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The basic reason we study economics is because material wants and needs are:

	A.	limited but resources are not.
	B.	unlimited and so are resources.
	C.	unlimited but resources are not.
	D.	limited and so are resources.

1 points

Question 2

Economics is concerned with:

	A.	limiting individuals' wants so that our scarce resources will not be used up.
	B.	using scarce resources to satisfy virtually limitless material wants and needs.
	C.	earning as much money as possible.
	D.	using as many workers as possible to produce any given level of output.

1 points

Question 3

The cost of a purchase or decision measured by what is given up to make the purchase or carry out the decision is its:

	A.	overhead cost.
	B.	opportunity cost.
	C.	hidden cost.
	D.	sunk cost.

1 points

Question 4

The factor of production that organizes economic activity and bears the risk of success or failure in a business venture is:

	A.	labor.
	B.	capital.
	C.	entrepreneurship.
	D.	all of the above.

1 points

Question 5

The incomes received by the four factors of production are:

	A.	rents, profit sharing, dividends, and net income.
	B.	rents, salaries, dividends, and net income.
	C.	capital gains, wages, dividends, and net income.
	D.	rents, wages, interest, and profits.

1 points

Question 6

Wages are earned by:

	A.	entrepreneurs.
	B.	suppliers of labor.
	C.	owners of capital.
	D.	owners of land.

1 points

Question 7

Interest is earned by:

	A.	owners of land.
	B.	suppliers of labor.
	C.	entrepreneurs.
	D.	owners of capital.

1 points

Question 8

Rents are earned by:

	A.	owners of capital.
	B.	suppliers of labor.
	C.	entrepreneurs.
	D.	owners of land.

1 points

Question 9

Profits are earned by:

	A.	entrepreneurs.
	B.	owners of capital.
	C.	owners of land.
	D.	suppliers of labor.

1 points

Question 10

Economic theories are:

	A.	always expressed in terms of mathematical equations.
	B.	actions, such as tax cuts, to change economic conditions.
	C.	formal explanations of the relationships between economic variables.
	D.	all of the above.

1 points

Question 11

Economic policies:

	A.	are guides to change economic conditions.
	B.	have consequences that vary from policy to policy.
	C.	are based on the value judgments of the persons forming the policies.
	D.	all of the above.

1 points

Question 12

Which of the following can be used to express economic theories?

	A.	Words.
	B.	Graphs.
	C.	Mathematical equations.
	D.	All of the above.

1 points

Question 13

A line that slopes upward on a graph indicates that the variables measured on the graph are:

	A.	always increasing but never decreasing.
	B.	directly related.
	C.	inversely related.
	D.	unrelated.

1 points

Question 14

A line that slopes downward on a graph indicates that the variables measured on the graph are:

	A.	unrelated.
	B.	inversely related.
	C.	always decreasing but never increasing.
	D.	directly related.

1 points

Question 15

Two variables are directly related when:

	A.	one variable decreases as the other decreases.
	B.	neither variable increases nor decreases.
	C.	one variable increases as the other decreases.
	D.	one variable does not change as the other decreases.

1 points

Question 16

Two variables are inversely related when:

	A.	one variable increases as the other increases.
	B.	one variable does not change as the other increases.
	C.	neither variable decreases nor increases.
	D.	one variable decreases as the other increases.

1 points

Question 17

Conditions held to be true in developing an economic model are:

	A.	economic theories.
	B.	variables of the model.
	C.	conclusions of the model.
	D.	assumptions.

1 points

Question 18

Which of the following can lead to economic growth?

	A.	Improved technology.
	B.	An increase in the supply of labor.
	C.	An increase in the amount of available capital.
	D.	All of the above.

1 points

Question 19

Goods, such as corn chips, that are produced for final buyers are:

	A.	consumer goods.
	B.	expenditure goods.
	C.	capital goods.
	D.	credit goods.

1 points

Question 20

An increase in production costs at a Ford automobile plant, and an increase in the general level of prices in the U.S. economy are examples of:

	A.	a macroeconomic problem and a microeconomic problem, respectively.
	B.	a microeconomic problem and a macroeconomic problem, respectively.
	C.	macroeconomic problems.
	D.	microeconomic problems.

1 points

Question 21

The following points showing different price-quantity combinations are plotted on a graph: ($1.00 and 40 units), ($2.00 and 30 units), ($4.00 and 20 units). A line connecting these points would be:

	A.	upward sloping.
	B.	perfectly vertical.
	C.	perfectly horizontal.
	D.	downward sloping.

1 points

Question 22

Which of the following statements is FALSE?

