economics exam review. choices are made because resources a.may run out b.have alternate uses c.are...

ECONOMICS EXAM REVIEW

Choices are made because resources

a. may run outb. have alternate usesc. are limitedd. can only be used once

Because of scarcity

a. people are forced to make choices

b. opportunity costs existc. People face trade-offsd. All of the above

All the combinations of goods and services that can be produced in a given period of time with a fixed amount of resources are called

a. opportunity costs b. production possibilities c. factors of production d. trade-offs

Which of the following will cause the production possibilities curve to shift

outward?

a. a reduction in the size of the labor force

b. an increase in the quantity of labor

c. an inefficiency that is corrected d. a decrease in the amount of

capital

When a nation increases its number of capital goods, it is usually true

that

a. it must do without some consumer goods in the present

b. labor must decline c. fewer consumer goods will be

available in the future

d. no opportunity costs exist for doing so

When a nation increases its number of capital goods, it is usually true

that

a. it must do without some consumer goods in the present

b. labor must decline c. fewer consumer goods will be

available in the future d. no opportunity costs exist for

doing so

The opportunity cost of growing corn is

a. no wheat b. no dairy products c. no soybeans d. whatever is valued as the

next most important to growing corn

Because specialized resources are more suited to specific tasks, the extra cost of

producing additional units will rise. This is due to

a. production possibilities b. scarcity c. law of increasing relative

costs d. opportunity costs

TRUE OR FALSE

The major purpose of economics is to understand choices.

TRUE OR FALSE

The major purpose of economics is to understand choices.

TRUE

TRUE OR FALSE

Because resources are scarce, the goods they produce are also scarce.

TRUE OR FALSE

Because resources are scarce, the goods they produce are also scarce.

TRUE

Which of the groups below best represent the factors of production?

a. teachers, lawyers, factory workers

b. trucks, factory workers, water c. factory workers, trucks,

hammers d. iron ore, water, trees

TRUE OR FALSE

For most choices, there is no opportunity cost.

TRUE OR FALSE

For most choices, there is no opportunity cost.

FALSE

Modern technology is resulting in

a. better quality goods b. inefficient use of resouces c. less leisure time d. higher prices

Specialization results in

a. increased number of goods

b. greater efficiency c. economic

interdependence d. all of the above

If price rises

a. buyers will buy less b. buyers will buy more c. buyers will buy the same

amount d. none of the above

A pure market economy would not have

a. government control b. competition c. private property d. freedom of choice

The American economy can best be described as

a. socialism b. capitalism c. communism d. a command economy

Analogy: The price system is to a market economy as ______is to a

command economy.

a. income redistribution b. customs and traditions c. government planning d. human capital

In a capitalist economic system, the factors of production are usually

controlled by

a. the government b. large monopolies c. individuals d. corporations

TRUE OR FALSE

In a command economic system, the individual has a say in the way the three basic economic questions are answered.

TRUE OR FALSE

In a command economic system, the individual has a say in the way the three basic economic questions are answered.

FALSE

TRUE OR FALSE

A mixed economic system contains elements of the three other economic systems.

TRUE OR FALSE

A mixed economic system contains elements of the three other economic systems.

TRUE

TRUE OR FALSE

Entrepreneurship is encouraged by freedom of choice and competition.

TRUE OR FALSE

Entrepreneurship is encouraged by freedom of choice and competition.

TRUE

TRUE OR FALSE

A traditional economy is based on how things have been done before.

TRUE OR FALSE

A traditional economy is based on how things have been done before.

TRUE

TRUE OR FALSE

Most countries have mixed economic systems.

TRUE OR FALSE

Most countries have mixed economic systems.

