Small Test - Economics EOC (GSE) UPDATED Domain: Microeconomic Concepts

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Which marketing slogan BEST illustrates price competition? (B)

A) "As Seen on T.V.!" B) "Low Price Guarantee" C) "Ten Convenient Locations Near You" D) "Get a Free Gift With Every Purchase Over $25"

Which slogan MOST likely reflects a price competition strategy by the company using it? (B)

A) "From Our Family to Yours!" B) "Get the Most For Your Money!" C) "The Highest Quality on Earth!" D) "Forget the Rest, Stick with the Best!"

In a market economy, what does a producer mean when it asks, "Is there a market for my products?" (C)

A) "Is there a place where we can sell our products?" B) "Is our product being made more cheaply overseas?" C) "Will consumers need and want to buy our products?" D) "Will the government support demand for our products?"

Corporations, as a separate legal entity, are subject to corporate taxes. Additionally, the stockholders in corporations are subjected to income taxes on the sale of stocks and income from dividends. This peculiar tax situation that corporations face is called (B)

A) "flat tax." B) "double taxation." C) "itemized deductions." D) "progressive income tax."

On the first day of school, the school store had 100 pencils for sale at $1 each. At the end of the week, there were 90 pencils left. The second week, the price of pencils dropped to $.75 each. At the end of the week, there were 75 pencils left. The store dropped the price $.25 each week, and at the end of the fourth week, there were no pencils left. Which price was the market clearing price? (A)

A) $.25 B) $.50 C) $.75 D) $1

In the graph, the equilibrium price is approximately (B)

A) $1.00 B) $3.00 C) $5.00 D) $6.00

According to this graph, approximately ____ would be supplied and demanded at the equilibrium price of ___. (C)

A) 2; $2.00 B) 5; $4.60 C) 18; $3.50 D) 47; $0.60

Market Demand Schedule for Burritos in Colemanville Price Quantity Demanded $4 900 $5 750 $6 700 $7 500 $8 300 $9 100 Correctly identify the outcome if the price of burritos in Colemanville drops from $7 to $4. (D)

A) 900 burritos will be supplied. B) A quantity of 500 burritos will be demanded. C) The quantity demanded of burritos will rise by 20%. D) A quantity of 400 additional burritos will be demanded.

Which of these statements is TRUE of complementary products? (D)

A) An increase in demand for one will cause a decreased demand for the other. B) An increase in the price of one will cause a decrease in the price of the other. C) An increased supply of one product will result in a decreased supply of the other. D) An increase in the demand for one will usually result in an increased demand for the other.

Oldtown has only two grocery stores, but that is about to change. Coming this fall, two new grocery store chains are opening that focus on offering a wide variety at low prices. What impact will this have on the people of Oldtown? (D)

A) At least one of the grocery stores will go out of business due to increased costs. B) The local government should increase taxes on groceries to help pay for new infrastructure. C) The supply of groceries in Oldtown will increase, but demand will decrease, leading to a shortage in basic necessities. D) This would increase competition among the grocery stores, which should lead to higher productivity and lower prices for consumers.

Which statement accurately describes the contents of this graph? (A)

A) At the equilibrium price, quantity supplied equals quantity demanded. B) At the equilibrium price, quantity supplied exceeds quantity demanded. C) When the price goes above the equilibrium price, quantity demanded increases. D) When the price goes below the equilibrium price, quantity supplied increases.

Which example BEST demonstrates the effect of artificial price controls on supply and demand? (D)

A) Both rent controls and minimum wage laws result in shortages. B) Both rent controls and minimum wage laws result in surpluses. C) Rent controls result in surpluses and minimum wage laws result in shortages. D) Rent controls result in shortages and minimum wage laws result in

In the Resource (Factor) Market, who demands the factors of production? (C)

A) Businesses / Firms B) Individuals / Households C) Businesses / Firms and Government D) Individuals / Households and Government

Which statement about the circular flow model is CORRECT? (D)

A) Businesses earn income from both the factor and product markets. B) Households earn income from both the factor and product markets. C) Households earn income from the product market, and businesses earn revenue from the factor market. D) Households earn income from the factor market and businesses earn revenue from the product market.