	A.	The study of economics is simplified because value judgments have no effect on the choices people make because of scarcity.
	B.	Scarcity is the basic reason for studying economics.
	C.	People must make tradeoffs, or give up one thing to get something else, because of scarcity.
	D.	Scarcity forces people to make decisions about how to best satisfy their material wants and needs.

1 points

Question 23

The opportunity cost of an item purchased is:

	A.	the alternative purchase that is forgone to acquire the item.
	B.	the time required to make a decision about the purchase.
	C.	the dissatisfaction experienced by the buyer when the item is no longer desired.
	D.	the tax paid on the item.

1 points

Question 24

Which of the following is an example of a capital good?

	A.	Food donated to flood victims.
	B.	Frozen yogurt.
	C.	A cash register.
	D.	In-line skates.

1 points

Question 25

The study of the U.S. economy as a whole, and how all households in the economy interact with all businesses and the government is:

	A.	macroeconomics.
	B.	microeconomics.
	C.	megaeconomics.
	D.	metaoeconomics.

1 points

Question 26

Which of the following is NOT a basic economic decision that must be made by every society?

	A.	What goods and services will be produced.
	B.	Who will receive the goods and services that are produced.
	C.	What goods and services consumers will need most.
	D.	What factors of production and methods will be used in producing goods and services.

1 points

Question 27

The way a society is organized to make the basic economic decisions is referred to as its:

	A.	production network.
	B.	social-economic structure.
	C.	output strategy.
	D.	economic system.

1 points

Question 28

The way in which a country makes the basic economic decisions depends on:

	A.	which basic economic decisions it must make.
	B.	whether or not it has solved the scarcity problem.
	C.	how the economic relationships among its households, businesses, and government are organized.
	D.	all of the above.

1 points

Question 29

The economic systems of people such as some early Native American tribes that were small, focused on agriculture, and operated with production methods not changed for generations are best characterized as:

	A.	command economies.
	B.	traditional or agrarian economies.
	C.	market economies.
	D.	mixed economies

1 points

Question 30

Which of the following statements describing a market economy is FALSE?

	A.	The basic economic decisions are made by households and businesses.
	B.	Households and businesses interact in markets to make economic decisions.
	C.	Households only buy and businesses only sell.
	D.	Price is the language through which buyers and sellers communicate.

1 points

Question 31

A "price system" is most closely associated with:

	A.	socialism.
	B.	a market economy.
	C.	a command economy.
	D.	all of the above.

1 points

Question 32

According to the circular flow model, money flows from households to businesses in:

	A.	output markets.
	B.	neither input nor output markets.
	C.	input markets.
	D.	both input and output markets.

1 points

Question 33

An example of a transaction in an output market is:

	A.	the purchase of labor services by a business.
	B.	the purchase of a new home by an individual.
	C.	the purchase of a building by an auto dealership.
	D.	all of the above.

1 points

Question 34

A good is produced efficiently when it is produced:

	A.	at the lowest possible cost.
	B.	with the smallest number of resources.
	C.	with equal amounts of the four factors of production.
	D.	at the lowest possible quality.

1 points

Question 35

In a pure market economy, who receives goods and services is determined by the:

	A.	value judgments of those administering each particular market.
	B.	sellers who have produced those goods and services.
	C.	availability of government income support payments.
	D.	ability to pay for those goods and services from income earned in resource markets.

1 points

Question 36

When a market system causes a problem or cannot achieve a goal set by society there is:

	A.	no alternative but to go to a purely planned economy.
	B.	mercantilism.
	C.	market socialism.
	D.	market failure.

1 points

Question 37

Cost-minimizing efforts by businesses that lead to pollution or inferior products are examples of:

	A.	project risk.
	B.	market failure.
	C.	command breakdown.
	D.	all of the above.

1 points

Question 38

The economic system in which the basic economic questions are answered through markets with some government intervention is a:

	A.	mixed economy.
	B.	market economy.
	C.	planned economy.
	D.	centralized economy.

1 points

Question 39

An example of government intervention in output markets would be:

	A.	antidiscrimination laws.
	B.	consumer protection laws.
	C.	corporate income taxation.
	D.	none of the above.

1 points

Question 40

In a planned economy:

	A.	how goods and services are produced is determined by what resources planners make available to producers.
	B.	value judgments of individual buyers and sellers are more important than value judgments of planners.
	C.	free enterprise is the prevailing philosophy.
	D.	goods and services are usually produced more efficiently than in a market system.

