Multiple Choice
Identify the choice that best completes the
statement or answers the question.
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1.
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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. |
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2.
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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. |
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3.
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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. |
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4.
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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. |
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5.
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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. |
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6.
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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. |
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7.
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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. |
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8.
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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. |
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9.
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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. |
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10.
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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. |
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11.
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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. |
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12.
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What is the struggle among various producers for the consumer’s business
called?
a. | socialism | c. | incentive | b. | competition | d. | self-regulation |
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13.
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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 |
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14.
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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? |
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15.
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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. |
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16.
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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. |
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17.
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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 |
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18.
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Which of the following was a free market philosopher?
a. | Karl Marx | c. | Vladimir Lenin | b. | Adam Smith | d. | Friedrich
Engels |
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19.
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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. |
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20.
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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 |
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21.
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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 |
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22.
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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 |
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23.
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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 |
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24.
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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 |
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25.
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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 |
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26.
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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. |
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27.
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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. |
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28.
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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. |
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29.
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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. |
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30.
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Which of the following is NOT an example of a public good?
a. | shopping malls | c. | highways | b. | national parks | d. | municipal
libraries |
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31.
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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 |
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32.
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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 |
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33.
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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 |
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34.
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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. |
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35.
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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 |
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36.
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What kind of system is the United States economy based on?
a. | cause and effect | c. | market | b. | centralized | d. | production |
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37.
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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. |
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38.
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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 |
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39.
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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. |
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40.
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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. |
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41.
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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 |
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42.
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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. |
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43.
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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 |
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44.
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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. |
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45.
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Which of the following is an example of a good with an inelastic supply?
a. | beanbags | c. | apples | b. | toothbrushes | d. | hats |
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46.
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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 |
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47.
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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. |
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48.
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What factor has the greatest influence on elasticity and inelasticity of
supply?
a. | profit | c. | labor | b. | time | d. | financing |
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49.
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Which of the following is a fixed cost for a store?
a. | short-term workers | c. | advertising | b. | rent | d. | inventory |
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50.
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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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