Economics EOCT
Which headline describes a situation that will MOST LIKELY lead to future economic growth? • "Government to pay for more people to attend college!" • "New natural resources discovered!" • "Population increases for 4th straight year!" • "Study shows a shift in the production possibilities curve to the left!"
"Government to pay for more people to attend college!"
Which transaction below will take place in the product market on a circular flow diagram? • The Pencil Company's paying yearly taxes. • Smithville Farm's purchase of 3 new tractors. • Jenny's posting of her resume on a website. • Chris' purchase of a new video game.
Chris' purchase of a new video game.
Assume Coke and Pepsi operate as an oligopoly. Which statement BEST represents this? • Coke and Pepsi own many different "brands" • Coke and Pepsi taste different, but are marketed the same way • Coke and Pepsi are major corporations with stockholders • Coke and Pepsi sell to over 75% of the market
Coke and Pepsi sell to over 75% of the market
The Law of Supply states that • as prices increase, quantity demanded decreases. • as prices increase, supply increases • as prices decrease, demand decreases • as prices decrease, quantity supplied decreases
as prices decrease, quantity supplied decreases
A budget surplus means that • government expenditures are greater than government revenues. • Government revenues are greater than government expenditures. • Federal Reserve spending is higher than Government spending. • government spending is higher than the Federal Reserve spending.
Government revenues are greater than government expenditures.
One argument in favor of a tariff would be that it would • help foreign producers by allowing them to ship goods to the U.S. • reduce competition for domestic producers. • help domestic consumers by allowing them to pay a lower price. • force foreign companies to ship goods that meet certain quality standards in the U.S.
reduce competition for domestic producers.
Which term belongs in the empty box near the bottom of the picture? • resource market • stock market • taxes • goods and services
resource market
Which economic situation exists directly because unlimited wants exceed limited resources? • productive resources • scarcity • inflation • gain from trade
scarcity
Which economic situation is characterized by unlimited wants exceeding limited resources? • surplus • specialization • shortage • scarcity
scarcity
Sellers enter a market looking to make as much money as possible by offering a good or service. Buyers enter a market looking to spend as little as possible for a good or service. This interaction determines the • economic system of a country. • market clearing price of a good. • production possibilities curve. • productivity of a business.
market clearing price of a good.
Which provides the greatest incentive for entrepreneurs to take risks? • prices • production possibilities • progressive taxes • profits
profits
In which type of business organization does the owner have the MOST liability? • monopoly • corporation • partnership • sole proprietorship
sole proprietorship
A price floor is problematic in a market because it leads to • increased taxes. • decreased productivity. • shortages. • surpluses.
surpluses.
Which would cause a production possibilities curve to shift to the left? • A massive disease that wipes out 1/2 of the population. • A huge population boom in a country. • A discovery of new resources. • Giving up some of one good to produce another.
A massive disease that wipes out 1/2 of the population.
Which would cause the supply of wheat to shift to the right? • Wheat producing companies leaving the market. • A new, faster wheat harvesting machine. • An increase in household incomes. • A decrease in producer subsidies.
A new, faster wheat harvesting machine.
Which statement describes the law of demand? • As prices rise, quantity demanded decreases. • As prices rise, demand decreases. • As prices fall, quantity demanded decreases. • None of the other answers listed are correct.
As prices rise, quantity demanded decreases.
The factors of production are • Consumption, Investment, Government Spending, and Net Exports • Human resources, natural resources, capital resources, and entrepreneurship • Land, labor, capital, time • Human resources, natural resources, capital resources, and time
Human resources, natural resources, capital resources, and entrepreneurship
Countries X and Y both produce salt and sugar. They have the same opportunity costs for both goods. Based on this information, which is true concerning trade between these countries? • Since neither has comparative advantage, they will not benefit from trade with each other. • Country X has comparative advantage in sugar and Country Y has comparative advantage in salt. • There is no information concerning absolute advantage so a decision about trade can not be reached. • They should flip a coin to decide who should produce sugar and then trade to be better off.
Since neither has comparative advantage, they will not benefit from trade with each other.
When the income in households increases, what is the likely result? • The demand curve shifts to the right • The supply curve becomes vertical. • The supply curve will shift to the left. • The demand curve shifts to the left.