1 points

Question 41

An economic system where many of the factors of production are collectively owned and there is an attempt to equalize incomes is:

	A.	absolutism.
	B.	capitalism.
	C.	mixed capitalism.
	D.	socialism.

1 points

Question 42

Which of the following countries would rely most on a market based decision-making process?

	A.	Cuba.
	B.	United States.
	C.	China.
	D.	England.

1 points

Question 43

Beginning in the mid-1980s, the Soviet Union, China, and other planned economies:

	A.	increased their dependence on centralized decision making.
	B.	turned their decision-making authority over to public officials in successful western economies.
	C.	formed into a single super-economy to reduce the scarcity problem.
	D.	moved toward greater use of free markets and individual decision making.

1 points

Question 44

The idea of individual decision making popularized by Adam Smith in the late 1700s provided the foundation for:

	A.	Chinese socialism.
	B.	the economy of the former Soviet Union.
	C.	U.S. capitalism.
	D.	mercantilism.

1 points

Question 45

The economic system where the interests of the state are placed ahead of the interests of individual is:

	A.	mercantilism.
	B.	mixed capitalism.
	C.	radical individualism.
	D.	pure capitalism.

1 points

Question 46

Laissez-faire capitalism:

	A.	is concerned with placing the interests of the state above the interests of individuals.
	B.	holds that, for the sake of fairness, the state should decide how much income people will receive.
	C.	holds that individual decision making with minimal government intervention will maximize the interests of society.
	D.	all of the above.

1 points

Question 47

Adam Smith, in his book, The Wealth of Nations, advocated:

	A.	mercantilism.
	B.	socialism.
	C.	government intervention into the economy to control people's self-interest.
	D.	laissez-faire capitalism.

1 points

Question 48

The invisible hand doctrine is most closely associated with:

	A.	laissez-faire capitalism.
	B.	managed capitalism.
	C.	socialism.
	D.	mercantilism.

1 points

Question 49

Which of the following developments brought about by the industrial boom in the U.S. led to calls for greater government intervention in the marketplace?

	A.	the advent of large, powerful monopolies.
	B.	low wages for workers and the use of child labor.
	C.	long hours and poor working conditions for workers.
	D.	all of the above.

1 points

Question 50

The government programs and legislative reforms initiated during the 1930s to reduce the problems of the Great Depression were termed:

	A.	Reaganomics.
	B.	the Employment Act proposals.
	C.	laissez-faire intervention.
	D.	the New Deal.

1 points

Question 51

A buyer's demand for a product refers to the amounts of the product the buyer would purchase at different:

	A.	prices.
	B.	income levels.
	C.	points in time.
	D.	all of the above.

1 points

Question 52

The Law of Demand focuses on changes in the amount of a good or service demanded that are caused by changes in:

	A.	the price of the good or service.
	B.	nonprice factors, such as buyer's income, or substitute products.
	C.	the time period under consideration; for example, a week versus a month.
	D.	all of the above.

1 points

Question 53

One reason buyers demand less of a product as its price increases is:

	A.	sellers offer less of the product for sale as its price increases.
	B.	substitute goods are usually available.
	C.	buyers must save more of their incomes as prices increase.
	D.	high-priced goods place buyers in higher tax brackets.

1 points

Question 54

The different amounts of a product that a seller would make available at different prices in a defined time period when all nonprice factors are held constant is:

	A.	the Law of Demand.
	B.	supply.
	C.	demand.
	D.	the Law of Supply.

1 points

Question 55

The Law of Supply states that as the price of a product increases:

	A.	sellers will offer less of the product for sale.
	B.	consumers will buy less of the product.
	C.	sellers will offer more of the product for sale.
	D.	new buyers will enter the market because the product appears popular.

1 points

Question 56

The reason sellers offer more goods or services for sale when price increases is:

	A.	greater ability to cover costs.
	B.	greater ability to earn a profit.
	C.	both of the above.
	D.	none of the above.

1 points

Question 57

Because of the Law of Supply, supply curves:

	A.	are perfectly vertical.
	B.	slope downward.
	C.	are perfectly horizontal.
	D.	slope upward.

1 points

Question 58

A shortage occurs in a market when quantity demanded is:

	A.	equal to quantity supplied.
	B.	less than quantity supplied.
	C.	more than quantity supplied.
	D.	none of the above.

1 points

Question 59

A surplus occurs in a market when quantity demanded is:

	A.	equal to quantity supplied.
	B.	less than quantity supplied.
	C.	more than quantity supplied.
	D.	none of the above.

1 points

Question 60

Equilibrium price and equilibrium quantity are the price and quantity:

	A.	where demand equals supply in a market.
	B.	toward which a free market automatically moves.
	C.	both of the above.
	D.	none of the above.

