Name: 
 

ECON FINAL A



Multiple Choice
Identify the choice that best completes the statement or answers the question.
 

 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. 

An example of a shortage is limited amounts of
a.
water available for irrigating a crop because it is used for other crops.
b.
labor available because the workers have other jobs.
c.
food available because the trucks carrying it are on strike.
d.
food available because few people want to buy it.
 

 3. 

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.
 

 4. 

All of the following are types of decisions that can be made at the margin EXCEPT
a.
whether to grow beans or corn on a large farm.
b.
whether or not to hire 100 new workers.
c.
whether to leave early in the morning or late in the day for a trip.
d.
whether or not to go on a vacation.
 

 5. 

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.
 

 6. 

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.
 

 7. 

The law of increasing costs means that when an economy increases the production of one item
a.
the opportunity cost goes up.
b.
the actual cost of making the item goes down.
c.
the actual cost goes up but the opportunity cost goes down.
d.
the production costs will increase also.
 

 8. 

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.
 

 9. 

The opportunity cost of a decision can be examined by using a
a.
production possibilities graph.
c.
global trade-off grid.
b.
factors of production chart.
d.
graph of increasing costs.
 

 10. 

Production possibilities frontiers curve when they are charted on a graph because they show
a.
the underutilization of resources.
b.
the maximum output of goods and services.
c.
the increasing costs resulting in increasingly less output.
d.
the technological level of the economy’s productivity.
 

 11. 

Which of the following is NOT characteristic of a centrally planned economy?
a.
The central government owns all land and capital.
b.
The central government makes all economic decisions.
c.
Each collective or factory sets its own goals.
d.
Each person is assigned a job.
 

 12. 

What is the struggle among various producers for the consumer’s business called?
a.
socialism
c.
incentive
b.
competition
d.
self-regulation
 

 13. 

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.
to make sure that the government can fulfill its needs for military personnel
d.
so that the government has some control over factor resources
 

 14. 

Which of the following is NOT a key economic question?
a.
What goods and services should be produced?
b.
How should these goods and services be produced?
c.
Who consumes these goods and services?
d.
How should it be ensured that goods and services are paid for?
 

 15. 

What does the process of specialization do for an economy?
a.
It eliminates unemployment.
c.
It fosters competition.
b.
It makes it more efficient.
d.
It makes it easier to control.
 

 16. 

What is one of the most important advantages of a free market?
a.
It can change rapidly.
c.
It is easy to regulate.
b.
It protects the less fortunate.
d.
It encourages growth.
 

 17. 

What incentive motivates a manufacturer to sell a product?
a.
making profits on sales
c.
pleasing the consumer
b.
putting others out of business
d.
popularity of the product
 

 18. 

Which of the following was a free market philosopher?
a.
Karl Marx
c.
Vladimir Lenin
b.
Adam Smith
d.
Friedrich Engels
 

 19. 

Which of the following is characteristic of a traditional economy?
a.
Communities tend to be fast-growing.
b.
They are usually based on light industrial production.
c.
They have a high standard of living.
d.
Children tend to have the same jobs as their parents did.
 

 20. 

What is the purpose of competition?
a.
to act as a regulating force in the marketplace
b.
to cause producers to attempt to put each other out of business
c.
to cause buyers to have to be careful about spending their money
d.
to act as a motivating force behind the free market
 

 21. 

Which of the following is a private organization that attempts to influence public officials to act or vote in ways that will benefit the group’s members?
a.
market research group
c.
public policy group
b.
free enterprise group
d.
interest group
 

 22. 

What is the most effective way for consumers to make their desires known to businesses?
a.
through mail and phone surveys
b.
by protesting and boycotting products
c.
by the purchases they make
d.
by hiring lobbyists and joining consumer groups
 

 23. 

Why does the government use its powers to make sure that businesses disclose so much information to the public?
a.
to make buyers more knowledgeable and safer
b.
to make it hard for businesses to make an excess profit
c.
to make it easier for consumers to save money
d.
to make it easy for businesses to have good information
 

 24. 

What is a positive externality?
a.
a way to generate trade that will benefit people who are from other countries
b.
an economic side effect that generates unexpected benefits
c.
a cash flow that will benefit both the government and the businesses who interact with it
d.
an extra payment to welfare recipients
 

 25. 

What does the Temporary Assistance for Needy Families program provide?
a.
retirement income for the elderly
b.
cash to the states to help run their welfare programs
c.
compensation to all who lose jobs
d.
cash to workers injured on the job
 

 26. 

What is the difference between a business cycle and the day-to-day ups and downs of the market?
a.
The day-to-day ups and downs of the market can be much more extreme than a business cycle.
b.
The day-to-day fluctuations are more likely to have an impact on people’s finances.
c.
A business cycle is usually more restricted, whereas market fluctuations are worldwide.
d.
A business cycle is a major, prolonged fluctuation rather than a day-to-day movement.
 

 27. 

What best describes the role of government in a free enterprise system?
a.
Control business activities.
b.
Decide what companies will be formed and then allow the managers to run them.
c.
Allow individuals to operate their businesses in ways they think will maximize their profits.
d.
Require companies to disclose information to consumers.
 

