2.The Resources Used to Make All Goods and Services Are The

Chapter One Quiz

1.Any resources that are made by humans and used to create other goods and services are called

A) / services. / C) / capital.
B) / production. / D) / labor.

2.The resources used to make all goods and services are the

A) / production possibilities. / C) / production trade-offs.
B) / factors of production. / D) / opportunity costs.

3.The purpose of a production possibilities graph is to

A) / enable a country to mobilize to win a war.
B) / keep an economy from having nonproductive workers.
C) / show alternative ways to use an economy’s resources.
D) / make it possible to increase an economy’s output.

4.An efficient economy is one that

A) / has very few people who do not work for a living.
B) / makes the best use of all its goods and services.
C) / uses its resources to make the most goods and services.
D) / makes the least costly use of its resources.

5.The government of a country must make a decision between increasing military spending and subsidizing wheat farmers. This kind of decision is a

A) / guns or butter issue. / C) / global trade-off.
B) / decision at the margin. / D) / basic economic decision.

6.What is the opportunity cost of a decision?

A) / the series of alternative decisions that could have been made
B) / the best possible way the question could have been decided
C) / the different ways that a different person might have made the decision
D) / the most desirable alternative given up for the decision

7.What is a factory building an example of?

A) / human capital / C) / an economic trade-off
B) / physical capital / D) / technology

8.Which of the following makes someone an entrepreneur?

A) / earning a lot of money as a computer programmer
B) / becoming a highly paid athlete
C) / running a service that hires people to install sprinkler systems in lawns
D) / inventing and selling the rights to manufacture a computer game

9.You bought two new DVDs with the last $30 in your checking account, and your next payday is on Monday. What is the opportunity cost of these DVDs?

A) / the difference between the cost to produce the DVDs and the price you paid for them
B) / $30
C) / dinner and a movie with your friends this Saturday night
D) / knowing you are the first of your friends to have these DVDs

10.A nation’s automakers install new robotic machinery to build cars. Now, cars take only a day to make, and the factories can produce many more cars than before. This is an example of

A) / land and natural resources. / C) / growth caused by technology.
B) / human capital. / D) / production possibility curves.

11.Which of the following lists would an economist consider to be land?

A) / factories, office buildings, assembly line workers
B) / farm fields, tractors, pesticides, fertilizers
C) / dams, bridges, rock quarries, oil wells
D) / iron ore, natural gas, fertile soil, rivers

12.A company that makes baseball caps is underutilizing its resources. What does this mean?

A) / The company is running more efficiently than its competitors.
B) / The company is paying its employees less than it should be.
C) / The company is making caps when it could be making t-shirts instead.
D) / The company is producing fewer caps than it could be.

13.Which of the following is an example of scarcity, rather than shortage?

A) / A popular toy is sold out during the busy holiday season.
B) / You have spent your last penny and payday is a week away.
C) / A person wants an endless supply of everything but cannot have it.
D) / Gasoline was rationed in America during World War II.

14.Why are all goods and services scarce?

A) / Some goods cost more than others.
B) / All resources are scarce.
C) / Some things are needs and others are wants.
D) / Some people want to have more goods than others.

15.The lack of which of the following represents a scarcity?

A) / orange juice because the trucks carrying it are on strike
B) / enough workers to finish two jobs because there’s a limited supply of workers
C) / enough workers to work at night because the pay is too low
D) / grapefruit juice because very few people want to buy it

16.What can a decision-making grid do?

A) / tell you the right course of action
B) / show you every possible consequence of your decision
C) / help you determine some of the opportunity costs for your decision
D) / show you every possible benefit of your decision

17.One example of thinking at the margin is

A) / determining whether it is better to spend your savings on a new CD player or on a television.
B) / deciding whether the benefit of working two extra hours per day is worth the sacrifice of not having enough time to work out at the gym.
C) / putting all of your money in a savings account because the interest rates are so high.
D) / deciding to buy a car you don’t really like because it is significantly less expensive than the one you want.

