ECON FINAL B

Name:

ECON FINAL B

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

What happens when wages are set above the equilibrium level by law?

a.	Firms tend to try to break the law and hire people at the equilibrium level.
b.	Firms employ more workers than they would at the equilibrium wage.
c.	Firms employ fewer workers than they would at the equilibrium wage.
d.	Firms hire more workers but for fewer hours than they would at the equilibrium wage.

On which kinds of goods do governments generally place price ceilings?

a.	those that are cheap but could become more expensive without the ceiling
b.	those that are not necessary but have become customary
c.	those that are essential and cheap
d.	those that are essential but too expensive for some consumers

When buyers will purchase exactly as much as sellers are willing to sell, what is the condition that has been reached?

a.	supply and demand	c.	equilibrium
b.	excess demand	d.	price floor

Which of the following is an example of a good whose price goes down because of improvements in technology?

a.	computer printers	c.	hard-bound books
b.	running shoes	d.	typewriters

What happens when the supply of a nonperishable good is greater than the consumer wants to buy?

a.	the good is discarded
b.	the good becomes a luxury and the price rises
c.	either the good remains unsold or the price drops
d.	either the good is saved for later sale or the price is raised

Why did Communist governments use a command economic system for many years?

a.	as a way to avoid the expense and difficulties of a free market
b.	in an attempt to create a society in which everyone was equal
c.	to limit the costs of production of many goods
d.	as a method of keeping the consumer from getting what he or she wanted

Why did the U.S. government use rationing for some foods and consumer goods during World War II?

a.	to guarantee each civilian a minimum standard of living in wartime
b.	to keep sellers from raising prices on necessary goods
c.	because the English government had also decided on rationing
d.	to earn more money to support the military

Which of the following is a situation that makes the market behave inefficiently?

a.	when consumers do not have enough information to make good choices
b.	when producers have the power to find out exactly what to produce
c.	when both consumers and producers are fully informed about a product
d.	when the market is in perfect competition and prices are high

What happens to a market in equilibrium when there is an increase in supply?

a.	Excess supply means that producers will make less of the good.
b.	Quantity demanded will exceed quantity supplied, so the price will drop.
c.	Quantity supplied will exceed quantity demanded, so the price will drop.
d.	Undersupply means that the good will become very expensive.

10.

What is it called when the government uses some tool other than money to allocate goods?

a.	supply management	c.	disequilibrium
b.	rationing	d.	resource allocation

11.

When is a buyer NOT willing to spend a lot of time and energy researching the market?

a.	when buying a large quantity of goods
b.	when there are many identical products available
c.	when the savings to be made are small
d.	when prices vary but quality is the same

12.

What kind of market runs most efficiently when one large firm supplies all of the output?

a.	a natural monopoly	c.	perfect competition
b.	a network	d.	imperfect competition

13.

What is one kind of monopoly that the U.S. government generally permits?

a.	the telephone company	c.	low-price gasoline
b.	professional sports leagues	d.	certain kinds of medications

14.

How does a company arrange to sell its products to people who are unwilling to pay the top price for them?

a.	by allowing rebates to some preferred customers who buy a lot of goods
b.	by charging each customer the maximum amount they are willing to pay
c.	by charging different prices according to the group to which the buyer belongs
d.	by changing the product and selling a lesser one to people who are unwilling to pay for the top product

15.

What is monopolistic competition?

a.	one company selling the identical product under different names
b.	one company selling several different products under different names
c.	a very few companies selling identical products
d.	many companies selling similar but not identical products

16.

Which of the following is NOT a form of nonprice competition?

a.	location	c.	advertising
b.	physical characteristics	d.	discounts

17.

What happens to a monopolistically competitive firm that begins to charge an excessive price for its product?

a.	The firm will go out of business.
b.	Consumers will substitute a rival’s product.
c.	Consumers will boycott the product.
d.	The government will regulate the price.

18.

When the government deregulates a product or service, what happens to it?

a.	The product or service is available to more people.
b.	The product or service becomes cheaper.
c.	Some government regulations over the industry are eliminated.
d.	Government control over the industry is stopped.

19.

Cartels are difficult to operate for which of the following reasons?

a.	They work only if members keep to their agreed output.
b.	They are illegal worldwide.
c.	Firms in a cartel are likely to lose money.
d.	The products are perfectly competitive.

20.

Why does the government sometimes give monopoly power to a company by issuing a patent?

a.	The government does not want competition for the product.
b.	The company makes a product better than anyone else’s.
c.	The company pays the government for the patent.
d.	The company can then profit from their research without competition.

21.

Which of the following is an advantage of a sole proprietorship?

a.	No one is responsible if it fails.
b.	It is the least-regulated form of business organization.
c.	It is an easy way to make a lot of money.
d.	It is easy to get financing to start one.

22.

What percentage of businesses are sole proprietorships?

a.	25 percent	c.	60 percent
b.	40 percent	d.	75 percent

23.

If a general partnership fails, who is responsible for the debts?

a.	anyone who works for the partnership
b.	all of the partners
c.	only the most senior general partner
d.	no one

24.

A joining of two or more businesses that are involved in different stages of producing the same good or service is called which of the following?

a.	vertical merger	c.	cooperative
b.	horizontal merger	d.	conglomeration

25.

Why is it easier for a partnership to borrow money and to hold good employees than it is for a sole proprietorship to do so?

a.	The more limited access to a partner’s personal funds make the business more careful.
b.	The large number of partners makes it more likely that the business will be a success.
c.	The larger number of partners means that people are easier to get along with.
d.	A partnership has more personal stability and access to more money.