TRUE

One criticism of Capitalism is that

a. it prevents economic growth b. its income distribution is

unequal c. its living standards are lower

than in socialist economies d. its individuals own very little

The way goods and services are produced in a market economy is

a. determined by government standards

b. with the least-cost combination of resources

c. inefficient d. no different than in a command

economy

A demand schedule

a. relates price to quantity demanded

b. is a demand curve when it is graphed

c. cannot change d. shows a direct relationship

between price and quantity demanded

If the price of good A rises and the demand for good B rises, then A and

B are a. substitutes b. complements c. not related goods d. not scarce goods

Recently some cities in Alabama passed a law that limited showers to 4 minutes, with a possible 30-day jail sentence for

violators. Which of the following is probably true?

a. a surplus of water existed b. the price of water was too high c. a shortage of water existed no

matter how high the price d. the price of water was below the

equilibrium price

If the supply of gasoline rises and demand does not change, then

a. the relative price of gasoline will rise

b. the equilibrium price of gasoline will increase

c. the equilibrium quantity of gasoline will increase

d. the equilibrium price and equilibrium quantity of gasoline will increase

Which of the following will lead to an increase in supply?

a. an increase in the price of a good b. a technological improvement in

the production of the good c. an increase in the price of labor d. all of the above

Prolonged shortages may come about if

a. demand increases relative to supply

b. price floors are set by government c. prices are not allowed to rise to

equilibrium d. buyers are allowed to compete for

goods

Which of the following goods probably has the most elastic

demand?

a. salt b. food c. alcoholic beverages d. private school education

Which of the following is not true concerning a proprietorship?

a. most U.S. firms are proprietorships

b. they are easy to form and dissolve

c. they offer limited liability d. profits are only taxed once

A corporation

a. is a legal entity that conducts business in its own name

b. permits unlimited liability to shareholders

c. must be dissolved if a majority stockholder dies

d. has severely limited abilities to attract financial resources

Shareholders

a. are the owners of corporations b. are less at risk than are

bondholders c. are subject to unlimited risk d. have less control over firm

decisions than do bondholders

Which of the following is not a characteristic of the monopoly

market structure?

a. one seller b. unique product c. restricted entry d. price taker

Which firm has the least control over price?

a. perfect competitor b. monopolistic competitor c. oligopolist d. monopolist

Nonprice competition or advertising

a. attempts to increase demand for one’s product

b. helps to differentiate one’s product

c. can lead to more information to buyers

d. all of the above

Corporations obtain most of the funds they need for expansion from

a. the sale of stock b. the sale of bonds c. short-term borrowing d. undistributed profits

Which of the following is least likely to result in increased productivity?

a. efficient use of natural resources b. employee training programs c. improved machinery d. working overtime

The most significant impact of technology on production has been

a. lower wages b. higher consumer prices c. poor-quality goods d. increased productivity

In the last twenty years in the United

States, there has been a sizable increase in the number of

a. laborers b. service workers c. farm workers d. manufacturing workers

The most important reason some people are paid more than others is

a. dirty or dull and repetitive work

b. talent and skill level differences

c. geographic location of the job d. discrimination against

minorities

Training, experience, and education are all considered

a. investment in human capital b. capital c. economic inequalities d. economic equalities

Most of the nation’s output of goods and services is purchased by

a. consumers b. business firms c. government d. foreign countries

Income left over after taxes have been paid is called

a. discretionary family income b. disposable family income c. real family income d. money family income

The only three ways a person can dispose of income is through

a. taxes, necessities, and luxuries b. necessities, luxuries, and savings c. taxes, consumption,

expenditures, and recreation d. consumption expenditures, taxes

and savings

The profit made on a sale of stock is known as

a. interest b. brokerage fee c. equity d. capital gain

A transaction that has an effect on a third party is called a (n)

a. merit good b. public good c. externality d. private good

The amount of return possible on an investment increases directly with

the

a. amount of risk b. amount of insurance c. financial advice d. mutual fund

A taxation system in which tax rates fall as income increases is

a. regressive b. proportional c. progressive d. all of the above

TRUE OR FALSE

In a market system, the consumer “votes” for the goods and services he wants to see produced.

TRUE OR FALSE


TRUE

TRUE OR FALSE

If the quality of labor decreases, the production possibilities curve will shift outward.

