Multiple Choice
Identify the choice that best completes the
statement or answers the question.
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1.
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Which of the following is characteristic of a traditional economy?
a. | Children tend to have the same jobs as their parents did. | b. | Communities tend to
be fast-growing. | c. | They have a high standard of living. | d. | They are usually based on light industrial
production. |
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2.
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The purpose of a production possibilities graph is to
a. | make it possible to increase an economy’s output. | b. | show alternative
ways to use an economy’s resources. | c. | enable a country to mobilize to win a
war. | d. | keep an economy from having nonproductive workers. |
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3.
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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. | demand | c. | allocation | b. | elasticity | d. | consumption |
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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 leave early in the morning or late in the day for a
trip. | b. | whether to grow beans or corn on a large farm. | c. | whether or not to go
on a vacation. | d. | whether or not to hire 100 new workers. |
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5.
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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 make sure that
the government can fulfill its needs for military personnel | c. | to ensure that the
government has the freedom to tax as necessary | d. | so that the government has some control over
factor resources |
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6.
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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. | interest group | b. | free enterprise group | d. | public policy
group |
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7.
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What incentive motivates a manufacturer to sell a product?
a. | putting others out of business | c. | popularity of the
product | b. | making profits on sales | d. | pleasing the consumer |
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8.
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Which of the following is NOT characteristic of a centrally planned
economy?
a. | Each person is assigned a job. | b. | The central government owns all land and
capital. | c. | Each collective or factory sets its own goals. | d. | The central
government makes all economic decisions. |
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9.
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Any resources that are made by humans and used to create other goods and
services are called
a. | production. | c. | services. | b. | labor. | d. | capital. |
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10.
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What does the Temporary Assistance for Needy Families program provide?
a. | cash to the states to help run their welfare programs | b. | retirement income
for the elderly | c. | cash to workers injured on the job | d. | compensation to all who lose
jobs |
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11.
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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. | store the goods until the price rises | c. | sell the goods now but try to get the higher
price for them | d. | store the goods indefinitely regardless of when the price
rises |
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12.
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Production possibilities frontiers curve when they are charted on a graph
because they show
a. | the technological level of the economy’s productivity. | b. | the underutilization
of resources. | c. | the increasing costs resulting in increasingly less output. | d. | the maximum output
of goods and services. |
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13.
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Which of the following is NOT a key economic question?
a. | Who consumes these goods and services? | b. | How should it be ensured that goods and
services are paid for? | c. | How should these goods and services be
produced? | d. | What goods and services should be produced? |
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14.
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The law of increasing costs means that when an economy increases the production
of one item
a. | the production costs will increase also. | b. | the actual cost of
making the item goes down. | c. | the opportunity cost goes
up. | d. | the actual cost goes up but the opportunity cost goes
down. |
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15.
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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. | national airlines in Western Europe | d. | small farmers in
France |
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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 protects the less fortunate. | b. | It is easy to
regulate. | d. | It encourages
growth. |
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17.
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The opportunity cost of a decision can be examined by using a
a. | factors of production chart. | c. | production possibilities
graph. | b. | global trade-off grid. | d. | graph of increasing costs. |
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18.
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What is the purpose of competition?
a. | to cause buyers to have to be careful about spending their money | b. | to act as a
regulating force in the marketplace | c. | to cause producers to attempt to put each other
out of business | d. | to act as a motivating force behind the free market |
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19.
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An efficient economy is one that
a. | makes the best use of all its goods and services. | b. | has very few people
who do not work for a living. | c. | makes the least costly use of its
resources. | d. | uses its resources to make the most goods and
services. |
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20.
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The resources used to make all goods and services are the
a. | opportunity costs. | c. | production possibilities. | b. | factors of
production. | d. | production
trade-offs. |
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21.
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Which of the following is an example of a good with an inelastic supply?
a. | beanbags | c. | toothbrushes | b. | apples | d. | hats |
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22.
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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 falls when income rises | d. | goods for which the
demand rises when income falls |
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23.
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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
available jobs. | c. | It reduces the dependence of the economy on business. | d. | It slows an economy
down for at least a while. |
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24.
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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 fluctuations are more likely to have an impact on people’s
finances. | b. | A business cycle is usually more restricted, whereas market fluctuations are
worldwide. | c. | The day-to-day ups and downs of the market can be much more extreme than a business
cycle. | d. | A business cycle is a major, prolonged fluctuation rather than a day-to-day
movement. |
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25.
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What is a positive externality?
a. | an economic side effect that generates unexpected benefits | b. | a cash flow that
will benefit both the government and the businesses who interact with it | c. | a way to generate
trade that will benefit people who are from other countries | d. | an extra payment to
welfare recipients |
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26.
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Which of the following was a free market philosopher?
a. | Adam Smith | c. | Vladimir Lenin | b. | Friedrich Engels | d. | Karl Marx |
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27.
