Final Exam Cram Assignment - Webs
Final Exam Study Check for Understanding
1. 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. |
2. Why are all goods and services scarce?
|a. |Some goods cost more than others. |
|b. |All resources are scarce. |
|c. |Some things are needs and others are wants. |
|d. |Some people want to have more goods than others. |
3. What is the opportunity cost of a decision?
|a. |the series of alternative decisions that could have been made |
|b. |the best possible way the question could have been decided |
|c. |the different ways that a different person might have made the decision |
|d. |the most desirable alternative given up for the decision |
4. The physical capital used by a woodworker to make furniture would include
|a. |saws and drills. |c. |hard work and time. |
|b. |wood and glue. |d. |a workshop and money. |
5. What could cause a production possibilities curve to move down and to the left?
|a. |A nation loses land after being defeated in a war. |
|b. |A baby boom 20 years ago resulted in a large number of young adults in the population today. |
|c. |An increase in the use of computer technology speeds up production. |
|d. |Thousands of investors from overseas invest money in a nation’s economy. |
6. Human capital includes
|a. |the salary paid to an accountant. |
|b. |a taxi driver’s knowledge of the city streets. |
|c. |the machinery used to weave cloth. |
|d. |the equipment used by a doctor to cure a patient. |
7. 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 |
8. You are an entrepreneur with an innovative idea for a new business. In which kind of economy would you have the most opportunity to try to achieve success?
|a. |market economy |c. |traditional economy |
|b. |command economy |d. |socialist economy |
9. 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 |
10. Which of the following is NOT an example of a public good?
|a. |shopping malls |c. |highways |
|b. |national parks |d. |municipal libraries |
11. What is the term for the total value of all goods and services produced in a particular economy?
|a. |net worth |c. |gross domestic product |
|b. |open market value |d. |standard of living |
12. You read an article in a news magazine that explains how the economy expanded for several years, then went into a period of contraction. What was the subject of this article?
|a. |the gross domestic product |c. |the business cycle |
|b. |microeconomics |d. |voluntary exchange |
13. 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 |
14. What is a basic principle of the law of demand?
|a. |The higher the price, the more people will want the good. |
|b. |Everyone has a limited income that they will spend. |
|c. |When a good’s price is lower, people will buy more of it. |
|d. |Services are of interest in the same way that goods are. |
15. When prices rise, which of the following happens to income?
|a. |It goes down. |c. |It rises to meet prices. |
|b. |It buys less. |d. |It is used to buy different things. |
16. Which of the following is a fixed cost for a store?
|a. |short-term workers |c. |advertising |
|b. |rent |d. |inventory |
17. Which of the following events could cause the demand curve for sports magazines to shift to the right?
|a. |The publisher cuts the price of an issue from $3.95 to $2.50. |
|b. |The price of an issue of a popular computer game magazine rises from $2.95 to $3.95. |
|c. |Consumer incomes have increased. |
|d. |Consumer incomes, especially those of sports fans, have decreased. |
18. 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. |
19. If the supply of a good is inelastic,
|a. |producers will not change their quantity supplied by much if the market price doubles. |
|b. |a small increase in price will lead producers to sharply increase their quantity supplied. |
|c. |producers have diminishing marginal returns of labor. |
|d. |producers will increase their quantity supplied in response to sharp drops in the market price. |
20. 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 |
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21. According to Figure 6.2, in this market, a price of $1.00 would be
|a. |the equilibrium price. |c. |a price ceiling. |
|b. |a price floor. |d. |a subsidy. |
22. If the government set a price of $2.00 a slice, how many slices of pizza will be sold each day, according to Figure 6.2?
|a. |none |c. |200 |
|b. |150 |d. |250 |
23. The price of a slice of pizza is $2.50. At the end of the day, how many unsold slices of pizza will be left, according to Figure 6.2?
|a. |none |c. |100 |
|b. |50 |d. |200 |
24. 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 |
25. Rent control is a type of
|a. |price ceiling. |c. |rationing. |
|b. |price floor. |d. |surplus. |
26. How do economists define profits?
|a. |The ability of a company to get subsidies. |c. |The ability to generate revenues |
|b. |The financial gain made in transactions |d. |Surpluses produced by efficient firms. |