In a circular flow diagram, labor and other factors of production are sold on resource markets. These resources are then used to produce goods and services sold on product markets. How are businesses involved in this flow? (A)

A) Businesses sell goods and services on product markets. B) On product markets, businesses sell factors of production. C) Businesses purchase goods and services on product markets. D) On resource markets, individuals buy factors of production.

Using this diagram, what outcome can be predicted if individuals stopped purchasing goods? (D)

A) Businesses would lose income. B) Businesses would produce less goods. C) Businesses would not be able to pay for resources. D) Businesses would experience all of these economic outcomes.

How might the purchase decisions of consumers impact a market economy? (A)

A) By buying some products, but not others, consumers might determine what is produced. B) When consumers buy products, the price of the product might decrease in response. C) If firms increase the supply of a product, consumers might purchase more. D) Where consumers decide to work might determine what is produced.

Using the supply and demand curve above, which statement is TRUE? (C)

A) By decreasing the price from $3.50 (P1) to $2.60 (P2), supply decreases. B) By decreasing the price from $3.50 (P1) to $2.60 (P2), demand decreases. C) By decreasing the price from $3.50 (P1) to $2.60 (P2), the quantity of supply decreases. D) By decreasing the price from $3.50 (P1) to $2.60 (P2), the quantity of demand decreases.

Demand for orange juice increases at the same time that the supply decreases. Which of these could explain that scenario? (B)

A) Consumers hear that citrus-based sugars increase the risk of diabetes, while citrus crop suffer from a severe frost. B) Consumers hear of the benefits of vitamin C contained in oranges, while citrus farmers suffer from a severe frost. C) Consumers hear of the benefits of vitamin C contained in oranges, while citrus farmers enjoy their best harvest in years. D) Consumers hear that citrus-based sugars increase the risk of diabetes, while citrus farmers enjoy their best harvest in years.

What is an economic principle that describes a consumer's desire and willingness to pay a price for a specific good or service? (A)

A) Demand B) Supply C) Law of Demand D) Law of Supply

The graph shows a demand curve. What can be said about the demand line moving to the right? (B)

A) Demand has decreased. B) Demand has increased. C) This indicates a reduced supply. D) An equilibrium price has been determined.

How might firms engage in price competition? (A)

A) Firms might advertise that they offer the lowest price on selected merchandise. B) Firms might promote the value their product offers for the price. C) Firms might join a coupon site to display their product's price. D) Firms might offer free gifts to attract new customers.

Which choice would be LEAST likely to be allowed to function as a natural monopoly in a society's economy? (A)

A) Food distribution B) Watershed management C) Electricity generation D) Hazardous waste disposal

What MIGHT be the purpose of government regulation of natural monopolies, or economies of scale? (A)

A) Government regulation might be used to facilitate competition. B) Government regulation might be designed to put a firm out of business. C) Government regulation might be intended to raise prices on all consumers. D) Government regulation might be created for less oversight of a profitable business.

How do prices act as signals to allocated goods, services, and productive resources in a market economy? (D)

A) High prices act as an incentive to drive demand higher. B) Low prices act as an incentive for producers to increase inventories. C) Low prices act as an incentive to drive consumers to substitute goods and services. D) High prices act as an incentive to increase the supply of a good, service or productive resource.

In the graph, what happened to the equilibrium price when the supply curve moved from S1 to S2? (B)

A) It did not change. B) The equilibrium price went up. C) The equilibrium price went down. D) It indicated a decrease in demand.

A Wal-Mart in Lawrenceville, Georgia, would be considered which type of market? (C)

A) It is a Product Market, because goods and services are sold there. B) It is a Resource (Factor) Market, because productive resources are sold there. C) It is both Factor and Product Markets, because goods, services and resources are sold there. D) It is neither, because the Circular Flow of Economic Activity has nothing to do with what is being bought and sold at Wal-Mart.

Why do firms spend money and time to advertise? (B)

A) It is a tax write-off for charity. B) To showcase their product among the competition. C) Regulations say that companies must advertise their product. D) There is no competition, so the company must inform the public.

How might a minimum wage law impact the supply and demand of workers? (A)

A) It might result in a surplus of supply. B) It might result in a shortage of supply. C) It might result in lower wages for workers. D) It might result in a lower unemployment rate.