TRUE OR FALSE

If the quality of labor decreases, the production possibilities curve will shift outward.

FALSE

TRUE OR FALSE

It is impossible for a nation to operate at a point inside its production possibilities curve.

TRUE OR FALSE

It is impossible for a nation to operate at a point inside its production possibilities curve.

FALSE

TRUE OR FALSE

Economic growth shifts the production possibilities curve outward from the origin.

TRUE OR FALSE

Economic growth shifts the production possibilities curve outward from the origin.

TRUE

TRUE OR FALSE

The market system does not adequately provide for the needs of all people.

TRUE OR FALSE

The market system does not adequately provide for the needs of all people.

TRUE

TRUE OR FALSE

Capitalism is another name for the free enterprise system.

TRUE OR FALSE

Capitalism is another name for the free enterprise system.

TRUE

TRUE OR FALSE

Competition has a negative effect on the U.S. consumer in the long run.

TRUE OR FALSE

Competition has a negative effect on the U.S. consumer in the long run.

false

A proportional tax system

a. is unfair b. cannot be consistent with the ability to

pay system c. means that upper income people pay a

smaller percentage of their income in taxes

d. requires upper income people to pay more tax dollars than lower income people

All of the following are considered benefits of economic growth except

a. higher employment levels b. higher living standards c. inflation d. income security

The idea that GDP should increase only enough to accommodate

population growth is called

a. sustainable growth b. unlimited economic growth c. zero economic growth d. productive capacity

Which of the following would not be a characteristic of a period of

economic growth?

a. declining investment b. declining unemployment c. expanding credit d. rising productivity

Which of the following is a function of money?

a. medium of exchange b. unit of accounting c. store of value d. all of the above

Which is not considered money?

a. checking account balances b. Federal Reserve notes c. credit cards d. coins

Which of the following is an advantage of money over barter?

a. permits more specialization of labor

b. does not require a double coincidence of wants

c. makes exchange faster d. all of the above

Which of the following is probably the least liquid?

a. savings account balances b. shares of stock in a major

corporation c. washing machines d. automobiles

Which of the following is not a part of M1?

a. savings account balances b. traveler’s checks c. currency d. unused credit card balances

Which of the following is the most important function of the FED?

a. regulate the money supply b. supervise member banks c. supply the economy with

currency d. hold member bank’s deposits

Under a fiat monetary standard, money is backed by

a. gold b. public faith that money can be

exchanged for goods and services c. precious metals that can be

exchanged for goods and services d. the Treasury’s assets

Legal reserves include

a. Vault cash and deposits at the FED

b. US government securitiesc. Goldd. All of the above

The goal of sound monetary policy is to

a. shrink the money supplyb. Balance tight and loose policyc. Control banksd. Increase the money supply

If the FED wanted to reduce the money supply, it would

a. cut discount rates b. buy government securities c. increase the reserve

requirement d. eliminate the reserve

requirement

When the government sells securities on the open market,

money is

a. put into the economy b. increased in value c. taken out of the economy d. the same supply

To regulate the supply of money, the FED may use all of the following

tools EXCEPT

a. discount rate b. reserve requirements c. open-market operations d. prime rates

During a period of inflation, the average consumer

a. looses purchasing power b. gains credit easily c. raises his standard of living d. borrows more

Which of the following best represents a nation’s standard of

living?

a. nominal GDP b. real GDP c. per capita real GDP d. per capita nominal GDP

Which of the following is not a cause of cost-push inflation?

a. An increase in demand at full employment

b. An increase in the price of a raw material

c. Wage increases due to union activity

d. Price increases to increase profits

The use of taxation and spending policies to regulate the economy is

called

a. Fiscal policy b. Normative manipulation c. spillover d. monetary policy

The control of the money supply and credit to regulate the economy is

called

a. Fiscal policy b. Normative manipulation c. spillover d. monetary policy

The only sector of the economy that can act in the best interest of the

economy is

a. Consumers b. Government c. business d. foreign countries

If the U.S. imports more than it exports it would lead to a

a. Trade balanceb. Trade deficitc. Positive balance of traded. Fixed foreign exchange market

TRUE OR FALSE

Entrepreneurship is encouraged by

freedom of choice and competition.