27. When government expenditures exceed revenues,
|a. |the government should raise interest rates to fight inflation. |
|b. |the government is forced to borrow money to finance the deficit. |
|c. |the government needs to increase imports to finance the surplus. |
|d. |the government should do nothing. |
28. In response to rising car traffic, demand for bicycles has increased. The new equilibrium point will show
|a. |more bicycles sold, but at a higher price. |
|b. |fewer bicycles sold, but at a higher price. |
|c. |more bicycles sold, but at a lower price. |
|d. |fewer bicycles sold, but at a higher price. |
29. 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 |
30. What is the definition of an oligopoly?
|a. |one firm producing 95 percent of the output |
|b. |two to four firms producing 70 percent to 80 percent of the output |
|c. |eight to ten firms producing 60 percent to 70 percent of the output |
|d. |eight to ten firms producing 90 percent of the output |
31. What is the definition of a monopoly?
|a. |A market structure dominated by 2-4 major firms. |
|b. |A market structure dominated by one large seller. |
|c. |A market structure where no firm controls price or market size. |
|d. |A market structure where the government supplies all buyers with the product. |
32. 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 |
33. 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 |
34. What are the money and other valuables that belong to a corporation or partnership called?
|a. |liabilities |c. |ownership |
|b. |assets |d. |liens |
35. Your running shoes were designed in the United States but assembled in Asia by a company called RunnerPro. RunnerPro is probably a
|a. |general partnership. |c. |multinational corporation. |
|b. |trade association. |d. |producer cooperative. |
36. What is collective bargaining?
|a. |union and company representatives meeting to negotiate a new labor contract |
|b. |an organization of workers representing several different occupations |
|c. |an agreement to allow everyone to be part of the labor negotiating process |
|d. |a situation in which the rights of labor have been set aside |
37. Why is improving worker productivity important?
|a. |the standard of living would improve |
|b. |American imports would increase |
|c. |collective bargaining would no longer be necessary |
|d. |budget deficits would fall |
38. How are wages for a particular job determined?
|a. |By advertisements in the newspaper or on line. |
|b. |By the equilibrium between the supply and demand for workers for that job. |
|c. |By the amount of inflation in the economy. |
|d. |By the Federal Wage and Hour Department. |
39. The equilibrium wage for doctors is high because the
|a. |demand for doctors equals the supply. |
|b. |supply of doctors is relatively low and the demand is relatively high. |
|c. |demand for doctors tends to be lower relative to supply. |
|d. |supply of doctors is relatively high and the demand is relatively low. |
40. The label in your jeans says that they were made in a Latin American country. This is probably because the jeans manufacturing company wanted to locate its plant
|a. |closer to raw materials. |
|b. |where labor was plentiful and therefore cheaper. |
|c. |in a warmer climate. |
|d. |in a region with less technology. |
41. Which of the following is an example of a barter system?
|a. |Instead of paying cash for a computer, you use a credit card. |
|b. |Instead of paying the full amount for a car, you pay 10 percent in cash and pay for the rest in monthly |
| |installments. |
|c. |Instead of paying rent, you clean the house for the owner. |
|d. |Instead of paying for a purchase in Mexico in pesos, you use dollars from the United States. |
42. 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 |
43. When you invest in a mutual fund,
|a. |your money is invested in a variety of insurance policies. |
|b. |you have easier access to your money than in a savings account. |
|c. |your money is invested in a variety of stocks and bonds. |
|d. |you are guaranteed a fixed return on your investment. |
44. A stock that reinvests its earnings in the business instead of paying regular dividends is called
|a. |an income stock. |c. |preferred stock. |
|b. |common stock. |d. |a growth stock. |
45. An example of a durable good would be
|a. |a car. |c. |a box of cereal. |
|b. |a paperback book. |d. |a pack of baseball cards. |
46. The lowest point in an economic contraction is called
|a. |a peak. |c. |a recession. |
|b. |a trough. |d. |a depression. |
47. GDP expressed in constant, or unchanging, prices is called
|a. |real GDP. |c. |nominal GDP. |
|b. |price level. |d. |net national product. |
48. In a typical business cycle, what stage immediately follows a peak?
|a. |contraction |c. |trough |
|b. |expansion |d. |growth |
49. When Alison, a college math professor, leaves her job at a small rural college and starts looking for a job at large urban university, she is
