Economics Final Exam



Economics EOCT Practice Test #3

GPS EF 1

1. Which sentence best describes the economic problem of scarcity?

A. It exists only in poor, underdeveloped nations.

B. It exists only after a natural disaster.

C. It existed only in the past when there was no technology

D. It is the basic economic problem facing all societies

2. A person decides to spend $20 on a ticket to a football game instead of buying a warm jacket for $20. What is the opportunity cost of this decision?

A. $20

B. the benefit of owning a warm jacket

C. the enjoyment of the football game

D. the opportunity to learn about football

3. Jamal started a pet sitting business. He found customers and hired workers

for the business. What productive resource does Jamal represent?

A. entrepreneurship

B. land

C. labor

D. capital

GPS EF 2 and 3

4. Division of Labor is

A. a kind of specialization that increases productivity

B. a kind of voluntary exchange of products

C. a kind of marginal cost that reduces productivity

D. a kind of labor that has no marginal costs

5. What is a rational economic decision?

A. One in which there are no opportunity costs

B. One in which benefits are unknown, but costs are low

C. One in which marginal benefits are greater than marginal costs

D. One in which marginal costs are greater than marginal benefits.

6. Which letter represents an inefficient use of resources?

A.

B. D

E C.

A. Letter C

B. Letter D

C. Letter E

D. Letter B

GPS EF 4

7. The main reason that modern command economies have failed is

A. Consumers demanded more freedom in the marketplace

B. Housing prices were too high and luxury goods were unavailable

C. Government decision-making led to shortages and inefficiency

D. Governments favored public works over consumer goods

8. A market economy depends on

A. private ownership and control of resources

B. government ownership and control of resources

C. an equal distribution of wealth

D. limited competition and profits

9. One weakness of the market system is that

A. they allow producers very little freedom

B. they cannot guarantee security and fairness

C. they do not respond quickly to change

D. they provide very few choices for consumers.

GPS EF5

10. Which of the following is an example of a market failure?

A. a meat processing plant that earns high profits while polluting neighbors’ water supply

B. an airline that goes bankrupt because of high prices and poor service

C. a consumer who goes into debt by using credit cards

D. a cable TV company that fails because its programs do not attract sponsors

11. Which type of government intervention promotes market competition?

A. transfer payments

B. antitrust laws

C. public libraries

D. price regulation

12. Which sentence BEST describes the effects of regulation and deregulation?

A. Regulation benefits consumers, while deregulation benefits producers.

B. Regulation benefits producers, while deregulation benefits consumers.

C. Regulation benefits both consumers and producers; deregulation hurts both.

D. Both regulation and deregulation have benefits and costs to producers and consumers.

GPS EF 6

13. To achieve economic growth, a society must

A. develop new resources

B. use resources less efficiently

C. increase taxes

D. decrease its labor force

14. Pablo starts a taxi cab business. He rents a garage, buys three cabs, hires three drivers, and advertises in the local newspaper. Which of his actions represent a physical capital investment?

A. renting a garage

B. buying three taxi cabs

C. hiring three drivers

D. advertising in the newspaper

15. A country is currently investing in new technology for all of its businesses. What change should occur in the businesses’ production possibilities curve?

A. the curve should shift outwards to show an increase in productivity

B. the curve will not change because resources are the same

C. the curve will shift inwards due to less efficiency

D. the curve will not change

GPS EM1

16. Which of the following is a microeconomic decision?

A. whether the government should increase minimum wage

B. whether the government should increase taxes

C. whether a computer programmer should accept a certain job offer

D. whether American businesses will profit from free trade

17. If the U.S. Government buys airplanes from an American company, the government is participating in the

A. product market

B. factor market

C. public market

D. stock market

18. If Joe goes for a job interview he is participating in the

A. product market

B. factor market

C. public market

D. stock market

GPS EM 2 and 3

19. The equilibrium price of a product is determined by the interaction of

A. competing producers

B. the government and producers

C. supply and demand

D. price ceilings and floors

20. The minimum wage is an example of

A. a price floor that creates a shortage

B. a price floor that creates a surplus

C. a price ceiling that creates a shortage

D. a price ceiling that creates a surplus

21.

Of the following, which situation would cause the supply curve to shift from S1 to S2 for pine trees?

A. Costs for cutting down pine trees increases due to government regulation

B. Good weather leads to an increase in the number of pine trees

C. Government increases the limit for the number pine trees that can be cut

D. Less people desire pine as a building material

GPS EM 4

22. Ramon decided to open his own software business as a sole proprietor. He borrowed money to buy computers and office equipment, and hired one assistant. What is a DISADVANTAGE of Ramon’s type of business organization?

A. ease of organization

B. flexibility

C. limited liability

D. unlimited liability

23. Which of the following is NOT true about a shareholder in a corporation?

A. A shareholder earns profits called dividends

B. A shareholder is liable for a corporation’s debts.

C. A shareholder may sell his or her stock.

D. A shareholder elects a board of directors.

24. Your local electric company operates in a market structure known as a(n)

A. monopoly

B. monopolistic competition

C. oligopoly

D. perfect competition

25. You see three TV commercials for different shampoos, each of which promises a special benefit that others lack. Which market structure do the shampoo companies demonstrate?

A. perfect competition

B. monopolistic competition

C. oligopoly

D. monopoly

EMA 1

26. The government begins funding training programs to teach computer repair and design to unemployed adults. Which kind of unemployment would such training help MOST?