The demand curve shifts to the right
If the government pays a business a subsidy, what is MOST likely to happen in that market? • There will be a decrease in demand for the good. • The market will see an increase in demand for the good. • There will be in decrease in the quantity supplied. • The market will see an increase in supply of the good.
The market will see an increase in supply of the good.
Which describes price elasticity of demand? • The measure of how much a change in price affects the quantity demanded. • The amount of a good that is demanded at a particular price. • The measure of how a change in demand changes equilibrium price. • The interaction of supply and demand to determine equilibrium price.
The measure of how much a change in price affects the quantity demanded.
When the money supply is increased, which is MOST likely to happen? • The price level will increase. • Each dollar will be able to buy more goods. • The price level will not be affected. • The price level will decrease.
The price level will increase.
Which BEST describes exchange rates? • The difference between the total number of exports minus the number of imports. • The price of one nation's currency in terms of another. • An interest rate charged to consumers who take out a loan. • An increase in the price of a market basket over a given time period.
The price of one nation's currency in terms of another.
Which describes scarcity? • A condition where supply exceeds demand. • Unlimited wants exceeding limited resources. • The situation that exists when there is temporarily a shortage of a good or service. • An unlimited demand for goods and services.
Unlimited wants exceeding limited resources.
When buyers and sellers interact in a market, what is the result? • Usually a market clearing price is determined. • Over time, fewer and fewer goods are produced because buyers have all they want. • Since buyers and sellers are always changing their preferences, markets become unstable and unreliable. • Equilibrium quantities are determined and then prices are set by the government.
Usually a market clearing price is determined.
Which is NOT one of the three basic economic questions that must be answered in an economy? • How to produce • What to produce • For Whom to produce • When to produce
When to produce
The government sets a price ceiling in a market. This is MOST LIKELY to cause • equilibrium. • a surplus. • efficiency. • a shortage.
a shortage.
Comparing changes in quantity demanded to changes in prices is related which economic concept? • equity • elasticity • opportunity costs • consumer sovereignty
elasticity
In order to build a skyscraper, Builders Inc. purchases land, rents out several cement trucks, and hires 400 construction workers and 50 managers. Builders Inc. represents • labor • capital • land • entrepreneurship
entrepreneurship
In the United States economy, the role of money is to • set prices on goods and services. • control inflation. • facilitate exchange between buyers and sellers. • create jobs in the factor market.
facilitate exchange between buyers and sellers.
What is the main difference between pure competition and monopolistic competition? • firms in pure competition have no substitutes to their goods • firms in pure competition rely more heavily on advertising • firms in pure competition are selling nearly identical, rather than differentiated goods • firms in pure competition make more profits
firms in pure competition are selling nearly identical, rather than differentiated goods
An assembly line can increase a factory's productivity because it allows workers to • use a wide range of knowledge • focus on a specific task • put in overtime hours • diversify their skills
focus on a specific task
Use the following list to answer the question: *There are only a few large sellers *All the products sold are very similar *There is a high degree of interdependent pricing. This list MOST LIKELY describes which kind of market structure? • pure competition • monopolistic competition • oligopoly • monopoly
oligopoly
Minimum wage causes what type of disequilibrium situation to exist?
price floor, surplus of labor
In the graph seen here, equilibrium is represented by which combination of price and quantity? • price of $3, quantity of 100 • price of $3, quantity of 80 • price of $5, quantity of 80 • price of $5, quantity of 120
price of $3, quantity of 100
Assume the Fed has recently made large purchases on the open market and Congress has passed legislation that includes large tax cuts. If this is true then apparently economic leaders believe • hyperinflation and overproduction is occurring. • the economy is performing on the production possibilities curve. • the economy is in the trough of the business cycle. • a drastic deficit in the balance of trade exists.
the economy is in the trough of the business cycle.
A COMMAND economy is an economy where the economic questions are answered by • a foreign country • the government • tradition • the consumers and producers
the government
If the producer in the PPC seen here is producing at point X, moving to point Z would mean an opportunity cost of • 3 pounds of cheese • 10 gallons of milk • 7 pounds of cheese • 20 gallons of milk
10 gallons of milk
Gross Domestic Product is a method for calculating how much a country produces by adding which four spending categories? • Consumption, Investment, Government, Business expenditures • Consumption, Investment, Government, Net Exports • Consumption, Interest Rates, Government, Net Exports • Wages, Rent, Interest, Dividends
Consumption, Investment, Government, Net Exports
What is MOST LIKELY to happen to the economy if the Federal Reserve Bank sells treasury securities at the same time that Congress passes a law increasing taxes? • Expansion, because both of the policies are expansionary. • There is not enough information to determine the outcome. • Contraction, because both of the policies are contractionary. • Stability, because the policies cancel each other
Contraction, because both of the policies are contractionary.
