Government Mid-Term
PASSAGE: It is always a difficult problem knowing how best to price a product.... Was it best to charge a high price and sell a smaller number...or charge a lower price and aim for volume? [Noumenon Corporation] decided to [test] the market for its new accounting program at different prices. The firm...raised prices in increments of $20 all the way up to $210. They found that total revenue was maximized at a price of $90. As a result of this experiment, they decided to...market the Intuit Accounting program at $89.95, much lower than the prices of competing software programs. QUESTION: In the experiment described in the passage, Noumenon Corporation was trying to determine the price that a. would create the most sales. c. most competitors could not beat. b. would bring in the most money. d. most consumers could afford.
B
According to this demand curve, if the price of movie videos increases from $14 to $16, the quantity demanded will a. fall from 600 to 400. c. fall from 400 to 200. b. rise from 400 to 600. d. rise from 200 to 400.
A
Demand for one particular brand of coffee is probably a. elastic. c. marginal utility. b. inelastic. d. substitutable.
A
Generally, the more substitutes there are for a good, the a. more elastic the demand. c. more complements there are. b. less valuable it is. d. less prices change.
A
Study the illustration. At a price of $10, how many more units of the product are supplied on curve S'S' than on curve SS? a. 9 c. 3 b. 6 d. 12
B
Non-price competition is a characteristic of both a. monopolistic competition and an oligopoly. b. perfect competition and a pure monopoly. c. an oligopoly and perfect competition. d. monopolistic competition and a pure monopoly.
A
One advantage of an oligopoly is a. more stable prices. c. fewer product offerings. b. lower prices per product. d. better services.
A
Study the illustration. At a price of $25, how much more of the product is demanded on curve D'D' than on curve DD? a. 2 units c. 1 unit b. 3 units d. 4 units
A
The movement shown in this graph represents a change in what? a. supply c. quantity supplied b. demand d. quantity demanded
A
Which of the following choices could cause the movement shown in this graph? a. a decrease in income c. an increase in the price of a substitute b. an increase in population d. a decrease in the price of a complement
A
Which products shown in the table are likely to have inelastic demand? a. gasoline in general, services of medical doctors b. fresh tomatoes, gasoline from a particular station, butter c. fresh tomatoes, gasoline in general, butter d. gasoline from a particular station, gasoline in general, butter
A
***Chart not included*** If you were to graph this demand schedule, the demand curve would a. slope upward from left to right. c. be horizontal. b. slope downward from left to right. d. be vertical.
B
A joint venture is a a. merger between two companies. b. temporary partnership set up for a specific purpose for a short period of time. c. partnership. d. conglomerate.
B
According to the illustration, what is the least common form of business organization in the United States? a. proprietorships c. corporations b. partnerships d. joint ventures
B
According to this organizational chart, to whom does the treasurer report? a. president c. stockholders b. board of directors d. secretary
B
According to this supply curve, 400 movie videos will be supplied at what price? a. $10 c. $14 b. $12 d. $16
B
According to this supply curve, if the price of movie videos decreases from $18 to $16, the quantity supplied will a. rise from 800 to 1000. c. rise from 600 to 800. b. fall from 1000 to 800. d. fall from 800 to 600.
B
An example of antitrust legislation is the a. Americans with Disabilities Act. c. Wade Act. b. Clayton Act. d. Truth in Lending Act.
B
Based on the passage, what characteristic of Sushi Nights' form of business organization left Scott Melton "holding the bag." a. unlimited life c. double taxation b. unlimited liability d. limited liability of stockholders
B
Based on this graph, how many Beanie BabiesTM were demanded at a price of $6 before they became a fad? a. 100 c. 300 b. 200 d. 400
B
Diminishing marginal utility refers to the fact that a. demand declines as income falls. b. additional satisfaction declines as additional units of an item are consumed. c. people have unlimited needs. d. in equilibrium, supply equals demand.
