econ test questions

Scarcity exists when there are _______ resources available to satisfy all the competing uses

a. too many

b. just enough

c. not enough

d. no

not enough

mod 1

Which of the following is not one of the categories of economic resources?

Money

Capital

Labor

Land

money

Rent control keeps prices of housing below market rates. Which of these is an unintended consequence of rent control?

A decrease in the price of utility expenses (electric and natural gas) for the housing

A shortage of housing

An increase in the price of utility expenses (electric & natural gas) for the housing

An increase in the quantity of housing available

a shortage of housing

When using the PACED decision making model you should choose the alternative with the highest ____________

net value

scarcity

price

opportunity cost

net value

Which of these is a positive incentive to get you to return books on time to the library?

entering you in a drawing to win a laptop when the books are returned on time

suspending your borrowing privileges until the book is returned

decreasing the number of books you can check out a time for the next yea

a fine that must be paid when you return the book

entering you in a drawing to win a laptop when the books are returned on time

Which of these groups responds to the incentive of higher profits?

voters

consumers

savers

producers

producers

Which of the following choices is NOT one of the three basic economic questions?

What goods and services should be produced

How should the goods and services be produced

When should the goods and services be produced?

For whom will these goods and services be produced

When should the goods and services be produced?

Which of these is not true about entrepreneurs

they will always make a profit

they take calculated risks

they encourage economic growth through new ideas

they incur losses when their business or ideas are not successful

they will always make a profit

Which of these best describes the invisible hand theory of Adam Smith?

the individual can only succeed in an economy if there is no government intervention

doing what is best for you as an individual will never benefit society as a whole

when we act to better ourselves, society as a whole also benefits

society must vote as to the best course of action to take

when we act to better ourselves, society as a whole also benefits

In a ___________________ economy, the government is minimally involved in the functioning of the economy but does act to protect consumers and impose some regulations on the market.

mixed

A _______________________________ shows the maximum combinations of two goods that can be produced when all resources and the best technology is used

Production Possibilities Curve

The first step in the PACED decision making model is to __________

Define the problem .

For every A you earn on your report card, your grandma gives you a twenty dollar bill. This is an example of _______________

a positive incentive

The _______________ ultimately determines the products that a command economy produces.

government

Under __________________________ , the desires of the consumers control the goods that will be produced

consumer sovereignty

Which of the following are examples of goods as opposed to services?

apple, car repair, pair of shoes

apple, car, pair of shoes

apple, car, shoe shine

movie theater ticket, car, pair of shoes

apple, car, pair of shoes

The economic term that describes the satisfaction that consumers gain from consuming goods and services is

pleasure

benefit

utility

want

utility

Consumer decisions are made by which of the following processes?

marginal decision process

Illogical decision process

conflicted decision process

all or nothing decision process

marginal decision process

As a consumer consumes more of a good or service, the additional satisfaction of consuming the additional units goes down. This is called the law of

diminishing wants.

diminishing requirements.

diminishing returns.

diminishing utility.

diminishing utility.

A worker's skills knowledge and experience are known as

factory capital

human capital

producer capital

consumer capital

human capital

What is measured by how many goods and services a worker produces in an hour?

productivity

gross domestic product

standard of living

corporate profits

productivity

If Romeo's Racket Ball business has sales for the month of 10,000 racketballs and a racketball sells for $15, what is Romeo's accounting profits per month given the explicit costs below?

Rent of $10,000

Utilities of $1,000

Labor costs of $2.50 per racketball

Material costs of $2.50 per racketball

Executive salaries of $39,000

$0

$50,000

$100,000

$25,000

$50,000

Total revenue minus explicit and implicit costs equals which of the following?

accounting profit

economic profit

foregone profits

excess profits

economic profit

Which of the following are characteristics of competitive markets?

large number of buyers and sellers, differentiated products, ease of entry

large number of buyers with few sellers, homogenous products, ease of entry

large number of buyers and sellers, homogenous products, barriers to entry

large number of buyers and sellers, homogenous products, ease of entry

large number of buyers and sellers, homogenous products, ease of entry

In the circular flow model, firms are buyers in which market and sellers in which market?

firms sell in the resource market and buy in the product market

firms sell in the product market and buy in the resource market

firms sell in the product market and buy in the product market

firms sell in the product market and buy in the product market

firms sell in the product market and buy in the resource market

In the circular flow model households sell labor to __________________ in exchange for _________________

firms

wages

An oligopoly is a market structure with __________ sellers and _______________ .