1 points

Question 61

A shortage will develop when a product's price is:

	A.	equal to the equilibrium price.
	B.	less than the equilibrium price.
	C.	greater than the equilibrium price.
	D.	none of the above.

1 points

Question 62

A surplus occurs when the price charged in a market is:

	A.	the equilibrium price.
	B.	above the equilibrium price.
	C.	below the equilibrium price.
	D.	zero.

1 points

Question 63

In the table, P = price, Qs = quantity supplied, and Qd equals quantity demanded.

P	Qs	Qd
$9	10	4
8	9	5
7	8	6
6	7	7
5	6	8
4	5	9

Reference: Ref 3-1

A surplus will develop in this market when price is:

	A.	$6.
	B.	$5.
	C.	$7.
	D.	$4.

1 points

Question 64

In the table, P = price, Qs = quantity supplied, and Qd equals quantity demanded.

P	Qs	Qd
$9	10	4
8	9	5
7	8	6
6	7	7
5	6	8
4	5	9

Reference: Ref 3-1

A shortage will develop in this market when price is:

	A.	$8.
	B.	$6.
	C.	$5.
	D.	$7.

1 points

Question 65

Changes in the quantity supplied of a good or service are caused by changes in the:

	A.	number of sellers in the market.
	B.	price of the good or service.
	C.	cost of inputs, i.e. wages, rents, and interest.
	D.	time period under consideration, i.e. a week versus a month.

1 points

Question 66

A decrease in demand means that:

	A.	buyers have moved upward along a stable demand curve.
	B.	the demand curve for a product has shifted to the right.
	C.	the demand curve for a product has shifted to the left.
	D.	buyers have moved downward along a stable demand curve.

1 points

Question 67

The effect on sellers of a change in a product's price would be shown by a movement from point A to point B in figure:

	A.	B.
	B.	D.
	C.	A.
	D.	C.

1 points

Question 68

A usury law on interest rates is an example of a:

	A.	price floor.
	B.	price ceiling.
	C.	policy to allow the free market to determine the level of interest rates.
	D.	none of the above.

1 points

Question 69

The minimum wage law is an example of:

	A.	a price ceiling.
	B.	a price floor.
	C.	a law that ensures there are no shortages or surpluses.
	D.	economic decision making based solely on individualism.

1 points

Question 70

The supply of a product is price elastic if a 10 percent increase in price leads to:

	A.	a 4 percent increase in quantity supplied.
	B.	no change in quantity supplied.
	C.	a 12 percent increase in quantity supplied.
	D.	a 10 percent increase in quantity supplied.

1 points

Question 71

The measure of a buyer's sensitivity to a change in the price of a product is referred to as:

	A.	the Law of Demand.
	B.	elasticity of demand.
	C.	demand reaction.
	D.	the demand recovery index.

1 points

Question 72

The supply of a product is price elastic when:

	A.	prices increase, but not when they decrease.
	B.	a given percentage change in price leads to a larger percentage change in quantity supplied.
	C.	sellers produce goods that buyers see as luxuries, but not when they produce goods that buyers see as necessities.
	D.	none of the above.

1 points

Question 73

If a given percentage change in the price of a product is greater than the resulting percentage change in quantity demanded, the price elasticity of demand for the product is:

	A.	less than 1.
	B.	not enough information to answer the question.
	C.	greater than 1.
	D.	1.

1 points

Question 74

A change in the quantity supplied of a product:

	A.	causes the product's supply curve to shift to the right or left.
	B.	is caused by a change in the number of sellers in the market.
	C.	means the entire supply schedule changes.
	D.	is caused by a change in the price of the product.

1 points

Question 75

Good A is a luxury and Good B is a necessity. Good C competes with many substitute products while Good D has few substitutes. You would expect the demands for goods:

	A.	A and B to be price elastic, and C and D to be price inelastic.
	B.	A and C to be price elastic, and B and D to be price inelastic.
	C.	B and D to be price elastic, and A and C to be price inelastic.
	D.	C and D to be price elastic, and A and B to be price inelastic.

1 points

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