18.Which of the following is NOT shown on a production possibilities curve?

A) / all of the goods and services an economy has the ability to produce
B) / the efficiency of an economy
C) / whether an economy has grown or shrunk
D) / the opportunity cost of a decision to produce more of one good or service

19.What can cause a production possibilities curve to move to the right?

A) / Thousands of people move out of the country.
B) / A new invention lowers the cost of production.
C) / An epidemic kills thousands of young men and women.
D) / The population is growing increasingly old.

20.You’ve been asked to go on vacation to the Grand Canyon with a friend and his family. Which of the following is a trade-off for accepting this invitation?

A) / seeing the Grand Canyon
B) / using your new hiking gear
C) / getting to know your friend and his family better
D) / spending time with your other friends at home

Ch. 2 Quiz (2012)

21.Why does even a free market economy need some government intervention?

A) / to provide for things that the marketplace does not address
B) / to ensure that the government has the freedom to tax as necessary
C) / so that the government has some control over factor resources
D) / to make sure that the government can fulfill its needs for military personnel

22.Which of the following was a free market philosopher?

A) / Friedrich Engels / C) / Vladimir Lenin
B) / Adam Smith / D) / Karl Marx

23.What does the process of specialization do for an economy?

A) / It makes it more efficient. / C) / It eliminates unemployment.
B) / It fosters competition. / D) / It makes it easier to control.

24.When speaking of the “invisible hand” in the marketplace, we mean that

A) / producers somehow know what the best price is for their goods or services so that they can enjoy a high standard of living
B) / the government quietly tells businesses what to produce and the best way to do so.
C) / when businesses are in financial trouble, the federal government will likely “bail them out” by lending them money to stay in business
D) / The interaction of buyers and sellers, motivated by self-interest and regulated by competition, all happens without a central plan

25.Why do markets exist?

A) / Markets allow people to buy what they need to consume and sell the specialized goods and services they produce. / C) / Markets provide self-sufficient people with public places for the exchange of ideas.
B) / Markets ensure economic equity for all people. / D) / Markets ensure that government does not intervene in the production of goods and services.

26. Suppose there is a family in which all the boys are expected to become farmers when they are adults, just as their fathers and grandfathers did. In which kind of economy do they participate?

A) / false economy / C) / command economy
B) / centrally planned economy / D) / traditional economy

27.What is the struggle among various producers for the consumer’s business called?

A) / self-regulation / C) / competition
B) / incentive / D) / socialism

28.You are an entrepreneur with an innovative idea for a new business. In which kind of economy would you have the most opportunity to try to achieve success?

A) / traditional economy / C) / command economy
B) / economy of scale / D) / market economy

29.What is the function of an economic system?

A) / to make sure all people have equal access to goods
B) / to produce and distribute goods and services
C) / to give all producers the same access to consumers
D) / to make sure people are paid for their labor

30.Which of the choices below correctly explains in what way the economy of China is in transition?

A) / The economy is moving from central planning toward a market-based system.
B) / Investments are determined by state control instead of by private decision.
C) / The government rarely interferes in the free market and is highly receptive to foreign investment.
D) / Individual firms are in the process of being sold to the state.

31.What is the motivating force behind the free market?

A) / self-interest / C) / specialization
B) / competition / D) / the invisible hand

32.What is the purpose of competition?

A) / to act as a motivating force behind the free market
B) / to cause buyers to have to be careful about spending their money
C) / to cause producers to attempt to put each other out of business
D) / to act as a regulating force in the marketplace

33.Each society determines who will consume what is produced based on

A) / its needs and wants
B) / its unique combination of social values and goals
C) / what region of the world that society is located
D) / assuring every member receives an equal amount of goods and services

34.Which of the following is NOT a key economic question?

A) / Who consumes these goods and services?
B) / How should these goods and services be produced?
C) / How should it be ensured that goods and services are paid for?
D) / What goods and services should be produced?