B
If the price of a product is above its equilibrium price, the result is a a. demand. c. shortage. b. surplus. d. black market.
B
On Curve A in the graph, suppose the price dropped from $10 to $7. Would quantity demanded increase or decrease and by how much? a. Quantity demanded would decrease by 1 unit. b. Quantity demanded would increase by 1 unit. c. Quantity demanded would decrease by 5 units. d. Quantity demanded would increase by 5 units.
B
Suppose you ranked the 9 activities of sole proprietorships shown in the table. The most common activity would be rank 1 and the least common, rank 9. What rank would you give to wholesale and retail activities? a. rank 1 c. rank 3 b. rank 2 d. rank 4
B
The board of directors of a corporation is responsible for a. running the company's day-to-day operations. b. hiring officers to run the business. c. determining the price of the company's shares. d. paying dividends to shareholders.
B
The movement in the graph shows that the quantity demanded of butter decreased because the a. price of butter increased. c. price of margarine increased. b. price of margarine decreased. d. price of butter decreased.
B
The principle that states that the more you have of something, the less satisfaction you will get from an additional unit is the a. law of demand. c. law of equilibrium. b. law of diminishing marginal utility. d. price elasticity.
B
Unlimited liability means that a. shareholders of a company receive dividends only if the company earns a profit. b. the owner of the business bears complete legal responsibility for all debts and damages arising from doing business. c. business cannot lose more than a preset amount. d. credit can be obtained more easily than in a business that has limited liability.
B
What does the movement shown on this graph represent? a. a change in demand b. the inverse relationship between price and quantity demanded c. a change in supply d. the inverse relationship between price and quantity supplied
B
What does the movement shown on this graph represent? a. a change in supply c. the law of diminishing returns b. a change in quantity supplied d. a shift in the equilibrium price
B
When the price of a good is too high for consumers, they look for a. inelastic demand. c. inflation. b. substitutes. d. luxury items.
B
Which letter represents the proper location on the diagram for "unlimited liability"? a. T c. V b. W d. Y
B
Which of the following choices could cause the movement shown in the graph? a. a decrease in income b. an increase in population c. a decrease in the price of a substitute d. an increase in the price of a complement
B
Which products shown in the table are likely to have elastic demand? a. gasoline in general, services of medical doctors b. fresh tomatoes, gasoline from a particular station, butter c. fresh tomatoes, gasoline in general, butter d. gasoline from a particular station, gasoline in general, butter
B
A temporary partnership set up for a specific purpose for a short period of time is known as a a. joint stock company. c. joint venture. b. acting board of directors. d. committee.
C
According to the law of demand, when the price of an item goes up, the quantity demanded a. stays at the same level. c. falls. b. rises. d. adjusts.
C
Based on the graph, the top 4 companies in the soft drink industry produced what percentage of all soft drink output? a. 90% c. 85% b. 87% d. 82%
C
Find the price of $15 on the demand schedule. What point does this price and quantity correspond to in the graph? a. v c. x b. w d. y
C
If you were to graph this supply schedule, the supply curve would a. be horizontal. c. slope upward from left to right. b. be vertical. d. slope downward from left to right.
C
In a limited partnership, a. all partners are equal. b. a bank limits the partnership's liability. c. some partners bear no risk. d. a general partner manages the business.
C
In the United States, which type of business accounts for the greatest share of revenues? a. sole proprietorship c. corporation b. partnership d. shareholders
C
Interlocking directorates occur when the boards of directors of competing companies a. buy out similar firms in their industry. b. sell their companies to one another. c. are composed of many of the same members. d. obtain a monopoly in a particular industry.
C
One of the advantages of purchasing a franchise is that the a. franchisee pays a fee and a percentage of the revenues taken in. b. franchisee signs a contract with the franchiser. c. franchiser often provides training. d. risk of losing money is small.
C
If one company purchases 52 percent of the stock of another company, the transaction is known as a a. joint venture. c. interlocking directorate. b. partnership. d. merger.