The diagram shows the circular flow of goods and resources. What is the primary purpose of this chart? (C)

A) It shows the relationship between supply and demand. B) It indicates the changing tastes in the product market. C) It shows how households and businesses interact in a market economy. D) It shows the need for government intervention in any economic system.

Imagine that a company decides to try a new form of online marketing and advertising. What is the MOST likely impact this will have on production? (A)

A) It will have no impact on production. B) It will cause the quantity of output in production to increase. C) It will cause the quantity of output in production to decrease. D) It will cause technology, labor, and capital in production to increase.

Before money was invented, how were goods and services exchanged? (B)

A) Kings evenly distributed items. B) Merchants and customers bartered. C) Individuals were self-sufficient. D) Priests evenly distributed items.

What is meant by the statement "money is a medium of exchange"? (C)

A) Money is a measure of societal status. B) Money is a measure of a product's value. C) Money can be traded for goods and services. D) Money can be acculumated as a form of wealth.

In which type of business organization do the owners have the least input and decision-making on the day to day operations? (B)

A) Monopoly B) Corporation C) Partnership D) Sole Proprietorship

Which type of market typically produces the highest level of output at the lowest price to consumers? (C)

A) Monopoly B) Oligopoly C) Perfect competition D) Monopolistic competition

What MIGHT be a benefit of natural monopolies, or economies of scale? (A)

A) Natural monopolies might offer a cost advantage due to the size of the firm. B) Natural monopolies might offer a variety of alternatives for goods and services. C) Natural monopolies might offer convenient locations for payment of goods and services. D) Natural monopolies might offer consumers the latest products due to research and development.

How do price controls interfere with the efficient allocation of goods and services in a market economy? (C)

A) Price controls work to enforce the market equilibrium price for goods and services. B) The government places price controls on goods and services that would otherwise defy the forces of supply and demand. C) Price controls create artificially high or low prices for goods and services, which in turn cause disequilibrium in the market. D) Price controls increase efficiency in markets by sending clear signals to buyers and sellers, thus making the allocation of goods and services easier to facilitate.

Sara wants to start her own business. She is not sure if she wants to be a sole proprietor or get a partner. She asks a financial adviser about the different ways in which she might finance her company. What would an adviser tell her is a disadvantage of getting a partner? (B)

A) She is responsible for paying all shareholders. B) She has to share all of the profits with the partner. C) She has to go through a government application process. D) She is responsible for all of the debts the business incurs.

James works at an automobile factory. Every day he goes to work and inspects the machines at the factory to make sure they are running smoothly. At the end of the every week, James is paid by his boss, Bill, for his good work. James takes his paycheck to the bank every Friday and deposits most of it, but keeps a little bit of spending money. He then takes his wife, Julie, out for dinner, using the leftover money from his paycheck. According to the circular flow of economics, which market is James participating in by going out to dinner with his wife, Julie? (C)

A) Stamp Market B) Factor Market C) Product Market D) Automobile Market

Consumers are told that the consumption of cauliflower will significantly reduce the risk of cancer. Which of these scenarios is likely to happen in the cauliflower market? (D)

A) The demand curve will shift to the left and the price of cauliflower will fall. B) The supply curve will shift to the right and the price of cauliflower will rise. C) The supply curve will shift to the right and the price of cauliflower will fall. D) The demand curve will shift to the right and the price of cauliflower will rise.

If the price of the good represented by the graph increased from $5 to $10, which statement would be true? (D)

A) The demand would increase by 5 units of the good. B) The demand would decrease, while the supply would increase. C) The quantity supplied of the good would decrease from 7 to 4. D) The quantity demanded would decrease, and the quantity supplied would increase.

How might a law setting minimum wage below the equilibrium point have an unintended effect? (B)

A) The effect might be less demand for workers. B) The law might result in wages lower than the equilibrium wage. C) The actual wages earned by workers might be higher than the equilibrium. D) The equilibrium point might shift upward in response to the minimum wage law.

Looking at the graph, if there is an increase in income for the households in this market, what is the MOST LIKELY result? (C)

A) The equilibrium price will fall. B) The demand curve will shift to the left. C) The demand curve will shift to the right. D) The supply curve will become a vertical line.

What should happen to the equilibrium price of whoopee cushions when the price of the rubber necessary to make the cushions declines? (B)

A) The equilibrium price will rise. B) The equilibrium price will fall. C) The equilibrium price will stay the same. D) The price of substitute products will rise.

