ECON TEST 1

Inflation Rate Formula

(Price index in year 2 - price index in year 1)/(Price index in year 1) x 100

What are the 4 basic resources?

1)Land 2)Labor 3)Capital 4) Entrepreneur

Scarcity, by definition, means A. A situation where the inputs for producing the thins we desire are insufficient to satisfy all our wants. B. Poverty C. A shortage. D. That less of the good is available than buyers wish to purchase.

A. A situation where the inputs for producing the things we desire are insufficient to satisfy all of our wants.

The Law of demand shows that there is. A. An inverse relations hip between price and quantity demanded. B. An inverse relationship between price and resource cost. C. A direct relationship between price and quantity demanded. D. An inverse relationship between price and profit.

A. An inverse relationship between price and quantity demanded.

Which of the following situations could generate a shortage? A. Demand for a good increases, but the price is not permitted to rise. B. Demand for a good increases, resulting in a new higher market clearing price. C.Demand for a good decreases, but the price is not permitted to fall. D. Demand for a good decreases, resulting in a new lower market clearing price.

A. Demand for a good increases, but the price is not permitted to rise.

If the price of milk falls, the supply of ice cream is likely to. A. Increase B. Require careful management C. Remain unchanged. D. Decrease

A. Increase

In economics, physical capital includes. A. Machinery B. Bank accounts C. Shares of stock. D. Money

A. Machinery

Suppose that because of unseasonable cold weather in Brazil, there has been a substantial decline in Brazilian coffee crop. This statement means means that. A. The amount of coffee beans available at various prices will decline. B. The price of coffee will fall. C. The quantity of coffee will be unchanged. D. Demand for coffee will rise.

A. The amount of coffee beans available at various prices will decline.

The Incentive Principle states that A. scarcity is a universal phenomenon that arises because resources are limited. B. An action should be taken if and only if the additional benefits from taking the action are at least as great as the additional costs of doing so. C. If the marginal benefit of an activity increases, then a rational person will engage in more of the activity. D. Having more of one thing usually means getting by with less of something else.

B. An action should be taken if and only if the additional benefits from taking the action are at least as great as the additional costs of doing so.

Regarding the law of supply, which of the following statements is correct. A. As the price of a good or service rises, the quantity supplied will decrease. B. As the price of a good or service rises, the quantity supplied will increase. C. The ceteris paribus assumption does not apply. D. As demand falls, supply rises

B. As the price of a good or service rises, the quantity supplied will increase.

The accumulated training and education that you have is. A. Physical capital B. Human capital C. Economic Goods D. Entrepreneurship

B. Human capital

The demand curve shows the relationship between quantity demanded and A. Quantity supplied B. Price C. Income D. Supply

B. Price

Activities designed to convert resources into goods and services is known as. A. Scarcity B. Production C. Consumption D. Supply

B. Production

Refers to the above figure. How do you describe what is happening as the economy moves from A to point C? A. The economy as acquired new resources that are will suited for producing bread. B. Resources are becoming unemployed. C. The technology for growing wheat has improved. D. Land that was once used graze sheep is now being used to grow wheat.

B. Resources are becoming unemployed .

Regarding the above figure, at a price of four cents, an of bubble gum will exist in the market. A.Equilibrium B.Surplus C.Excess quantity demanded D. Shortage

B. Surplus

Using the above table, at a price of $5 there will be a ? A. Surplus of 10 units. B. Surplus of 20 units. C. Shortage of 20 units. D. Shortage of 10 units.

B. Surplus of 20 units.

The direct relationship between changes in price and changes in quantity supplied is. A. The law of relative production B. The law of supply. C. A change in supply. D. Shown by a shift in the supply curve.

B. The law of supply

Based on the above figure, which diagram depict the effect on the supply of Corn Flakes when the price of corn has decreased?

C

From an economics perspective, which of the following is NOT a resource? A. Labor B. Land C. A product E. Entrepreneurship

C. A product

Demand is a schedule showing. A. The relationship between the cost of producing a good and the price that suppliers will charge in the market place. B. How much income it takes to afford various quantities of a good. C. A set of possible prices for a good and the quantities of the good that will be purchased at each of those prices. D. How population changes will affect the amount of a good that is needed.