D
If the price of an item rises, quantity demanded usually a. reflects the presence of new suppliers. b. rises. c. remains unchanged. d. falls.
D
Market structure describes a. profitability of a business. b. ownership structure of a business. c. structure of a company's board of directors. d. amount of competition a business faces.
D
Natural monopolies are businesses that a. deal with natural resources. b. compete against other monopolies. c. are unregulated. d. provide such things as utilities, public transportation, and cable TV.
D
The substitution effect can decrease the quantity demanded of a good.
T
PASSAGE: Myles Monaghan could almost be the next Alex Rodriguez. He's got a cannon for an arm. He almost never drops the ball....So how come he spent his last few springs playing lacrosse? "BASEBALL IS BORING," says the 12-year-old Larchmont, N.Y., jock. Nationwide, the average number of children playing America's once-favorite pastime has tumbled nearly 20% according to the Sporting Goods Manufacturers Association. Sales of everything from balls to baseball cards are falling. QUESTION: Based on the passage and what you know about demand, why are sales of baseball cards dropping? a. Baseball cards are a substitute for the sport of baseball. b. The price of baseball cards is rising. c. Baseball cards are a complement of the sport of baseball. d. The price of baseball cards is falling.
C
PASSAGE:Scott Melton thinks he got a raw deal. Melton, who recently opened Sushi Nights on Main Street in Deep Ellum [Texas], filed for Chapter 11 bankruptcy in April for Sushi Deep Ellum Inc., the general partnership he formed to operate Deep Sushi.... Last June, Deep Sushi's limited partners, a group of 10 or so anesthesiologists and other human meat menders, gave Melton the boot. Not only that, they stiffed him, he says. "They left me holding the bag for $57,000 worth of unpaid taxes...including utilities and vendor bills...." QUESTION:What form of business organization operated Sushi Nights, the restaurant discussed in the passage? a. proprietorship c. general partnership b. limited partnership d. corporation
C
Suppose the demand curve shifts from D1 to D2, as shown on the graph. How do the quantity supplied and quantity demanded change at the new equilibrium price? a. Quantity supplied increases and quantity demanded decreases. b. Quantity supplied decreases and quantity demanded increases. c. Both quantity supplied and quantity demanded increase. d. Both quantity supplied and quantity demanded decrease.
C
The movement shown in this graph represents a change in what? a. quantity demanded c. demand b. marginal utility d. demand elasticity
C
The quantity demanded of a product is affected by a. output versus input. c. price. b. surplus quantities. d. shortages.
C
What does the movement from b' to b on the graph represent? a. an increase in demand c. a decrease in demand b. an increase in quantity demanded d. a decrease in quantity demanded
C
What economic principle does the graph illustrate? a. law of supply c. law of diminishing returns b. law of diminishing marginal utility d. law of demand
C
What form of business organization does this organizational chart depict? a. partnership c. corporation b. proprietorship d. joint venture
C
What letter on the graph represents the proper location for the market structure "oligopoly"? a. W c. Y b. X d. Z
C
Which letter represents the proper location on the diagram for "owners earn dividends"? a. W c. Y b. X d. Z
C
Which of the following choices could cause the movement shown in this graph? a. inputs become more expensive c. technology improves production b. the number of firms decreases d. taxes increase
C
Which of the following represents a form of non-price competition? a. barriers to entry c. advertising b. economies of scale d. deception
C
According to the law of supply, higher prices prompt producers to a. increase demand. c. produce less. b. maintain current production. d. produce more.
D
According to this demand curve, how many movie videos will be demanded at a price of $10? a. 400 c. 800 b. 600 d. 1000
D
All of the following are characteristics of a monopoly except a. single seller. c. barriers to entry. b. complete control of market price. d. presence of many competing firms.