A. frictional

B. seasonal

C. structural

D. cyclical

27. If aggregate demand and real GDP are beginning to fall and the unemployment rate is beginning to rise, what conclusion can you draw?

A. The economy is in an expansion phase.

B. The economy is facing a slowdown.

C. The economy is in recovery.

D. Aggregate supply is increasing.

28. In a year when the federal government spends more money than it collects in taxes, the immediate result is

A. an increase in the GDP

B. a decrease in the GDP

C. a federal budget deficit

D. a federal budget surplus

29. The consumer price index is a measure of

A. gross domestic product

B. aggregate supply

C. aggregate demand

D. inflation

30. _____________ prices are adjusted for inflation, whereas __________________ prices are not.

A. nominal; real

B. real; nominal

C. adjusted; unadjusted

D. scaled; functional

EPF3

31. The BEST example of a progressive tax in the United States is

A. personal income taxes

B. sales tax

C. federal excise taxes

D. Social Security taxes

32. The BEST example of a regressive tax in the United States is

A. personal income taxes

B. sales tax

C. luxury taxes

D. property taxes

EMA 2 and 3

33. Which of the following is responsible for the monetary policy of the U.S.?

A. Congress

B. The president

C. The Senate

D. The Federal Reserve System

34. When the Federal Reserve sells government securities, or bonds, on the open market, what affect does this action have on the economy?

A. increases the money supply; increases consumer demand

B. increases money supply; reduces inflation risks

C. decreases the money supply; increases consumer demand

D. decreases money supply; reduces inflation risks

35. If GDP is decreasing and the unemployment rate is increasing, which fiscal policy would the government MOST likely use?

A. increase taxes

B. decrease taxes

C. increase bank reserves rates

D. decrease spending

36. If the inflation rate is rising too fast, which fiscal policy would make MOST sense?

A. increase taxes

B. decrease taxes

C. increase spending

D. decrease bank reserves

EIN 1

37. In the year 2000, nation A sold exports worth $5 million and bought imports worth $8 million. Which of the following is DEFINITELY true about nation A?

A. It had a positive balance of payments.

B. It had a negative balance of payments.

C. It had a trade surplus

D. It had a trade deficit

38. Country A will probably not purchase corn from Country B if…

A. Country B has the comparative advantage in corn production.

B. Country A has the comparative advantage in corn production.

C. Country A has the absolute advantage in corn production.

D. Country B has the absolute advantage in corn production.

39.

| | | |

| |CORN |SOYBEANS |

| | | |

|U.S. |75 |100 |

| | | |

|RUSSIA |60 |40 |

Which conclusion can be drawn from the table?

A. The U.S. has an absolute advantage in corn; Russia has an absolute advantage in soybeans.

B. The U.S. has an absolute advantage in soybeans; Russia has an absolute advantage in corn.

C. The U.S. has an absolute advantage in both crops.

D. Russia has an absolute advantage in both crops.

EIN 2

40. Which of the following is not a trade barrier?

A. a tariff

B. a quota

C. an embargo

D. a free trade agreement

41. A person who favors a protectionist trade policy would MOST likely

A. call for an end to quotas

B. support a reduction in tariffs

C. call for trade restrictions to save American jobs

D. claim trade restrictions result in fewer choices and higher prices.

42. What is the MOST important purpose of the North American Free Trade Agreement (NAFTA)?

A. to increase trade barriers between the U.S., Canada, and Mexico

B. to reduce trade barriers between the U.S., Canada, and Mexico

C. to help the Mexican economy with American and Canadian subsidies

D. to compete with the nations of the European Union

EIN 3

43. What might cause the value of the U.S. dollar to appreciate in relationship to the Euro?

A. increased demand for European products in the U.S.

B. increased demand for U.S. products in Europe

C. increases in the U.S. money supply

D. high rates of inflation in the U.S.

44. One advantage of a weak dollar is that

A. travel abroad is cheaper for Americans

B. American income tax rates go down

C. Imports are cheaper for Americans to buy

D. American exports increase

45.

| | |

|Value of $1 U.S. in pesos |Value of 1 peso in U.S. dollars |

| | |

|10.34 |.09 |

Stacy traveled to Mexico and took $100 in U.S. currency. When she exchanged the $100 for pesos, she received about

A. 10.3 pesos

B. 103 pesos

C. 1034 pesos

D. 900 pesos

EPF 1 and 2

46. Which of the following is NOT an important part of rational economic decision making?

A. analyzing needs and wants

B. considering short-term goals

C. considering long-term goals

D. focusing on instant gratification

47. If a bank pays 3% interest on savings, how much interest will it charge for loans?

A. 3%

B. less than 3%

C. more than 3%

D. the discount rate

EPF 4

48. Which of the following might lower your credit score?

A. having worked at the same job for three years

B. having paid all your bills on time

C. never having applied for credit before

D. never having ‘bounced’ a check before

EPF 5 and 6

49. If you switched to an insurance policy with a higher deductible, you could probably expect

A. a higher premium

B. a lower premium

C. a higher coverage limit

D. no coverage at all

50. Of the following people, which one would probably have the highest rates for car insurance?

A. a 50 year old single male

B. a 30 year old married woman

C. an 18 year old boy

D. an 18 year old girl

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