Which describes what has happened in the graph? • An increase in demand has caused a decrease in equilibrium price. • Supply has decreased, causing an increase in equilibrium price. • Demand has increased, causing an increase in equilibrium quantity. • The increase in supply has caused an increase in equilibrium quantity.
Demand has increased, causing an increase in equilibrium quantity.
If an economy experiences the following: 12% inflation (very high), 2.5% unemployment (very low), and high investment, they are MOST LIKELY on which part of the business cycle? • Trough • Expansion • Contraction • Recession
Expansion
Which is a primary benefit of all types of insurance? • Insurance keeps prices low in a market. • It helps people share risk. • People can be more careless. • Lawsuits are easier to settle.
It helps people share risk.
Which BEST describes scarcity? • What is given up when a choice is made • When there is not a lot of something • There is a limited amount of a resource to meet an unlimited demand • There is limited demand for an item that is plentiful
There is a limited amount of a resource to meet an unlimited demand
Assume the United States has absolute advantage over Singapore in the production of all goods. Which statement about trade possibilities between the two countries is correct? • They can still arrange a beneficial trade if each one focuses production on a good in which they have comparative advantage. • Singapore could benefit from a trade with the United States, but the United States would not benefit. • The terms of trade will be based on the United States's absolute advantage. • Since the United States has absolute advantage in all goods, it is impossible to reach a trade agreement.
They can still arrange a beneficial trade if each one focuses production on a good in which they have comparative advantage.
Assume you read the following headline "The US Dollar Appreciates against All World Currencies!" Which sequence of events would be MOST likely to happen next? • US imports decrease, US exports increase • US imports go unchanged, US exports increase • US imports increase, US exports decrease • US imports decrease, US exports decrease
US imports increase, US exports decrease
If the Fed buys treasury securities on the open market at the same time that the Government drastically increases spending, then • the policies will cancel each other and there will be no change in the economy. • it is obvious both institutions thought the economy was on a peak. • the business cycle will invert. • aggregate demand is likely to increase causing inflation.
aggregate demand is likely to increase causing inflation.
Red Financial is a financial institution owned by a group of shareholders. They are insured by the FDIC and offer a large range of financial services and personal financial planning. Red financial also makes large profits, which the stockholders like. Based on this information, which type of financial institution is Red Financial? • bank • online transfer facility • savings and loans • credit union
bank
Blue Financial is a financial institution owned by its members. It offers lower loan rates and easier application processes for it's members. Based SOLELY on this information, Blue Financial is MOST LIKELY a • credit union. • bank. • savings and loan. • credit card agency.
bank.
How does specialization relate to voluntary exchange? • it has the same relationship as productivity does to growth • cause and effect, specialization leads to a need for voluntary exchange • it is an inverse relationship • cause and effect, voluntary exchange forces us to specialize
cause and effect, specialization leads to a need for voluntary exchange
Equity of results and security are characteristics more often seen in which type of economic system? • monopolies • market • oligopolies • command
command
A market basket represents a long list of goods and services that the average household buys in a given time period. By dividing a market basket of goods and services from one time period by a market basket from another time period a person can calculate the • consumer price index • unemployment rate • aggregate supply • gross domestic product
consumer price index
You hear on the radio that the FED is lowering the discount rate and buying a large number of treasury bonds. Based on this information, which part of the business cycle does the FED most likely believe the economy is in? • unemployment • expansion • contraction • peak
contraction
Jim says "as the price of something increases, the quantity demanded decreases." Jim is • correct, that is the law of demand • incorrect, he means demand instead of quantity demanded • correct, that is the law of supply • incorrect, he means supply instead of quantity demanded
correct, that is the law of demand
Assume an economy is having high unemployment and low GDP. Which fiscal policy would be most appropriate to correct this situation? • increase the discount rate • decrease government spending • decrease taxes • increase the reserve requirement
decrease taxes
Which strictly monetary policy combination would work best to slow down an overheating, overproducing economy? • decrease the discount rate, buy treasury securities • increase taxes, increase the discount rate • increase the discount rate, sell treasury securities • increase taxes, lower government spending
increase the discount rate, sell treasury securities
If the U.S. economy was in a recession, which fiscal policy would be most appropriate to get out of the recession? • decrease government spending, the citizens will have more money to spend • raise the reserve requirement, banks will have more money to loan • decrease taxes, people have more disposable income • buy bonds on the open market, the money supply will increase
decrease taxes, people have more disposable income
National deficits are different than the national debt because • deficits occur when expenditures exceed revenues for 1 fiscal year. • debts are consistently repaid and deficits can not be. • deficits are calculated using all previous deficits. • only deficits vary from year to year.