Which statement accurately reflects how the workers' earnings are determined in the graph? (C)

A) The janitors have a lower wage than the surgeons. B) The surgeons have higher productivity than the janitors. C) The demand for surgeons is greater than the supply, pushing up wages. D) The demand for janitors is greater than the supply, ensuring low wages.

A new technology increases the speed of computers without increasing production costs. What is the MOST LIKELY effect of this technology? (D)

A) The price of new computers will decline. B) The price of new computers will increase. C) The demand for new computers will decline. D) The demand for new computers will increase.

During Halloween, candy makers accurately anticipate the increased demand for candy for all of the parties and Trick-or-Treat. Manufacturers work hard to make sure the supply of candy and the demand for candy increase the same amount. What will happen to the price of candy on November 1, if there were a huge storm in the area and it didn't allow for shopping in the days leading up to (and the day of) Halloween? (B)

A) The price would not change. B) The price would fall to move the excess supply of candy. C) The price would rise to make up for the loss of profits. D) There is not enough information to make a determination.

As the supply shifts from S1 to S2, what can be inferred about the quantity demanded? (B)

A) The quantity demanded will increase. B) The quantity demanded will decrease. C) The quantity demanded will not be affected. D) The quantity demanded can not be determined.

Which relationship is the BEST example of the Law of Supply? (A)

A) The quantity of a good supplied rises as the price rises. B) The quantity of a good supplied rises as the price falls. C) The quantity of a good supplied falls as the price rises. D) The quantity of a good supplied is not impacted by price.

There was a tremendous drought in California, where the majority of lettuce is grown for the United States. Lettuce is vitally needed to make delicious tacos for Taco Tuesday. As a result of the drought, the price of lettuce used in making tacos doubles. People get tired of eating tacos on Tuesday and switch to eating lasagna. What happens to lettuce in the short term? (A)

A) The quantity supplied stays the same, but the price falls. B) The supply demanded stays the same, but the price rises. C) The supply and price stay the same. D) The supply and price both fall.

What is the relationship between quantity supplied and price? (B)

A) They are not related. B) They are directly related. C) They are inversely related. D) They are related through demand.

What generalization can be made using the graphs? (B)

A) Unlike the janitors, the graph for surgeons shows high demand and high supply. B) Unlike the janitors, the graph for surgeons shows high demand and low supply. C) Like the janitors, the graph for surgeons shows high demand and high supply. D) Like the janitors, the graph for surgeons shows high demand and low supply.

Pips Burrito Company, started by Mr. Pips, began as just a single man operating out of a small stand by the side of the road, but over the years it grew. Now, 50 years later, the company is listed on the NYSE, something Mr. Pips might have never imagined possible. The fact that Pips Burrito company lives on well past the original entrepreneur best characterizes which feature of corporations? (A)

A) Unlimited Life B) Double Taxation C) Limited Liability D) Unlimited Liability

Which statement BEST describes a benefit of natural monopolies, like utilities? (B)

A) Utility companies can charge whatever price fits the market demand. B) Natural monopolies can provide services in areas not served by other firms. C) Natural monopolies, like utility companies, are designed to be profitable firms. D) Utility companies, and other natural monopolies, are highly regulated by governments.

If the supply of computer engineers increases at the same time that the demand for these workers decreases, what would be the MOST LIKELY effect on wages for these workers? (C)

A) Wages would stay the same as job opportunities increase. B) Wages would increase as the number of workers increases. C) Wages would decline as the competition for jobs increases. D) Wages would increase as competition for these workers increases.

When makers of a product increase their price, consumers are often unwilling to continue to purchase the product (or at least as much of the product). This is known as (C)

A) a Price Ceiling. B) the Law of Supply. C) the Law of Demand. D) Equilibrium Price.

Which factor might cause an increase in the supply of a product? (C)

A) a decrease in productivity B) fewer sellers in the marketplace C) the introduction of new technology D) an increase in the cost of raw materials

To have demand, what must you have (C)

A) a desire for the item. B) the ability to pay for the item. C) the desire and the ability to pay for the item. D) a basic need and a constant supply of the item.