D
Based on the table, approximately what number of sole proprietorships are engaged in mining? a. 323,080 c. 1,615,400 b. 3,230,800 d. 161,540
D
Entrepreneurs are people who a. sit on a corporate board of directors. b. earn profits. c. pay dividends. d. startup businesses.
D
Federal agencies actually decrease competition in an industry by a. allowing foreign companies to compete in the United States. b. using antitrust legislation against monopolies. c. preventing the formation of conglomerates. d. creating legal barriers to entry in an industry.
D
PASSAGE: Rice is what you'll probably end up with these days if your local McDonald's is in Indonesia. With the collapse of the Indonesian currency, the rupiah, in 1998, potatoes...have quintupled in price. That means rice is turning with an increasing frequency as an alternative to the french fry.... It's not hard to fathom why fries are an endangered menu item says Jack Greenberg, CEO of McDonald's: "No one can afford them." QUESTION: Based on this passage, McDonald's is serving rice in its Indonesian restaurants because of a. a decrease in the price of a complement. b. an increase in the price of a complement. c. a decrease in price of a substitute. d. an increase in the price of a substitute.
D
PASSAGE: Three years after a major farm bill ended the nation's decades-old program of agricultural price supports, Congress is considering beefing up safety nets to aid farmers around the country hit by dramatically low crop prices, shrinking exports, and falling incomes. QUESTION: In the passage, the term "price supports" refers to a a. shortage. c. price ceiling. b. surplus. d. price floor.
D
The change from the old demand curve to the new demand curve shown in the table represents a a. movement upward along the demand curve. b. movement downward along the demand curve. c. shift of the demand curve to the left. d. shift of the demand curve to the right.
D
What does the movement from b to b' on the graph represent? a. an increase in quantity supplied c. a decrease in supply b. a decrease in quantity supplied d. an increase in supply
D
What letter on the graph represents the proper location for the market structure "monopoly"? a. W c. Y b. X d. Z
D
What number should appear in place of the X in the table? a. $2,540 c. $3,019 b. $187 d. $168
D
Which of the following choices could cause the movement shown in the graph? a. technology improves production c. the number of firms increases b. inputs become cheaper d. taxes increase
D
Which of the following choices could cause the movement shown in this graph? a. an increase in the price of film c. an increase in the price of cameras b. a decrease in the price of film d. a decrease in the price of cameras
D
A startup company is a company owned by a single person.
F
A vertical merger involves the merger of two competing firms.
F
According to the law of demand, quantity and price move in the same direction.
F
After introducing a product nationwide, businesses often test-market their products.
F
Charging a very high price for a product is an example of penetration pricing.
F
Interlocking directorates occur when the boards of directors of competing firms buy out similar firms in their industries.
F
Mechanization involves assigning different tasks to different types of workers.
F
Owning a franchise is less risky than owning an independent business because the franchiser guarantees a certain level of profit.
F
Stocks and bonds are two forms of short-term financing.
F
The board of directors of a corporation makes most decisions about the company's day-to-day affairs.
F
The law of demand does not apply in a monopoly.
F
The point of cost-benefit analysis is to show how much it costs to finance an expansion.
F
The purpose of antitrust legislation is to make sure that businesses do not take advantage of their employees.
F
When people's income goes up, they usually consume less of a good or service.
F
A cartel raises the prices of the goods it controls.
T
A franchisee pays a certain percent of their revenues to the franchiser.
T
According to the law of supply, producers are willing to supply more when the price of a good or service goes up.
T
Businesses often receive a discount for paying their suppliers on time.
T
Businesses use market research to help them understand what consumers want.
T
Flyers you receive in the mail are a form of direct-mail advertising.
T
If demand for a good increases and supply does not, the equilibrium price will rise.
T
In a pure monopoly, the seller will charge more than the equilibrium price.
T
In a sole proprietorship, owners pay only personal income taxes on their profits.
T
In setting prices, businesses must consider the costs of production, advertising, selling, and distribution.
T
Most products and services go through a product life cycle.
T
Quality control is part of the production process.
T