deficits occur when expenditures exceed revenues for 1 fiscal year.
What is MOST LIKELY to happen to US imports and exports if the US dollar appreciates relative to other currencies? • both imports and exports will decrease • imports will decrease, exports will increase • imports will increase, exports will decrease • both imports and exports will increase
imports will increase, exports will decrease
Which set of information would indicate that an economy is on the recovery phase of the business cycle? • low inflation, increasing unemployment, decreasing GDP • decreasing inflation, increasing unemployment, decreasing GDP • increasing inflation, increasing unemployment, increasing GDP • increasing inflation, decreasing unemployment, increasing GDP
increasing inflation, decreasing unemployment, increasing GDP
The consumer price index is used primarily to measure the • unemployment rate. • economic growth of a country. • production possibilities curve. • inflation rate.
inflation rate.
An entrepreneur uses which productive resources when creating a good or service? • land, labor, capital • scarcity, incentives, interdependence • technology, education, growth • monetary and fiscal policies
land, labor, capital
A major advantage corporations offer over sole-proprietorships is • limited liability. • total control of the company. • ease of startup. • the ability to set prices freely.
limited liability.
In economics rational decisions occur when • a budget is used for spending and saving decisions. • command economies answer the three basic economic questions. • suppliers lower their prices to increase demand. • marginal benefits equal or exceed marginal costs.
marginal benefits equal or exceed marginal costs.
Competition and free enterprise are most common in which type of economic system? • planned • communist • market • traditional
market
Growth, efficiency, and freedom are broad social goals that are typically associated with which type of economic system? • monopoly • market • command • traditional
market
Joe lives in a country where the citizens decide where they want to work, what they want to buy, and how much they want to pay for items. Based on this limited description, Joe's country operates under what kind of economic system? • command • traditional • market • oligopoly
market
The Federal Income Tax in the United States forces people making higher incomes to pay a higher percentage in taxes. This is an example of a • optional tax • regressive tax • progressive tax • proportional tax
progressive tax
When dealing with investments, as risk of losing money increases • it is more likely the investment is short term. • more insurance is needed to protect the investment. • the rate of return is usually higher. • more people take that risk.
the rate of return is usually higher.
Sherry runs a business with her sister. They are trying to decide whether to incorporate or not. If they decide to incorporate, what's one major disadvantage they will face? • they will increase their liability • there is a greater possibility for loss of control of the company • it will be more difficult to raise capital for the business • the likelihood of conflict
there is a greater possibility for loss of control of the company
How does a corporation benefit from selling stock? • it gives them limited liability • they can raise larger amounts of capital • it eliminates the potential for conflict • they get larger profits
they can raise larger amounts of capital
The EU would be most likely get involved in a trade barrier that occurred between • Mexico and the United States. • two Asian countries. • ECOWAS and South America. • two European countries.
two European countries.
Sylvia purchased a product that claimed it could make her lose weight. She later found out that the company purposefully did not actually include the key ingredient in the product and it did not work. Which terms best describe this transaction? • voluntary and fraudulent • non-fraudulent and mutually beneficial • marginal and scarce • rational and equitable
voluntary and fraudulent
Julio decides to attend college after high school rather than getting a job. What is his opportunity cost of attending college? • wages he could have earned at a job • all the things he could have done in that time • his tuition and fees • the education he gains in college
wages he could have earned at a job
A headline reads: "High Tech Firms Begin Producing New Generation of Computers." What basic economic question is being addressed in this headline? • what to produce • when to produce • how to produce • for whom to produce
what to produce
