SEMESTER ECONOMICS

Competency PreTest

NAME ______

EPF 2: The student will demonstrate knowledge of the role of producers and consumers in a market economy

  1. Mark the examples of economic incentives and disincentives with either an “I” for an incentive, a “D” for a disincentive, or with a “?” if you don’t know
  1. ______Interest Charge
  2. ______Cost
  3. ______Income
  4. ______Profit
  1. _____ The phrase “scarce resource” means
  1. The resource is hard to find
  2. The resource will run out in the foreseeable future
  3. The demand for the resource is high relative to supply
  4. I Don’t Know
  1. _____ The phrase that best describes “the highest possible return” is . . .
  1. The individual making the economic decision will receive the best possible benefit
  2. The individual making the economic decision will receive a monetary reward (Profit).
  3. The individual making the economic decision will receive a high interest rate on their money
  4. I Don’t Know
  1. _____ Which of the following is an example of the definition of consumer sovereignty
  1. People living in a Capitalist economy where consumer preferences lead production decisions
  2. People living in a Command economy where government makes what’s best for consumers
  3. People living in a democratic society with free elections
  4. A country that is not subject to the will of another country for its economic success
  5. I Don’t Know
  1. Mark the following statements as true “T” or false “F” relative to the definition of “entrepreneur” or with a “?” if you don’t know

_____ A manager hired to run a business is an entrepreneur

_____ An owner of stock in a corporation is an entrepreneur

_____ Out teacher is an entrepreneur for our school

_____ An entrepreneur serves as a bridge between consumers and businesses

_____ Profit provides the primary motivation to entrepreneurs

_____ Entrepreneurs try to provide rewards to non-customers

_____ An entrepreneur needs to take risks to be successful

  1. Match the following terms with their definitions or with a “?” if you don’t know
  1. _____Franchise 1. Type of business owned by stockholders
  2. _____Sole Proprietorship 2. A type of business owned by two or more individuals
  3. _____Corporation 3. A type of business owned by one person
  4. _____Cooperative 4. A type of business that uses another company’s name
  5. _____Partnership 5. A type of business owned by the consumers of the business
  1. Using the letters above, put the appropriate letter next to an advantage/disadvantage of that ownership option.

  1. _____ Many tax breaks available
  2. _____ support from host company
  3. _____ Spreads liability out to others
  4. _____ Consensus problems can occur
  5. _____ Has supportive customers
  6. _____ Heavily regulated option
  7. _____ Often has an enormous workload
  8. _____ With death of principal, often dissolves

  1. If I own a franchise, I’m generally free to make the following decisions on my own (“Y” for Yes, “N” for No, and “?” if you don’t know).
  1. _____ What products I can sell
  2. _____ The name of my business
  3. _____ What prices I can charge
  4. _____ The slogan for a national advertising campaign
  5. _____ Who I can hire
  1. Besides prices, identify three other ways a business can compete with other businesses (Use “?” if you don’t know)
  1. ______2. ______3. ______
  1. Fill in the squares with the following terms:consumer, and competitor, and producer to reflect the standard Channel of Distribution for products and services in our economy. Two terms are used once and one term is used three times. Insert a “?” if you don’t’ know
  1. _____ Competition between businesses can do the following in our economy
  1. Lower prices
  2. Improve variety and quality of products and services
  3. Improve customer service
  4. Encourage advances in technology in the development of consumer products and services
  5. All of the Above
  6. None of the Above
  1. _____ Consumers also compete in the market place. Who do consumers compete with?

  1. Other Consumers
  2. Retailers
  3. Producers
  4. Wholesalers
  5. All of the Above
  6. I Don’t Know

  1. _____ From the list of explanations below, which does the phrase “Vote with Your Dollars” refer to
  1. Consumers can donate to the political candidate of their choice
  2. Consumers determine what producers produce by making purchases
  3. How the action at an auction comes about
  4. None of the above
  5. I Don’t Know
  1. _____ Every time an individual or group makes an economic decision, they might make the wrong decision. This causes stress and anxiety in society. The word or phrase that best describes this chance of making mistakes is . .

  1. Failure
  2. Loss
  3. Cost
  4. Risk
  5. I Don’t Know

  1. For a market economy, answer the following statements as either “T” (true), “F” (false), or “?” you don’t know

_____ Companies collude to form monopolies

_____ Price fixing is a form of monopolistic behavior

_____ When businesses collude for good business reasons, we can expect prices to improve

_____ Increased competition can prevent collusion among businesses

_____ A business buying other businesses can lead to a monopoly

_____ In a competitive field of business, if at least a 35% segment of the businesses collude to raise prices, we as consumers are likely to pay higher prices and receive poorer service while at the store.

  1. _____ In a free market economy, the government has a ______role

  1. Limited
  2. Controlling
  3. No
  4. Competitive
  5. I Don’t Know

  1. Answer the following questions with a “T” for true, “F” for false, or a “?” if you don’t know for our economy
  1. _____ The government can have an influence on the amount of money consumers can spend
  2. _____ Businesses can have an influence on the amount of money consumers spend
  3. _____ Consumers can have an influence on how much a business spends
  4. _____ For every dollar spent in a store, someone is making an income
  5. _____ Businesses can influence how much the government can spend
  6. _____ The government can influence the amount of money businesses spends
  1. In our economy, the role of government should be to do what? Identify three roles below. Use a “?” if you don’t know.

______

______

______

  1. Define the following terms or write “?” if you don’t know

Product Market ______

Factor Market ______

Factors of Production ______

Factor Payment ______