35.A person who believed in the doctrine of laissez faire would disapprove of

A) / the invisible hand of the marketplace. / C) / government funding of education.
B) / self-interest as the motivating force in the free market. / D) / consumer sovereignty.

36.Which of the following is characteristic of a traditional economy?

A) / They have a high standard of living.
B) / They are usually based on light industrial production.
C) / Communities tend to be fast-growing.
D) / Children tend to have the same jobs as their parents did.

37.What is an important advantage of a free market?

A) / It does not change unless the government directs it. / C) / It protects the less fortunate.
B) / It offers a wide variety of goods and services. / D) / It is easy to regulate.

38.Which of the following is NOT characteristic of a centrally planned economy?

A) / Each person is assigned a job.
B) / Each collective or factory sets its own goals.
C) / The central government owns all land and capital.
D) / The central government makes all economic decisions.

Chapter 4 Quiz: Demand (Part 1)

39.How is the current demand for a good related to its future price?

A. / If the price is expected to rise, current demand will fall.
B. / If the price is expected to drop, current demand will rise.
C. / Current demand is not related to future price.
D. / If the price is expected to drop, current demand will fall.

40.A pharmaceutical company sells NOMOCREAKS, a drug that reduces joint pain caused by arthritis. Which of the following would likely shift the demand curve for the drug to the right?

A. / The Food and Drug Administration announces that NOMOCREAKS is no more effective than ordinary aspirin.
B. / The manufacturer of NOMOCREAKS now puts 100 capsules in the same bottle that used to hold 80 capsules, but charges the same price as the 80 capsule bottle.
C. / The American Society of Orthopedic Surgeons endorses the drug as the most effective one on the market for relieving arthritis pain
D. / the price of the drug is reduced by 40%

41.What kind of table lists the quantity of a good that a person will buy at different prices?

A. / demand curve / C. / market demand schedule
B. / market demand curve / D. / demand schedule

42.What term describes demand with an elasticity of less than 1?

A. / inelastic / C. / low
B. / elastic / D. / unitary elastic

43.Ceteris paribus, or “all other things held constant,” is an assumption that has which of the following effects on a demand schedule?

A. / It is accurate no matter what changes may occur in the market.
B. / It takes only prices into account.
C. / It is accurate only at one price level.
D. / It considers the effects of all possible changes on demand.

44.When prices rise, which of the following happens to income?

A. / Rising prices have no effect on income. / C. / It goes down.
B. / It rises to meet prices. / D. / It buys less.

45.A shift in the demand curve means which of the following?

A. / a change in demand at every price
B. / a change in consumer income
C. / a rise in prices
D. / a decrease in both price and quantity demanded

46.Which of these events could permanently shift an individual’s demand curve for umbrellas to the right?

A. / He moves from a desert community to a rainy city by the ocean.
B. / The price of umbrellas decreases significantly as inexpensive umbrellas are imported from China.
C. / Weather forecasters predict that a major hurricane will hit his city the following week.
D. / He buys a car so he no longer needs to walk to and wait at a bus stop every morning to get to work.

47.What is a company’s total revenue?

A. / the amount of goods a company can expect to sell
B. / the amount a company receives for selling its goods
C. / the price of a company’s goods
D. / the amount of profit a company can expect to make

48.What is a basic principle of the law of demand?

A. / When a good’s price is lower, people will buy more of it.
B. / The higher the price, the more people will want the good.
C. / Most people want more material things than they can afford
D. / Everyone has a limited income that they will spend.

49.What does it mean when the demand for a product is inelastic?

A. / A price increase does not have a significant impact on buying habits.
B. / People will not buy any of the product when the price goes up.
C. / Customers will react by finding substitutes.
D. / There are very few satisfactory substitutes for the product.

50.What are inferior goods?

A. / goods for which the demand rises when income falls
B. / goods that are poorly made and do not last very long
C. / goods that no one wants to buy
D. / goods for which the demand falls when income rises

51.Why does a demand curve slope downward from left to right?

