Econ Practice Exam

Who wrote The Wealth of Nations ?

Adam Smith

What conclusion can you draw from this demand curve?

Advertising increased demand for jeans.

*Use the circular flow from the previous question. The arrows ______ represent laborers going from the household to the firm.

C

*Use the circular flow from the previous question. The arrows _____ represent firms paying laborers

D

All of the following would be countries that at one time operated on a command style system EXCEPT

United States

What is a cooperative?

a business operated for the shared benefit of its owners, who are also its customers

Angela opens a coffee shop, which she owns and where she sells a national brand of gourmet coffee. She pays licensing fees to do this. What kind of business it this?

a franchise

What is a market demand curve?

a graph showing how much of a product a market is willing and able to buy

Total cost is the sum of

fixed costs and variable costs

You can buy and sell any legal good in the U.S. because of economic

freedom

Companies engage in competitive pricing to

gain a bigger share of the market

All of the following are true of a command economy EXCEPT

gives motivation to produce based on efficiency and equity

All of the following would operate in the factor market EXCEPT

going to the doctor

In a communist economy, resources are owned by

government

Improving the standard of living and overall production from quarter to quarter, year to year and generation to generation in the economy is the focus of economic

growth

Suppliers often reduce prices because they

have a surplus of products to sell

Which of the following categories received 10 percent of federal spending?

health

What is it called when companies that produce the same product merge?

horizontal merger

All of the following are considered firms EXCEPT

households

A factory closes, laying off hundreds of workers, and consumer spending in the town falls. What factor is affecting demand?

income

Improving an existing technology is considered an economic

innovation

Consumer goods and services, which are intended for the final use of consumption are known as

input outputs

To create a Subway sandwich the factors of production are necessary to produce the sandwich in its final form. The meats, lettuce, bread, mayo, etc., as well as the workers and machines are known as

inputs

A merger happens when one company

joins another company to form a single firm

What is the household providing in the flow of arrows represented by letter A?

labor for the firm

Into what four categories do economist divide factors of production?

land, labor, capital, and entrepreneurship

What is the term for a business in which none of the co-owners is responsible for the debts or mistakes of the others?

limited liability partnership

What is one of the major disadvantages of corporations?

loss of control

Economic decisions are based on the voluntary exchange of households and firms in this type of economic system

market

With capitalism, the allocation of goods and resources is determined by

market forces

What do business owners use to gather information for market demand schedules?

market research

Like the United States, this system is based on market principles, but accepts the role of government

mixed

A market structure in which only one seller sells a product for which there are no close substitutes is called a

monopoly

Competition is positive for all the following reasons EXCEPT

monopoly of business

Lower prices generally

motivate consumers to buy

Higher prices generally

motivate producers to enter a market

Which of the following categories received 8 percent of federal spending?

net interest

Monopolists are able to control prices because they have

no competition and there are no close substitutes for their products

An economic system is best defined as a(n)

organized method of allocating scarce resources

What is the term for a business that is co-owned by two or more people who agree on how responsibilities, profits, and losses will be divided?

partnership

Arrow 1 in the diagram represents the flow of

payment for goods

Which of the following shows the production of 4,000 TVs and 3,000 trucks?

point 4

Which of the following represents production that is impossible to attain?

point 7

One of the physical properties of money is

portability

Which of the following explains economics as it is, not as it should be?

positive economics

Which of the following is a disadvantage of partnership but not of sole proprietorship?

potential for conflict

The maximum amount that sellers may charge for a good or service is called a

price ceiling

Producers determine the allocation of scarce resources by seeking

profits and responding to consumer votes on a product

Which of the following is a corporation that issues stock that can be freely bought and sold?

public corporation

What is the point of market equilibrium?

quantity 1 million and price $60

At what point does the supply curve end?

quantity 2 million and price $100

At what point does the demand curve begin?

quantity 500 thousand and price $100

According to the law of supply, when prices increases,

quantity supplied increases

Economists use a supply curve to

show the law of supply in graph form

What is a business owned and managed by a single person called?

sole proprietorship

In a market economy with imperfect competition sellers

sometimes join with other sellers to influence prices

Which of the following is an advantage of partnership but not of sole proprietorship?

specialization of skills

The expenses that a new business pay to enter a market are called

start-up costs

A monopoly that exists because a firm controls an invention is called a

technological monopoly

What explains the shape of a demand curve?

the law of diminishing marginal utility

Supply is defined as

the willingness and ability of producers to offer goods and services for sale

The Federal Reserve System is

twelve regional banks with a central decision-making board

Which of the following best describes wants?

unlimited and ever changing

*Use the circular flow from the previous question. The arrows ______ represent firms paying laborers

8 to 6

How many TVs are being produced at point 2?

9,000

What does the term limited life mean?

The business does not continue if the owner leaves.

An oligopolist sells

either standardized or differentiated products

In a market economy with perfect competition, sellers

enter and exit the market freely

When there is a shortage, producers raise prices in an attempt to

equalize the quantity supplied and demanded

What does the saying "There is no such thing as a free lunch" mean?

everything costs something

The flow of labor to firms is represented by the arrows

5 to 7

On curve S2, when the price is $3.00, what is the quantity supplied?

500

On curve D2, at what price is the quantity demanded 300?

$120

On curve S1, at what price is the quantity supplied 200?

$2.00

On curve S2, at what price is the quantity supplied 400?

$2.50

How many trucks are being produced at point 3?

2,000

What percent of federal spending is allocated for national defense?

20

What percent of federal spending is allocated for transportation?

3

On curve S1, when the price is $2.50, what is the quantity supplied?

300

The flow of outputs (consumer goods and services) from firms to households is represented by arrow

B

Which of the following describes a demand curve?

It slopes downward from left to right.

All of the following would be examples of traditional economies EXCEPT

The United States

All of following are advantages of a market economy EXCEPT

all decision making is centralized, or in the hands of a few

In a communist economy, workers are

always employed by the government or government-controlled groups

The appearance of a supply curve is

an upward slope, bottom left to top right

Car manufacturers who use robots to do certain jobs on the assembly line are trying to increase supply by

applying new technology

Equilibrium price is the price at which the quantity of a product demanded by consumers and the quantity supplied by producers

are equal

What term is defined as an enterprise that produces goods or services, usually to make a profit?

business organization

What do various points on a demand curve represent?

change in quantity demanded

Demand deposits are

checking accounts

In this type of system, the economic questions are based upon central planners in government

command

In a market economy, the real power in the market place is held by the

consumer

Which of the following buys goods for personal use?

consumer

Which of the following examines the costs and expected benefits of a choice?

cost-benefit analysis

Reducing or eliminating government control of business is called

deregulation

What two factors are necessary for demand?

desire for a good or service and the ability to pay for it

Assembly line production is an example of

division of labor

In the marketplace, producers are looking to

earn a profit

Which term means "making decisions based on what you believe is the best combination of costs and benefits?"

economizing

Making the most of scarce resources focuses on the goal of economic

efficiency