C. A set of possible prices for a good and the quantities of the good that will be purchased at each of those prices.

Education and training of workers would best be categorized as. A. Physical capital B. Labor C. Human capital D. Land

C. Human capital

Oil found in Alaska is an example of. A. Human capital B. Physical capital C. Land or natural resource. D. Labor

C. Land or natural resource

Refer to the above figure. How do you describe what is happening as the economy moves from point C to point B? A. The economy has increased tis wool production by 30 bales at an opportunity cost of 250 loaves of bread. B. The economy has acquired new resources for making bread. C. Previously unemployed resources are now being devoted to the production of wool. D.Previously unemployed resources are now being devoted to the production of bread.

C. Previously unemployed resources are now being devoted to the production of wool.

Which of the following is NOT a determinant of demand? A. Consumers' incomes B. Prices of other goods C. Production technology D. Consumers' tastes

C. Production technology

If the demand for a product remains the same and the supply falls, A. Both the market clearing price and equilibrium quantity will fall. B. The market clearing price will fall and the equilibrium quantity will rise. C. The market clearing price will rise and the equilibrium quantity will fall. D. Both the market clearing price and the equilibrium quantity will rise

C. The market clearing price will rise and the equilibrium quantity will fall.

If the demand for a product remains the same and the supply increases, A. Both the market clearing price and the equilibrium quantity will fall B. The market clearing price will fall and the equilibrium quantity will rise. C. The market clearing price will rise and equilibrium quantity will fall. D. Both the market clearing price and the equilibrium quantity will rise.

C. The market clearing price will rise and the equilibrium quantity will fall.

Opportunity cost is best defined as. A. The dollar price of the purchased item. B. The sum of the dollar values of all alternatives given up when choices are made. C. The next highest valued alternative when a choice is made. D. The cost of producing the purchased goods.

C. The next highest valued alternative when a choice is made.

Which of the following is NOT a non-price determinant of demand? A. expectations of future prices B. Tastes and preferences C. The price of the good or service. D. Prices of related goods and services.

C. The price of the good or service.

Scarcity exists because A. There is a disruption in the disruption in the distribution of goods caused by bad weather. B. There is a shortage of qualified workers throughout the world. C. There are not enough resources available to produce all the goods that people want. D. There is shortage of goods caused by war.

C. There are not enough resources available to produce all the goods that people want.

The fact that our wants are unlimited but our resources are limited implies that. A. We should limit our wants. B. The only way to make someone better off is to make someone else worse off. C. We have to make choices. D. Entrepreneurship has failed as an economic system.

C. We have to make choices.

Using the above table, the market clearing price for the product is? A.$4 B.$2 C.$3 D.$5

C.$3

The Market Economic System is also know as:

Capitalism

5 Non-price determinants of demand

Consumer Tastes and Preferences, Income Effect, Substitution Effect, Prices of Related Goods, Consumer expectations

Assume the above figure illustrates the demand & supply of Corn Flakes. Based on the above figure, which diagram depicts the effect on the supply of Corn Flakes when when the price of corn has tripled?

D

A subsidy to carrot farmers will. A. Decrease the quantity of carrots supplied. B. Increase the quantity of carrots demanded. C. Leave both supply supply and demand of carrots unchanged. D. increase the supply of carrots.

D. Increase the supply of carrots.

The fact that when the price of a good goes up, people buy less of it is known as the. A. Law of supply B. Need for inferior goods. C. Concept of market equilibrium D. Law of demand

D. Law of Demand

The curve will shift to the left when. A. The product becomes fashionable B. The demand for the product decreases. C. The supply for the product increases. D. Some producers leave the industry

D. Some producers leave the industry.

As an economy moves from point to point along its production possibilities curve , which one of the following variables changes? A. The level of technology B. The time frame under consideration C. The total amount of resources employed D. The amount of each good or service production

D. The amount of each good or service production.

If one day it was discovered that canned foods caused cancer, which of the following would likely result. A. The supply curve of canned foods would shift to the right. B.The demand curve for canned foods would shift to the right. C.The supply curve of canned foods would shift to the left. D.The demand curve for canned foods would shift to the left.