Answer 1:few

Answer 2:some barriers to entry

Implicit costs are __________ costs or the opportunity costs of using resources _____________ in production.

indirect

owned by the firm

Entrepreneurs are primarily motivated by ___________ .

profit

In the circular flow of the economy ________ are leakages and ________ are injections.

taxes and savings

loans and exports

If the price of oranges, a substitute for apples, increases. what will happen to the demand for apples?

demand for apples will increase

there will be a movement along the demand curve for apples

demand for apples will stay the same

demand for apples will decrease

demand for apples will increase

The relationship between price and quantity supplied is typically

direct

vertical

negative

indirect

direct

If consumers expect the price of a product to be higher In the future, what will happen to the demand for the product today?

demand will decrease

demand will increase

quantity demanded will decrease

quantity demanded will increase

demand will increase

What is the relationship between quantity demanded and supplied at equilibrium?

quantity demanded is less than quantity supplied

quantity demanded is greater than quantity supplied

quantity demanded increases beyond quantity supplied

quantity demanded equals quantity supplied

quantity demanded equals quantity supplied

Price floors create

surpluses

shortages

equilibrium

a lack of demand

surpluses

In the market for cell phones, if the supply of cell phones increases what will happen to the price and quantity of cell phones?

price will increase and quantity will increase

price will decrease and quantity will decrease

price will increase and quantity will decrease

price will decrease and quantity will increase

price will decrease and quantity will increase

When the price of hot dogs decreases, what happens in the market for the complementary good of hot dog buns?

demand decreases, decreasing price and quantity

supply decreases, decreasing price and quantity

supply increases, increasing price and quantity

demand increases, increasing price and quantity

demand increases, increasing price and quantity

If income decreases and consumers purchase more of a product, the product is considered to be a/an ___________

inferior good

With inelastic demand, consumers are relatively _______ to changes in prices.

insensitive

With elastic demand, the percentage change in quantity is ____________ the percentage change in price.

larger than

When quantity demanded is less than quantity supplied, price will fall causing quantity demanded to _________ and quantity supplied to ________

increase

decrease

The relationship between price and quantity demanded typically is ________

inverse

The United States most closely resembles which type of economic system?

Traditional

Mixed

Centrally planned

Market

Command

mixed

Contracts do which of the following?

All of these

Encourage economic activity

Create a legal agreement enforceable by law

Specify the terms of an agreement between parties

Facilitate trust between parties in a market

all of these

Which of the following is a NOT public good provided by the government?

Clean water

National defense

Police protection

Roads

Pollution

pollution

Fish in the ocean are

nonrival and nonexcludable

nonrival and excludable

rival and nonexcludable

rival and excludable

rival and nonreplenishible

rival and nonexcludable

Which of the following is a major spending category of the federal government?

healthcare

transportation

education

police and fire protection

public safety

healthcare

The federal government relies most heavily on which type of revenue?

income taxes

sales taxes

fines and fees

property taxes

estate taxes

income taxes

If a low income family pays 15% of their income in taxes and a high income family pays 5% of their income in taxes, the tax system is

regressive

excessive

unfair

proportional

progressive

regressive

The government is NOT likely to address a positive externality using

subsidies

taxes

laws

regulations

property rights

taxes

Which of the following is NOT a public good provided by the government?

roads

bridges

police and fire protection

healthcare

national defense

healthcare

An accident caused by texting and driving is an example of a(n) _______

negative externality

Antitrust laws make ______________ illegal.

anti-competitive behavior

When the government requires safety inspections for cars it is trying to limit a market failure due to ____________

negative externalities

_________ protects worker safety.

OSHA

___________ is a safety net program that provides healthcare.

CHIP

Gross domestic product measures the_______ in the economy in a given time period.

market value of final goods and services produced

market value of old and new final goods and services sold

number of final goods and services produced

number of final goods and services sold

market value of final goods and services produced

To calculate the unemployment rate, which of the following are necessary pieces of information?

I. the number of unemployed persons

II. the population

III. the number of people in the labor force

IV. the working age population

I and III

How would you best describe a manufacturing employee who has lost his job because he was replaced by a robot (new technology) and does not have the skills necessary to help operate the robot?

Cyclically unemployed.

Structurally unemployed.

Frictionally unemployed.

Seasonally unemployed.

Structurally unemployed.

If the actual inflation rate is lower than the expected inflation rate, this is

Bad for borrowers but good for lenders.

Bad for both borrowers and lenders.

Good for borrowers but bad for lenders.

Good for both borrowers and lenders.

Bad for borrowers but good for lenders.

The monetary policy-making body of the Federal Reserve System is

the Federal Reserve regional banks and branches.

the Federal Open Market Committee

the Board of Governors of the Federal Reserve System.

the Federal Reserve Board Chairman and the Secretary of the US Treasury.

the Federal Open Market Committee

Which of the following people is the best example of a frictionally unemployed individual?

Nicholas who lost his job as a real estate salesperson when the housing market weakened during a recession.

Samantha who quit her job to find work closer to home and reduce her commute.

Aaron who quit his job at a local restaurant and is no longer looking for work since he wants to retire.

Charlie who has lost his job at a local factory because of a decrease in exports and can't find a job that matches his skills.

Samantha who quit her job to find work closer to home and reduce her commute.

An American car company sells 200 vehicles to Germany for a total of $600,000, while the United States imports 100 cars from a German car company for a total of $500,000 from Germany. What would the effect of this trade deal be on the United States' GDP?

U.S. GDP decreases because net exports are positive.

U.S. GDP decreases because net exports are negative.

U.S. GDP increases because net exports are negative.

U.S. GDP increases because net exports are positive.

U.S. GDP increases because net exports are positive.