26.

What is the major difference between a corporation and other kinds of businesses?

a.	A corporation is much larger than other kinds of businesses.
b.	A corporation is not responsible for its debts if it fails.
c.	A corporation has a separate entity apart from that of the owners and workers.
d.	A corporation has officers who are responsible for the business.

27.

What are royalties?

a.	fees paid to law firms and accountants
b.	a percentage of a franchise’s earnings paid to the parent company
c.	fees paid to celebrities for using their names
d.	a percentage of profits paid to the government

28.

Which of the following represents the percentage of all U.S. businesses that are corporations, and the percentage of all goods that those corporations sell?

a.	10 percent of businesses; 50 percent of goods sold
b.	20 percent of businesses; 90 percent of goods sold
c.	50 percent of businesses; 75 percent of goods sold
d.	20 percent of businesses; 50 percent of goods sold

29.

What is a fringe benefit?

a.	a cash payment for casual work
b.	a business other than sales or marketing
c.	a payment other than wages or salaries
d.	an accounting term meaning profits

30.

Which of the following is a disadvantage of a sole proprietorship?

a.	lack of permanence	c.	legal constraints
b.	high taxes	d.	difficult to start up

31.

Which of the following is an example of a barter system?

a.	Instead of paying rent, you clean the house for the owner.
b.	Instead of paying cash for a computer, you use a credit card.
c.	Instead of paying the full amount for a car, you pay 10 percent in cash and pay for the rest in monthly installments.
d.	Instead of paying for a purchase in Mexico in pesos, you use dollars from the United States.

32.

Which of the following is an example of money as a unit of account?

a.	purchasing a toy for $8.99
b.	lending a friend $25.00
c.	opening a savings account at a bank
d.	checking the price of a camera at several stores before buying it at the lowest price

33.

Which of the following is the main disadvantage of using shells as money instead of coins?

a.	durability	c.	uniformity
b.	portability	d.	divisibility

34.

Which of the following is an example of representative money?

a.	a fur coat	c.	gold earrings
b.	diamonds	d.	an IOU note

35.

What is the purpose of the Federal Deposit Insurance Corporation (FDIC)?

a.	to make sure that banks do not fail
b.	to make sure that customers do not lose money if a bank fails
c.	to make sure that banks charge a fair amount of interest on loans
d.	to make sure that the government has enough gold to cover its expenses

36.

What did the Federalists believe about banking?

a.	They believed that the banking system already in existence was sufficient.
b.	They believed an international banking system would be best.
c.	They believed that a centralized banking system was necessary.
d.	They believed that state governments should own and run the nation’s banks.

37.

What occurred during the Free Banking Era?

a.	Currency varied widely from state to state.
b.	Repaying of loans was not closely monitored.
c.	The Second Bank of the United States was established.
d.	The dollar bill was introduced.

38.

What were “greenbacks”?

a.	paper currency used by the Confederacy during the Civil War
b.	privately issued currency used by the Union during the Civil War
c.	copper coins used by the Confederacy during the Civil War
d.	commodity money used by the Union during the Civil War

39.

What is a mortgage used to purchase?

a.	car	c.	college tuition
b.	real estate	d.	business expenses

40.

Which of the following is NOT an example of a liquid asset?

a.	cash	c.	a certificate of deposit
b.	travelers’ checks	d.	a checking account

41.

All of the following are examples of financial intermediaries EXCEPT

a.	a credit union.	c.	a finance company.
b.	a stock certificate.	d.	a life insurance company.

42.

The main advantage of diversification as an investment policy is that it

a.	reduces risk to investors.
b.	increases investors’ access to their money.
c.	offsets the effects of inflation on investments.
d.	guarantees a fixed rate of return on an investment.

43.

An accurate statement about bonds would be that

a.	they are insured by the FDIC.
b.	they are generally held for 3 or 6 months.
c.	they are usually a low-risk investment.
d.	they entitle the holder to a share of ownership in a corporation.

44.

The interest rate the bond issuer pays to the bondholder is called the

a.	coupon rate.	c.	discount rate.
b.	maturity rate.	d.	value rate.

45.

Savings bonds differ from most other bonds in that

a.	they provide a higher rate of return.
b.	they are held for a shorter time.
c.	the buyer does not receive periodic interest payments in exchange for a lower purchase price.
d.	they are issued in fairly large denominations in exchange for a lower purchase price.

46.

To finance the building of a new police station, a local government is most likely to issue a

a.	junk bond.	c.	municipal bond.
b.	treasury bond.	d.	money market bond.

47.

Investing in a money market mutual fund is a higher risk than investing in a certificate of deposit because unlike CDs, money market funds

a.	are not insured by the FDIC.
b.	are not protected by the Securities and Exchange Commission.
c.	do not earn a fixed interest rate.
d.	must be held for a preset amount of time.

48.

An example of equity is

a.	a treasury bond.	c.	a treasury bill.
b.	a share of stock.	d.	a long-term certificate of deposit.

49.

An example of blue chip stock might be

a.	a new start-up firm.
b.	a foreign-owned company that operates in another country.
c.	an established company that is traded over the Internet.
d.	a large, well-known company traded on the NYSE.

50.

The Dow Jones Industrial Average consists of

a.	500 different stocks that change annually.
b.	30 stocks that are considered representative of the market as a whole.
c.	the top-selling 250 stocks over a 10-year period.
d.	60 stocks selected from the NYSE, the NASDAQ-AMEX, and the OTC market.