TRUE OR FALSE

Entrepreneurship is encouraged by

freedom of choice and competition.

TRUE

TRUE OR FALSE

All persons in the United States have the right to own personal property, land, factories, farms and businesses.

TRUE OR FALSE

All persons in the United States have the right to own personal property, land, factories, farms and businesses.

TRUE

TRUE OR FALSE

The government is not allowed to buy private property for public purposes.

TRUE OR FALSE

The government is not allowed to buy private property for public purposes.

FALSE

TRUE OR FALSE


TRUE OR FALSE


TRUE

TRUE OR FALSE

A change in the quantity demanded of cigarettes is the result of a change in the price of cigarettes.

TRUE OR FALSE

A change in the quantity demanded of cigarettes is the result of a change in the price of cigarettes.

TRUE

TRUE OR FALSE

An increase in price will cause a leftward shift in demand a rightward shift in supply.

TRUE OR FALSE

An increase in price will cause a leftward shift in demand a rightward shift in supply.

TRUE

TRUE OR FALSE

Buyers tend to change to lower-priced from higher-priced goods, according to the substitution effect.

TRUE OR FALSE

Buyers tend to change to lower-priced from higher-priced goods, according to the substitution effect.

TRUE

TRUE OR FALSE

If the price of tennis racquets rises, then the demand for tennis balls will tend to rise also.

TRUE OR FALSE

If the price of tennis racquets rises, then the demand for tennis balls will tend to rise also.

FALSE

TRUE OR FALSE

If the price of cassettes rises, the demand for CD’s will rise.

TRUE OR FALSE

If the price of cassettes rises, the demand for CD’s will rise.

TRUE

TRUE OR FALSE

If the price is below the equilibrium price, a shortage will develop.

TRUE OR FALSE

If the price is below the equilibrium price, a shortage will develop.

TRUE

TRUE OR FALSE

If supply shifts to the left and demand does not change, then the equilibrium price and the equilibrium quantity will rise.

TRUE OR FALSE

If supply shifts to the left and demand does not change, then the equilibrium price and the equilibrium quantity will rise.

FALSE

TRUE OR FALSE

If demand shifts to the left and supply does not change, then the equilibrium price and the equilibrium quantity will fall.

TRUE OR FALSE

If demand shifts to the left and supply does not change, then the equilibrium price and the equilibrium quantity will fall.

TRUE

TRUE OR FALSE

Minimum wage laws are a form of price ceiling.

TRUE OR FALSE

Minimum wage laws are a form of price ceiling.

FALSE

TRUE OR FALSE

Increasing productivity makes goods more expensive.

TRUE OR FALSE

Increasing productivity makes goods more expensive.

false

TRUE OR FALSE

Productivity refers to the efficiency with which we produce goods and services.

TRUE OR FALSE

Productivity refers to the efficiency with which we produce goods and services.

true

TRUE OR FALSE

A firm in a perfectly competitive industry is a price-taker.

TRUE OR FALSE

A firm in a perfectly competitive industry is a price-taker.

true

TRUE OR FALSE

A geographic monopoly exists when the market is not large enough to support more than one seller.

TRUE OR FALSE

A geographic monopoly exists when the market is not large enough to support more than one seller.

true

TRUE OR FALSE

The presence of many buyers and sellers in the market is a characteristic of an oligopoly.

TRUE OR FALSE

The presence of many buyers and sellers in the market is a characteristic of an oligopoly.

false

TRUE OR FALSE

The increase in farm productivity is the result of advances in science and technology.

TRUE OR FALSE

The increase in farm productivity is the result of advances in science and technology.

true

TRUE OR FALSE

The breakfast food industry is a good example of an oligopoly.