In economics, "equilibrium price" is a situation in which (B)

A) a partial temporary reduction in prices occurs. B) there is neither shortage nor surplus of goods. C) the quantity demanded is greater than the quantity supplied. D) the quantity supplied is greater than the quantity demanded.

An increase in the market demand for gasoline in the present, all else equal, could be caused by (A)

A) a rise in peoples' income. B) a reduction in the price of the gasoline. C) an expected price decrease in the near future. D) a reduction in the cost of drilling and refining petroleum.

If a product is sold at the price indicated and supplied in the quantity indicated by the intersection of the supply and demand curves in the graph, there should be (B)

A) an increase in price. B) no shortage and no surplus. C) a shortage until the price is raised. D) a change in the expected future price.

In a business organization, the splitting of management and ownership into two distinct functions is an example of a(n) (B)

A) arbitage. B) corporation. C) entrepreneur. D) partnership.

If the price for widgets was set at $2.50 (D)

A) buyers would purchase all of the available widgets. B) producers would discover that the price was too low. C) buyers would purchase more widgets than are available. D) producers would discover that the price should be lowered.

If the price for widgets was set at $4 (D)

A) buyers would purchase all of the available widgets. B) producers would discover that the price was too low. C) buyers would purchase more widgets than are available. D) producers would discover that the price should be lowered.

If the price for widgets was set at $4.25 (D)

A) buyers would purchase all of the available widgets. B) producers would discover that the price was too low. C) buyers would purchase more widgets than are available. D) producers would discover that the price should be lowered.

If the price for widgets was set at $2.00 (C)

A) buyers would refuse to purchase enough widgets. B) producers would discover that the price was too high. C) buyers would purchase more widgets than are available. D) producers would discover that the price should be lowered.

Johnny has invested in 10 shares of a big name electronics company. Each share is worth $150.28, and the company pays Johnny $2.13 for each share that he owns. With his 10 shares he earns $21.30 per year. What is this type of earning called? (B)

A) capital gain B) dividend income C) interest income D) adjusted gross income

The owners of a corporation are taxed on the capital gains from sales of stock, as well as on dividends. Further, a corporation is legal entity subject to corporate taxes. This is known as _____ taxation. (A)

A) double B) excessive C) progressive D) single

Heather is seeking to start a business. She is concerned with having enough money to start the business, even after taking a loan from the bank. She is willing to take on partners but she still wants to have control over most aspects of the company. Which form of business organization would be best to set up? (C)

A) franchise B) corporation C) partnership D) sole proprietorship

In an industry in which there are several providers of a type of good, why can one business not charge much higher prices for their goods? (C)

A) government rules prevent them from raising prices B) higher prices will cause more producers to increase production C) higher prices will encourage consumers to purchase substitute goods D) buyers are brand loyal, so they will stick with a brand, no matter the price

According to the diagram showing the circular flow of goods and resources, where do businesses sell the goods and services they produce? (B)

A) in the factor market B) in the product market C) in the capital market D) in individual households

The PRIMARY reason that natural monopolies are allowed to exist in areas such as energy production is that (B)

A) it would be too difficult to regulate these industries. B) it is more efficient for society to allow one company to be in control. C) it is not in the public interest to deregulate the providing of utilities. D) it would create inflationary pressures to allow more than one company to compete.

What is the PRIMARY means cartels use to control the price of the goods they produce? (C)

A) lobbying legislatures B) buying out competitors C) controlling supply levels D) increasing product quality

American solar power incorporated sells solar cells for people to install on their houses. What would the introduction of a Chinese company that also produces solar cells do to the market? (A)

A) lower prices B) raise prices C) eliminate demand D) force the American company out

For which market model is there a very large number of firms (offering the same goods for sale), which helps to lower costs and prices? (C)

A) monopoly B) oligopoly C) perfect competition D) monopolistic competition

Which market structure has the largest number of suppliers? (C)

A) monopoly B) oligopoly C) perfect competition D) monopolistic competition

Which market(s) has no competition (A)

A) monopoly B) oligopoly C) perfect competition D) monopolistic competition

Which markets compete in non-price competition? (C)

A) oligopoly and perfect competition B) monopoly and monopolistic competition C) monopolistic competition and oligopoly D) perfect competition and monopolistic competition

Demand for a product is measured not only by consumer desire for a product, but also by (D)

A) opportunity costs. B) competition for the consumer. C) demand for all similar products. D) ability and willingness to buy the product.