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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. | The baby boomers did not raise demand until they became adults, when they had their
own money to spend. | c. | People were poorer because they had so many
children, so demand was lowered. | d. | After they reached the teenage years, the baby
boomers were integrated into the society and no longer affected
demand. |
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28.
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What kind of system is the United States economy based on?
a. | centralized | c. | production | b. | cause and effect | d. | market |
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29.
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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. | decision at the margin. | b. | basic economic
decision. | d. | global
trade-off. |
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30.
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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 is accurate no matter what changes occur. | b. | It is accurate only
at one price level. | c. | It takes only prices into
account. | d. | It considers the effects of all possible changes on
demand. |
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31.
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What shows the quantities of products demanded at each price by all consumers in
a market?
a. | a schedule of consumer prices | c. | a market demand
schedule | b. | a market pricing list | d. | an elasticity and consumption list |
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32.
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Which of the following is an example of lower production costs brought about by
the use of technology?
a. | the importing of fresh vegetables from South America rather than using canned
vegetables | b. | the making of breads and pastries in local shops rather than large
bakeries | c. | the use of e-mail to replace slower surface mail | d. | the delivery costs
of gasoline to the consumer by diesel trucks |
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33.
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Which of the following is NOT an example of a public good?
a. | national parks | c. | municipal libraries | b. | highways | d. | shopping malls |
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34.
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What determines how a change in prices will affect total revenue for a
company?
a. | values of elasticity | c. | the consumers’ incomes | b. | elasticity of
demand | d. | the company’s
pricing policy |
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35.
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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 it easier for consumers to save money | b. | to make it hard for
businesses to make an excess profit | c. | to make buyers more knowledgeable and
safer | d. | to make it easy for businesses to have good
information |
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36.
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Which of the following is a fixed cost for a store?
a. | rent | c. | short-term workers | b. | advertising | d. | inventory |
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37.
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An example of a shortage is limited amounts of
a. | labor available because the workers have other jobs. | b. | food available
because few people want to buy it. | c. | food available because the trucks carrying it
are on strike. | d. | water available for irrigating a crop because it is used for other
crops. |
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38.
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Which of the following is a critical rule for determining whether something is a
public good?
a. | The benefits of the facility are greater for the society than for the individuals
using it. | b. | The total cost is small for each individual taxpayer. | c. | The total benefits
to society are greater than the total cost. | d. | The benefit to each individual who uses the
facility is greater than the cost. |
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39.
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Which of the following is the best example of the law of supply?
a. | A food producer increases the number of acres of wheat he grows to supply a milling
company. | b. | A milling company builds a new factory to process flour to
export. | c. | A sandwich shop increases the number of sandwiches they supply every day when the
price is increased. | d. | A catering company buys a new dishwasher to
make their work easier. |
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40.
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What does the process of specialization do for an economy?
a. | It makes it easier to control. | c. | It makes it more
efficient. | b. | It eliminates unemployment. | d. | It fosters competition. |
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41.
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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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42.
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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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43.
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What is the struggle among various producers for the consumer’s business
called?
a. | incentive | c. | self-regulation | b. | socialism | d. | competition |
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44.
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What determines the price and the quantity produced of most goods?
a. | the quality of the goods that are produced | b. | the consumer’s
perception of necessity | c. | the availability of substitutes for the
goods | d. | the interaction of supply and demand |
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45.
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What best describes the role of government in a free enterprise system?
a. | Control business activities. | b. | Require companies to disclose information to
consumers. | c. | Allow individuals to operate their businesses in ways they think will maximize their
profits. | d. | Decide what companies will be formed and then allow the managers to run
them. |
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46.
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What is the most effective way for consumers to make their desires known to
businesses?
a. | by protesting and boycotting products | b. | through mail and phone
surveys | c. | by hiring lobbyists and joining consumer groups | d. | by the purchases
they make |
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47.
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What does it mean when the demand for a product is inelastic?
a. | A price increase does not have a significant impact on buying
habits. | b. | There are very few satisfactory substitutes for the product. | c. | Customers are
sensitive to the price of the product. | d. | People will not buy any of the product when the
price goes up. |
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48.
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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. | Battery manufacturers raise the price of eight AA batteries from $3.50 to $3.95 a
set. | c. | A new law requires battery manufacturers to spend more money on environmentally-sound
trash disposal. | d. | A new trade agreement enables stores to import foreign
batteries. |
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49.
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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. | There is no relationship between the
two. | c. | The profit made on each item goes down. | d. | It becomes practical
to produce more goods. |
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50.
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What is the effect of import restrictions on prices?
a. | They often cause prices to rise steeply and then drop. | b. | They usually do not
have any lasting effect on price. | c. | They cause prices to drop. | d. | They cause prices to
rise. |
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