TRUE OR FALSE

The breakfast food industry is a good example of an oligopoly.

true

TRUE OR FALSE

Corporations are the most common business organization in the U.S.

TRUE OR FALSE

Corporations are the most common business organization in the U.S.

false

TRUE OR FALSE

Proprietorships account for the largest amount of business revenues.

TRUE OR FALSE

Proprietorships account for the largest amount of business revenues.

false

TRUE OR FALSE

Corporate shareholders are taxed twice on the corporations earnings.

TRUE OR FALSE

Corporate shareholders are taxed twice on the corporations earnings.

true

TRUE OR FALSE

Proprietorships and partnerships face limited liability for the debts of their firms.

TRUE OR FALSE

Proprietorships and partnerships face limited liability for the debts of their firms.

false

TRUE OR FALSE

Trade credit is the most common type of short-term financing for businesses.

TRUE OR FALSE

Trade credit is the most common type of short-term financing for businesses.

true

TRUE OR FALSE

People who own corporate bonds have loaned the company money.

TRUE OR FALSE

People who own corporate bonds have loaned the company money.

true

TRUE OR FALSE

High interest rates encourage borrowing by companies.

TRUE OR FALSE

High interest rates encourage borrowing by companies.

false

TRUE OR FALSE

Retained earnings are undistributed profits.

TRUE OR FALSE

Retained earnings are undistributed profits.

true

TRUE OR FALSE

Officers selected by the board of directors run the corporation.

TRUE OR FALSE

Officers selected by the board of directors run the corporation.

true

TRUE OR FALSE

Members of one in five American families own shares of stock.

TRUE OR FALSE

Members of one in five American families own shares of stock.

true

TRUE OR FALSE

Assets – Liabilities = Net Worth

TRUE OR FALSE

Assets – Liabilities = Net Worth

true

TRUE OR FALSE

In recent years the number of blue collar jobs has remained at the same level.

TRUE OR FALSE

In recent years the number of blue collar jobs has remained at the same level.

false

TRUE OR FALSE

At present, the size of the labor force in the U.S. is about half the total population.

TRUE OR FALSE

At present, the size of the labor force in the U.S. is about half the total population.

true

TRUE OR FALSE

In recent decades, the rate of population growth in the U.S. has been slowing down.

TRUE OR FALSE

In recent decades, the rate of population growth in the U.S. has been slowing down.

true

TRUE OR FALSE

The average age of the U.S. population is getting younger.

TRUE OR FALSE

The average age of the U.S. population is getting younger.

false

TRUE OR FALSE

Jobs in the U.S. have been shifting from the goods-producing to the service industries.

TRUE OR FALSE

Jobs in the U.S. have been shifting from the goods-producing to the service industries.

true

TRUE OR FALSE

The demand for workers in an industry tends to rise as the demand for the goods it produces increases.

TRUE OR FALSE

The demand for workers in an industry tends to rise as the demand for the goods it produces increases.

true

TRUE OR FALSE

Supply and demand are the major factors in determining wage rates.

TRUE OR FALSE

Supply and demand are the major factors in determining wage rates.

true

TRUE OR FALSE

The more training required for a job, the larger the supply of workers available.

TRUE OR FALSE

The more training required for a job, the larger the supply of workers available.

false

TRUE OR FALSE

Public goods and services cannot be easily divided and sold in small units.

TRUE OR FALSE

Public goods and services cannot be easily divided and sold in small units.

true

TRUE OR FALSE

One of the functions of taxes is to discourage certain behaviors.

TRUE OR FALSE

One of the functions of taxes is to discourage certain behaviors.

true

TRUE OR FALSE

The sales tax is an example of a proportional tax.

TRUE OR FALSE

The sales tax is an example of a proportional tax.

false

TRUE OR FALSE

The largest source of income for the federal government is the federal personal income tax.

TRUE OR FALSE

The largest source of income for the federal government is the federal personal income tax.

true

TRUE OR FALSE

Government can encourage economic growth by promoting saving and investing.