 28. 

What effect does new technology usually have on an economy?
a.
It makes the economy stronger and more efficient.
b.
It reduces the dependence of the economy on business.
c.
It slows an economy down for at least a while.
d.
It reduces the available jobs.
 

 29. 

Which of the following is a critical rule for determining whether something is a public good?
a.
The benefit to each individual who uses the facility is greater than the cost.
b.
The benefits of the facility are greater for the society than for the individuals using it.
c.
The total benefits to society are greater than the total cost.
d.
The total cost is small for each individual taxpayer.
 

 30. 

Which of the following is NOT an example of a public good?
a.
shopping malls
c.
highways
b.
national parks
d.
municipal libraries
 

 31. 

When a consumer is able and willing to buy a good or service, he or she creates which of the following?
a.
consumption
c.
elasticity
b.
demand
d.
allocation
 

 32. 

What determines the price and the quantity produced of most goods?
a.
the consumer’s perception of necessity
b.
the interaction of supply and demand
c.
the availability of substitutes for the goods
d.
the quality of the goods that are produced
 

 33. 

What are inferior goods?
a.
goods that are not well produced
b.
goods that no one wants to buy
c.
goods for which the demand rises when income falls
d.
goods for which the demand falls when income rises
 

 34. 

How is future price related to current demand?
a.
If the price is expected to rise, current demand will drop.
b.
If the price is expected to fall, current demand will rise.
c.
If the price is expected to rise, current demand will rise.
d.
Future price is not related to current demand.
 

 35. 

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
 

 36. 

What kind of system is the United States economy based on?
a.
cause and effect
c.
market
b.
centralized
d.
production
 

 37. 

Ceteris paribus, or “all other things held constant,” is an assumption that has which of the following effects on a demand schedule?
a.
It takes only prices into account.
b.
It considers the effects of all possible changes on demand.
c.
It is accurate no matter what changes occur.
d.
It is accurate only at one price level.
 

 38. 

What shows the quantities of products demanded at each price by all consumers in a market?
a.
an elasticity and consumption list
c.
a market pricing list
b.
a schedule of consumer prices
d.
a market demand schedule
 

 39. 

How did the existence of the baby boom generation change demand in the United States?
a.
Demand was raised for different goods with each age the baby boomers reached.
b.
After they reached the teenage years, the baby boomers were integrated into the society and no longer affected demand.
c.
People were poorer because they had so many children, so demand was lowered.
d.
The baby boomers did not raise demand until they became adults, when they had their own money to spend.
 

 40. 

What does it mean when the demand for a product is inelastic?
a.
People will not buy any of the product when the price goes up.
b.
A price increase does not have a significant impact on buying habits.
c.
Customers are sensitive to the price of the product.
d.
There are very few satisfactory substitutes for the product.
 

 41. 

Which of the following is an example of lower production costs brought about by the use of technology?
a.
the delivery costs of gasoline to the consumer by diesel trucks
b.
the use of e-mail to replace slower surface mail
c.
the making of breads and pastries in local shops rather than large bakeries
d.
the importing of fresh vegetables from South America rather than using canned vegetables
 

 42. 

What is the effect of import restrictions on prices?
a.
They cause prices to drop.
b.
They cause prices to rise.
c.
They often cause prices to rise steeply and then drop.
d.
They usually do not have any lasting effect on price.
 

 43. 

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.
sell the goods now but try to get the higher price for them
c.
store the goods until the price rises
d.
store the goods indefinitely regardless of when the price rises
 

 44. 

Which of the following is the best example of the law of supply?
a.
A sandwich shop increases the number of sandwiches they supply every day when the price is increased.
b.
A food producer increases the number of acres of wheat he grows to supply a milling company.
c.
A catering company buys a new dishwasher to make their work easier.
d.
A milling company builds a new factory to process flour to export.
 

 45. 

Which of the following is an example of a good with an inelastic supply?
a.
beanbags
c.
apples
b.
toothbrushes
d.
hats
 

 46. 

Which of the following receives government subsidies that are in place to protect the population rather than for economic reasons?
a.
a national car company in Indonesia
c.
tobacco growers in the United States
b.
small farmers in France
d.
national airlines in Western Europe
 

 47. 

When the selling price of a good goes up, what is the relationship to the quantity supplied?
a.
The cost of production goes down.
b.
The profit made on each item goes down.
c.
It becomes practical to produce more goods.
d.
There is no relationship between the two.
 

 48. 

What factor has the greatest influence on elasticity and inelasticity of supply?
a.
profit
c.
labor
b.
time
d.
financing
 

 49. 

Which of the following is a fixed cost for a store?
a.
short-term workers
c.
advertising
b.
rent
d.
inventory
 

 50. 

Which of these events would indicate a movement along a supply curve for batteries?
a.
Workers at a major battery factory go on strike and stop production.
b.
A new law requires battery manufacturers to spend more money on environmentally-sound trash disposal.
c.
Battery manufacturers raise the price of eight AA batteries from $3.50 to $3.95 a set.
d.
A new trade agreement enables stores to import foreign batteries.
 



 
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