat? A) Figure A B) Figure B C) Figure C D) Figure D

D

5) The money price of a pizza is $12 per pizza and the money price of a taco is $2 per taco. The relative price of a pizza is A) $24 per pizza. B) 1/6 pizza per taco. C) $12 per pizza. D) 6 tacos per pizza.

D

9) Scarcity guarantees that A) demands will be equal to wants. B) demands will exceed wants. C) most demands will be satisfied. D) wants will exceed demands.

D