What will probably happen when the price of a product goes down? (B)

A) other prices will increase B) more people will want that product C) fewer people will want that product D) more will be able to pay for for that product

Jorge and Fred have a product they would like to sell. They decide to share the risks and profits by forming an unincorporated business. The business organization Jorge and Fred have MOST LIKELY formed is a(n) (A)

A) partnership. B) corporation. C) entrepreneurship. D) sole proprietorship.

The market demand curve for a firm operating under perfect competition is (B)

A) perfectly vertical. B) perfectly horizontal. C) upward sloping to the right. D) downward sloping to the right.

A price set below the current market price is a characteristic of a (C)

A) price floor. B) regular price. C) price ceiling. D) equilibrium price.

Money can be easily converted into goods or services. This is an example of which "function of money"? (C)

A) store of value B) measure of value C) medium of exchange D) commodity transfer

− Cost of inputs increases − Number of sellers decreases These changes would MOST LIKELY have which impact on the market? (B)

A) supply would increase B) supply would decrease C) demand would increase D) demand would decrease

The photo shows a shopping mall in Beijing, China. Inside, there are food sites selling pizza and hamburgers and clothing stores selling blue jeans and basketball sneakers. These items have become popular around the world because (B)

A) the Chinese and other governments promote them as a way to gain revenue. B) they are often seen on American television and film programs. C) there are few other options for food and clothing in China. D) they are the cheapest and best products available.

Cartels control the production and pricing of goods mainly through (B)

A) the elimination of competition. B) the cooperation of their members. C) the limitation of price controls. D) the manipulation of government pressur

Money that individuals receive from businesses return to businesses in (B)

A) the factor markets. B) the product markets. C) the purchase of land. D) the payment for resources.

John works a part-time job at a local fast food restaurant. He saves up him money to purchase a used car for $2500. Because the tires on the vehicle that he is going to purchase are worn, he negotiates a set of new tires to be placed on the vehicle prior to the official sale. The dealership purchases the tires from the Bridgestone factory to placed on the vehicle. John writes a check for his purchase and drives the car to his job that evening. The purchase of the tires in the scenario represent the (D)

A) the household. B) the government. C) foreign nations. D) the factor market.

Which of these is the best economic definition of "pure competition"? (D)

A) the market is dominated by one seller B) the market is dominated by a few buyers C) the market is dominated by two or more sellers D) the market is not dominated by either buyers or sellers

What would be the situation if the price was moved from p2 to p1? (C)

A) the price would be too low B) the price would be dropped C) there would be a surplus of widgets D) there would be a shortage of widgets

If the government decided to subsidize the production of bobble-head dolls (B)

A) the supply curve will shift to the left. B) the supply curve will shift to the right. C) the demand for bobble-heads will decrease. D) the demand for bobble-heads will equal the supply.

The Law of Supply states that (D)

A) the supply of a product is not affected by its price. B) when the supply of a product decreases, the price of the product falls. C) when the supply of a product increases, the price of the product rises. D) the quantity supplied of a product will increase when the price of that product increases.

For an industry to be perfectly competitive, what must exist? (C)

A) there are no competitive markets B) many firms selling identical items C) many firms selling different items D) many consumers wanting different items

One reason that government regulation of natural monopolies is essential is (D)

A) to ensure that competition continues to flourish. B) to create more opportunities for corporate investment. C) to allow more customer input into methods of production. D) to prevent the monopoly from raising prices uncontrollably.

Shelby and her sister Isa want to go into business together selling beauty products. They have agreed to share the risks and profits associated with their new business endeavor, what type of business ownership should they set up? (B)

A) trust B) partnership C) corporation D) proprietorship

A utility (such as a power company) which controls all services in a designated area is called a (C)

A) trust. B) cartel. C) natural monopoly. D) devised oligopoly.

Many companies sell different types of cell phones. Some consumers prefer to use a specific brand because of its different kind of features. This is an example of (D)

A) trusts. B) monopoly. C) pure competition. D) monopolistic competition.

Which is considered a negative side effect of minimum wage? (A)

A) unemployment B) full employment C) increased interest rates D) failure to meet equilibrium production


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