According to economists, what drives long run inflation?

The velocity of money

The supply of money

The demand of money

The value of money

The supply of money

Economic growth is best measured by percent changes in ______

real GDP

Typically, there is a _____________ between real GDP and employment.

positive relationship

Last year the price level was 100 and this year's price level is 134. Based on this information, the annual inflation rate was ______

34%

__________ is another term for a contraction in the business cycle.

recession

Money is created by commercial banks when

they make loans.

they hold more reserves than are required.

they call in loans.

they issue currency to replace worn out currency.

they make loans.

Suppose the federal government attempts to combat a recession by purchasing a new fleet of warships for the Navy produced by a US manufacturer. What type of economic policy is the government conducting?

contractionary fiscal policy

expansionary monetary policy

expansionary fiscal policy

contractionary monetary policy

expansionary fiscal policy

What is the Federal Reserve System's congressionally assigned dual mandate?

Price stability and maximum employment

Maximum employment and zero inflation

Economic growth and price stability

Economic growth and maximum employment

Price stability and maximum employment

Which of the following are monetary policy tools?

changing the discount rate and government spending

open market operations and tax changes

changing the reserve requirement and open market operations

government spending and tax changes

changing the reserve requirement and open market operations

What is the term that describes a form of money that has no intrinsic value and is money by government decree?

Commodity

Cash

Fiat

Bank note

fiat

Assume that real GDP has been declining and the unemployment rate has been edging upward. What might the Congress and the president do about this problem?

Decrease transfer payments to the disabled

Increase spending on road construction

Decrease funding for food stamps

Increase taxes on small businesses

Increase spending on road construction

Which of the following is an example of active fiscal policy action?

Reducing the reserve requirement

Increasing the discount rate

Reducing the personal and corporate income tax rates

Increasing the interest rate paid on government bonds

Reducing the personal and corporate income tax rates

A government budget surplus occurs when

government revenues exceed expenditures.

the government makes loans.

government expenditures exceed revenues

government prints too much money

government revenues exceed expenditures.

The money supply in the United States is made up of currency, coins, and _______

balances in bank accounts

When the Federal Reserve lowers the reserve requirement, the lending ability of banks _______

increases

the Federal Open Market Committee has the authority to decide the nations ___________

monetary policy

_______________ use depositors' savings to earn income by lending money to borrowers.

Financial institutions

If the Federal Reserve sold government bonds it would be conducting ________________

Contractionary monetary policy .

A(n) __________ is when both parties are willing and agree to exchange a product for an agreed upon value.

benefits of trade

voluntary exchange

costs of trade

involuntary exchange

voluntary exchange

Which of these is a reason that producers may choose to import raw materials(resources) from foreign countries?

all of these

better quality of resources than in domestic country

lower cost than domestic products

resources are unavailable in the domestic country

all

An open economy means that countries

will trade with each other

specialize in the production of goods where they have absolute advantage

will only produce goods that cannot be produced anywhere else

will not trade with each other at all

will trade with each other

If American farmers sell part of their corn production to Mexican consumers, their sale represents

a trade surplus for the United States and a trade deficit for Mexico

an export for the United States and an import for Mexico.

a trade deficit for the United States and a trade surplus for Mexico

an import for the United States and an export for Mexico

an export for the United States and an import for Mexico.

If the country of Wiffleville has exports of $450 million and imports of $380 million, they are operating with ______________.

negative net exports

a trade deficit

a trade surplus

balanced trade

a trade surplus

When the US dollar becomes weaker, which of the following is true?

it becomes more expensive for the French to buy American goods

it becomes more expensive to travel abroad

it becomes cheaper for Americans to buy German cars

all countries trading with the US will experience higher prices on American goods

it becomes more expensive to travel abroad

A tax on imported goods is a _____________________.

tariff

licensing requirement

embargo

quota

tariff

FTAs promote which of the following?

lower prices on imports

all of these

increased output

higher levels of trade

all of these

A ________ restricts the quantity of imports that are permitted into a country.

Quota

When a country exports more than it imports, the difference is called a ____________ .

trade surplus

The country of Alphaville has a trade deficit of $60 million. To decrease this deficit, Alphaville must either increase exports or _____________ .

decrease imports

When a country buys goods from other countries, these goods are called __________

imports

Which of the following is an example of human capital?

good health

all of these

on-the-job training

job experience

education

all

Which of the following is a result of increased investment in human capital?

lower education costs

lower job benefits

higher earnings

all of these

reduced job security

higher earnings

Which of the following is the largest category of earned income?

Overtime pay

Capital gains

Gratuities and bonuses

Salaries and wages

Interest income

Salaries and wages

Which of the following is a mandatory payroll deduction?

FICA Social Security taxes

State income taxes

All of these

Federal income taxes

FICA Medicare taxes

all

Which of the following is a type of employee benefit?

Paid vacation and sick days

Parking

Child care

All of these

Health insurance

all

Which of the following is also called an Employee Withholding Allowance certificate?

W-9 formI-9 formNone of these

I-9 form

None of these

W-2 form

W-4 form

w-4 form