|a. |frictionally unemployed. |c. |cyclically unemployed. |
|b. |structurally unemployed. |d. |a discouraged worker. |
50. Which of the following is most likely to be worried about high inflation?
|a. |A unionized factory worker |c. |a doctor with a suburban practice |
|b. |a shopkeeper |d. |a retired couple on a fixed income |
51. If Bob loses his job at the GM plant because car manufacturing is slow due to a downturn in the economy, you can conclude that he is
|a. |cyclically unemployed. |c. |structurally unemployed. |
|b. |seasonally unemployed. |d. |frictionally unemployed. |
52. Your store receipt says that you paid a 7.5% sales tax on sports equipment. This sales tax is an example of a
|a. |proportional tax. |c. |regressive tax. |
|b. |progressive tax. |d. |income tax. |
53. Your pay stub deducts money for FICA. What does this mean?
|a. |Money is being withheld to fund Social Security and Medicare. |
|b. |Money is being withheld for federal, state, and city taxes. |
|c. |Money is being withheld for personal exemptions and deductions. |
|d. |Money is being withheld for excise and estate taxes. |
54. What happens to the money that your employer withholds from your paycheck?
|a. |Your employer holds it until you leave your job and then returns it to you. |
|b. |Your employer returns to you at the end of the year so that you can pay your federal taxes. |
|c. |Your employer holds it in case you damage his property. |
|d. |Your employer sends it to the federal government to help pay your income tax bill. |
55. An example of expansionary fiscal policy would be
|a. |cutting taxes. |
|b. |cutting government spending. |
|c. |cutting production of consumer goods. |
|d. |cutting prices of consumer goods. |
56. An example of contractionary fiscal policy would be
|a. |cutting taxes. |
|b. |decreasing government spending. |
|c. |increasing production of consumer goods. |
|d. |expanding the government’s role in regulating private industry. |
57. The purpose of expansionary fiscal policy is to
|a. |increase output. |
|b. |prevent hyperinflation. |
|c. |slow the growth of the GDP. |
|d. |increase the separation between government and private industry. |
58. What is the cost of money?
|a. |the smoothing out of fluctuations in the market |
|b. |the economy’s use of open market operations |
|c. |the price of the interest rate |
|d. |the bank’s use of money creation |
59. What does the Consumer Price Index measure?
|a. |the willingness and ability of consumers to purchase goods and services |
|b. |the economy’s total output (GDP) |
|c. |the price of money, or the interest rate |
|d. |the rate of inflation |
60. How could the Federal Reserve encourage banks to lend out more of their reserves?
|a. |reduce the discount rate |c. |increase the prime rate |
|b. |raise the required amount of reserve |d. |reduce the money supply |
61. What type of policy does the Federal Reserve use to counteract an expansion that is causing inflation and high interest rates?
|a. |fiscal policy |c. |easy money policy |
|b. |tight money policy |d. |policy lags |
62. What type of policy does the Fed use to counteract a contraction?
|a. |fiscal policy |c. |easy money policy |
|b. |tight money policy |d. |policy lags |
63. What is one possible short-term effect of an easy money policy?
|a. |decreasing inflation |c. |a contracting money supply |
|b. |higher interest rates |d. |increased investment spending |
64. Which of these situations is most likely to cause the Fed to introduce a tight money supply?
|a. |A recession has reduced aggregate demand and increased unemployment. |
|b. |The federal government passes a new budget with a large deficit. |
|c. |The economy is prosperous with relatively low inflation and low unemployment. |
|d. |The economy is expanding quickly and inflation is a concern. |
65. Which of the following instruments is NOT used by the Federal Reserve to change the money supply?
|a. |the discount rate |c. |the federal tax code |
|b. |the required reserve ratio |d. |open market operations |
66. When a nation imports more than it exports, economists say it has which of the following?
|a. |a trade surplus |c. |a trade deficit |
|b. |a balance of trade |d. |a national difference |
67. What happens when a nation’s currency depreciates?
|a. |Its products become more expensive to other nations. |
|b. |Its trade increases. |
|c. |Its products become cheaper to other nations. |
|d. |Its trade decreases. |
68. Ecuador has a comparative advantage in the production of bananas over the United States. Which of the following statements is true?
|a. |Ecuador also has an absolute advantage in the production of bananas. |
|b. |The United States has an absolute advantage in the production of bananas. |
|c. |Ecuador can produce bananas at a lower opportunity cost than the United States. |
|d. |The United States cannot produce bananas. |
69. The United States placed a limit on the number of cars that can be brought into the country for sale. This is an example of
|a. |an import quota. |c. |a customs duty. |
|b. |a tariff. |d. |a voluntary export restraint. |
70. Brain drain is
|a. |the tendency of workers in less developed countries to reject new technologies. |
|b. |the tendency of educated people to leave less developed countries build careers in developed countries. |
|c. |the impact of poverty on the productivity of workers in less developed countries. |
|d. |the impact of malnutrition on education and productivity in less developed countries. |
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