D. The demand curve for canned foos would shift to the left.

Refer to the above figure. Which one of the following statements is true with regard to the economy depicted in the graph? A. The total amount of resources it takes to produce 20 bales of wool and 500 loaves is more than the amount of resources needed to produce 50 bales of wool and 250 loaves of bread. B. Point C cannot be produced. C. The best production point is 500 loaves of bread and 50 bales of wool. D. The total amount of resources it takes to produce 20 bales of wool and 500 loaves of bread is the same as the amount of resources needed to produce 50 bales of wool and 250 loaves of bread.

D. The total amount of resources it takes to produce 20 bales of wool and 500 loaves of bread is the same as the amount of resources needed to produce 50 bales of wool and 250 loaves of bread.

Refer to the above figure. Production at Point "E". A. Is not attainable with given resources and technology B. Would indicate that this economy is producing beyond its capabilities. C.Would demonstrate a total lack of technical expertise. D. Would indicate production at a level below what is possible.

D. Would indicate production at a level below what is possible.

Refer to the above figure. Production at Point "F". A. Would no be desirable B. Can be attained only if a society desired more goods and services. C. Can only be attained by giving up Point E. D. Is not attainable given the underlying assumptions of the production possibilities curve

D. is not attainable given the underlying assumptions of the production possibilities curve

An example of an entrepreneur would be. A. The cashier at your local supermarket. B. The cafeteria employee who won the employee of the month award. C. A Greyhound bus driver. D. The owner of a new Indian food restaurant.

D. the owner of a new Indian food restaurant.

Regarding the above figure, at a price of two cents, the quantity of bubble gum demanded will be A.3 B.2 C.5 D.4

D.4

During periods of unemployment. A. The production possibilities curve shifts outward. B. The production possibilities curve shifts inward. C. The economy operates at a point outside the production possibilities curve. D. The economy operates at a point inside the production possibilities curve.

D.The economy operates at point inside the production possibilities curve.

Basic production decisions 3)

For whom are goods produced?

4 basic economic systems

Free-Market, Indicative planning, mixed planning and centrally-planned.

Nature and extent of individuals rights 1)

Freedom of mobility and employment

Basic production decisions 1)

Given available resources what goods must be produced

per capita GDP

Gross Domestic Product per person

Basic production decisions 4)

How much of each good should be produced?

4th of property rights

Legal recourse if private property is stolen, confiscated vandalized or damaged

Nature and extent of individuals rights 2)

Owner rights/ rights right to own assets.

Nature and extent of individuals rights 3)

Property rights

cash flow rights

Refers to the claims to the future cash flows that the buildings and land are expected to generate.

Control rights

Rights to make decisions concerning how and by whom a thing may be used.

Economic systems differ along 3 dimension 2)

System incentive used to motivate others A) Material rewards/ Incentives B) Moral persuasion C) Coercion

real growth rate

The gross domestic product (GDP) calculated to account for changes in currency values and price changes.

7 non-price determinants of supply

The non-price determinants of supply are taxes & subsidies, technology, number of seller, price of other products, expectations and resources.

Disposal Rights

The right of disposal of goods, including retention of ownership and retention of the right to sell the goods.

Basic production decisions 5)

What price should the goods be offered ?

Basic production decisions 2)

What production techniques is to be used in the production of goods

Economic systems differ along 3 dimension 1)

Who controls/ owns the society Private sector - free market systems Public sector - Centrally planned

circular flow diagram

a visual model of the economy that shows how dollars flow through markets among households and firms

Law of Demand

consumers buy more of a good when its price decreases and less when its price increases

Economic

is a social science that studies decision making in the face of scarcity of resources.

rate of inflation

measure of change in the value of a currency; rate of rising prices in a country

Define the capital

money for investment

Law of Supply

producers offer more of a good as its price increases and less as its price falls

property rights

the ability of an individual to own and exercise control over scarce resources

Real Gross Domestic Product

the economy's aggregate output measured in dollars of constant purchasing power

Natural Rights

the idea that all humans are born with rights, which include the right to life, liberty, and property

buyer's reservation price

the largest dollar amount the buyer would be willing to pay for a good

production possibilities frontier

the line on a production possibilities graph that shows the maximum possible output

Opportunity cost

the most desirable alternative given up as the result of a decision

seller's reservation price

the smallest dollar amount for which a seller would be willing to sell an additional unit, generally equal to marginal cost

total cost

the sum of fixed and variable costs

Market-equilibrium price

where supply meets demand; the most product is sold; MC=MB, prevailing sale amount