A. / because price increases as demand increases
B. / because revenues increase as price decreases
C. / because demand increases as price decreases
D. / because revenues decrease as price increases

52.Which of the following would probably have inelastic demand for a student?

A. / mouse pad / C. / sneakers
B. / ball point pen / D. / school bus pass

53.What determines how a change in prices will affect total revenue for a company?

A. / elasticity of demand / C. / values of elasticity
B. / the company’s pricing policy / D. / the consumers’ incomes

54.Which of the following is a good that might not be bought when prices rise?

A. / complement / C. / inferior good
B. / substitute / D. / luxury

55. The price of movie tickets in a town has risen from $6 to $8.50. What is the most likely effect of the change in price?

A. / The demand curve for movie tickets will move right.
B. / The quantity demanded of movie tickets will increase.
C. / The demand curve for movie tickets will move left.
D. / The quantity demanded of movie tickets will decrease.

56.Jasmine is willing to buy 40 pencils at 25 cents apiece. When the price is ten cents apiece, she is willing to buy 100 pencils. Which of the following statements could be true about Jasmine’s demand for pencils?

A. / She will buy 80 pencils at 15 cents apiece.
B. / She will buy 20 pencils at 20 cents apiece.
C. / She will buy 100 pencils at 5 cents apiece.
D. / None of these statements is likely to be true.

Ch. 5 Quiz on Supply (2012)

57. Regulation is government intervention in a market that results in all of the following EXCEPT

A. / influencing the price of a good. / C. / governing the quantity of a good.
B. / lowering the costs of production of a good. / D. / affecting the quality of a good.

58. Which of the following is an example of government influence on supply?

A. / Federal law changing Presidents Day to February 5th
B. / A bakery’s rent on the building increases by $500 per month
C. / Hybrid cars sales increase by 15% in 2010
D. / Federal law making requiring every car to have airbags

59. Which of the following is a fixed cost for a pizza restaurant?

A. / temporary workers / C. / cost of pepperoni
B. / rent / D. / take-out boxes

60.Which of the following is an example of lower production costs brought about by the use of technology?

A. / the use of e-mail to replace slower surface mail
B. / the importing of fresh vegetables from South America rather than using canned vegetables
C. / the making of breads and pastries in local shops rather than large bakeries
D. / the delivery costs of gasoline to the consumer by diesel trucks

61.Which of these events would cause a shift to the right in the supply curve of a candy manufacturer?

A. / The manufacturer lowers the price of its candy bars.
B. / The company shuts down for several weeks because there’s been a fire.
C. / Upgrades to its mixing equipment allow the company to make more bars.
D. / The company raises the price of its candy bars.

62.What do sellers do if they expect the price of goods they have for sale to increase dramatically in the near future?

A. / sell the goods now and try to invest the money instead of resupplying
B. / store the goods indefinitely regardless of when the price rises
C. / store the goods until the price rises
D. / sell the goods now but try to get the higher price for them

63.When the selling price of a good goes up, what is the relationship to the quantity supplied?

A. / It becomes practical to produce more goods. / C. / There is no relationship between the two.
B. / The cost of production goes down. / D. / The profit made on each item goes down.

64.Which of the following is NOT an example of the law of supply?

A. / A furniture store raises the price of its sofas since they can sell more.
B. / More consumers are buying sofas than ever before.
C. / A competitor produces more sofas after the price is raised.
D. / A furniture manufacturer raises the price and increases the number of sofas it produces.

65.Which of the following is the best example of the law of supply?

A. / A food producer increases the number of acres of wheat he grows to supply a milling company.
B. / A milling company builds a new factory to process flour to export.
C. / A sandwich shop increases the number of sandwiches it sells every day when the price is increased.
D. / A catering company buys a new dishwasher to make their work easier.

66.What factor has the greatest influence on elasticity and inelasticity of supply?