TRUE OR FALSE

Government can encourage economic growth by promoting saving and investing.

true

TRUE OR FALSE

If population increases faster than GDP, the standard of living increases.

TRUE OR FALSE

If population increases faster than GDP, the standard of living increases.

false

TRUE OR FALSE

Debtors profit from inflation.

TRUE OR FALSE

Debtors profit from inflation.

true

TRUE OR FALSE

Checking accounts and checking-type accounts are considered forms of money.

TRUE OR FALSE

Checking accounts and checking-type accounts are considered forms of money.

true

TRUE OR FALSE

The value of M1 is always greater than the value of M2.

TRUE OR FALSE

The value of M1 is always greater than the value of M2.

false

TRUE OR FALSE

M2 is the most liquid definition of money.

TRUE OR FALSE

M2 is the most liquid definition of money.

false

TRUE OR FALSE

A bank’s legal reserves are equal to its total assets.

TRUE OR FALSE

A bank’s legal reserves are equal to its total assets.

false

TRUE OR FALSE

The nation’s money supply may increase when banks make loans.

TRUE OR FALSE

The nation’s money supply may increase when banks make loans.

true

TRUE OR FALSE

If an individual bank has excess reserves, it can make loans.

TRUE OR FALSE

If an individual bank has excess reserves, it can make loans.

true

TRUE OR FALSE

If reserve requirements rise, the amount of money in circulation increases.

TRUE OR FALSE

If reserve requirements rise, the amount of money in circulation increases.

false

TRUE OR FALSE

When prices fall, the value of money rises.

TRUE OR FALSE

When prices fall, the value of money rises.

true

Final Review-------

What is the fundamental problem of economics?

scarcity

Final Review-------

What are the four factors of production?

Land, labor, capital and entrepreneurship

Final Review-------

Which of the following is an example of a good?

a.A carb.A car washc.A tune-upd.An oil change

Final Review-------Which of the following will cause

the PPC to shift outward?a.Reduction in size of labor forceb.Increase in the quantity of laborc.Inefficiency that is correctedd.Decrease in the amount of capital

Final Review-------

Who is considered the “father of modern economics”?

Adam Smith

Final Review-------Which of the following best

represents payment for a service?a.$1.95 for a hamburgerb.$18.95 for a textbookc.$15,000 for a new card.$10.00 for a haircut

Final Review-------What does having a “pure” market

economy mean?

No government involvement

Final Review-------In what type of economy does the

government make all the basic economic decisions?

command

Final Review-------

Private property rightsEconomic freedomProfit motiveGovernment control All of these are characteristics of

what type of economy?Capitalism

Final Review-------

What is the most common form of business organization in the U.S.?

Sole proprietorship

Final Review-------The owners of a corporation are

called what?

shareholders

Final Review-------Buying only one soda instead of two

at lunchtime describes the economic concept of what?

Diminishing marginal utility

Final Review-------

How does the demand curve respond to an increase in demand?

The demand curve shifts to the left

Final Review-------

The demand curve will always slope___________________.

downward

Final Review-------

What will cause a change in quantity demanded of a product?

A change in price

Final Review-------

If prices are not allowed to reach equilibrium, what will occur?

Prolonged shortages

Final Review-------

If there is a shortage in the market, what will likely happen to price?

Price will rise

Final Review-------

What are the four market structures discussed in class?

Perfect competitionMonopolistic competitionOligopolyMonopoly

Final Review-------

Which market structure would have the least control over price?

Perfectly competitive market

Final Review-------

The refusal of workers to go to work is called what?

Strike

Final Review-------

Training, experience, and education are all considered…….

Investment in human capital

Final Review-------

The traditional theory of wage determination says that wages are determined by……………

Supply and demand

Final Review-------

The profit made on the sale of stock is known as…………….

Capital gain

Final Review-------

A taxation system where rates rise as income rises is called ……..

A progressive tax system

THE END

economics exam review. choices are made because resources a.may run out b.have alternate uses c.are...

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