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Unit 1 Economics

Practice Test

1. Which of the following factors cause a movement along the demand curve?

a. change in the prices of related goods

b. change in the price of the good

c. change in the population

d. both a change in the price of the good and a change in population

2. The law of demand states that

a. as the price increases, the quantity demanded will increase

b. as the price decreases, the demand curve will shift to the right

c. as the price increases, the demand will decrease

d. as the price increases, the quantity demanded will decrease

3. If goods A and B are substitutes, a decrease in the price of good B will

a. increase the demand for good A

b. increase the demand for good B

c. decrease the demand for good A

d. increase the demand for good B and decrease the demand for good A

4. If goods A and Z are complements, an increase in the price of good Z will

a. increase the demand for good A

b. decrease the demand for good Z

c. decrease the demand for good A and good Z

d. decrease the demand for good A

5. Recently, consumer tastes for tattoos have increased. This means that the ___________ for tattoos has ___________.

a. quantity demanded; increased

b. demand; decreased

c. demand; increased

d. quantity demanded; decreased

6. A good is inferior if

a. when income increases, the demand is unchanged

b. when income increases, the demand decreases

c. when income increases, the demand increases

d. income and the demand are unrelated

7. A decrease in the price of eggs will result in a(n)

a. increase in the demand for eggs

b. increase in the supply of eggs

c. greater quantity of eggs supplied

d. greater quantity of eggs demanded

8. The demand curve for DVDs has shifted to the right.

a. a decrease in the price of DVDs

b. an increase in the price of DVDs

c. an increase in the supply of DVDs

d. an increase in the income of buyers

9. When the price of gas goes up, the demand for tires goes down. This means tires and gas are

a. substitutes

b. complements

c. both expensive

d. things you need so you can drive your car

10. Since chicken and beef are substitute goods, if the price of chicken decreases significantly, there would be

a. an increase in demand for beef

b. an increase in the supply of chicken

c. an increase in the quantity demanded of beef

d. a decrease in the demand for beef

11. An increase in the demand for gas today caused by concerns that gas prices will be higher tomorrow is attributable to which of the following?

a. income

b. consumer expectations

c. consumer preferences

d. producer expectations

12. Which of the following is likely to cause a rightward shift in the demand for home-delivered pizza?

a. a lower price of pizza

b. a lower price of fast-food hamburgers

c. a higher price of pepperoni

d. a larger population

13. An inverse relationship between price and quantity is represented by

a. the demand curve

b. the supply curve

c. the production possibility curve

d. Taco Bell

14. The ___________ apples will decrease due to higher apple prices

a. demand for

b. tastes for

c. supply of

d. quantity demanded of

15. The demand curve for running shoes has shifted to the right. What could have caused it?

a. a decrease in the price of running shoes

b. an increase in the price of running shoes

c. an increase in the supply of running shoes

d. an increase in the income of runners

16. If the market for corn is in equilibrium

a. every buyer who wants to consume corn can acquire corn

b. every producer who wants to sell corn can do so

c. the price is at a level where the quantity of corn produced is equal to the quantity of corn consumed

d. all consumers of corn receive the same quantity of corn

17. When the price of lamps increases, the

a. supply increases

b. quantity supplied increases

c. supply decreases

d. quantity supplied decreases

18. A decrease in the price of eggs will result in a(n)

a. increase in the demand for eggs

b. increase in the supply of eggs

c. decrease in the supply of eggs

d. downward movement along the supply curve of eggs

19. Consider the supply curve for cotton shirts. An increase in the price of cotton will

a. increase the supply of cotton shirts

b. decrease the supply of cotton shirts

c. decrease the demand for cotton shirts

d. increase the quantity supplied of cotton shirts

20. A technological advance in the production of automobiles will

a. increase the demand for automobiles

b. increase the supply of automobiles

c. decrease the demand for automobiles

d. decrease the supply of automobiles

21. A decrease in supply means

a. a shift of the supply curve to the left

b. a downward movement along the supply curve

c. less will be demanded at every price

d. more will be supplied at every price

22. An increase in supply can be caused by

a. input prices rising

b. a decrease in the price of the good

c. an increase in the number of sellers

d. expectations of future prices increases

23. An increase in supply can be caused by

a. A decrease in the number of firms producing the good

b. A decrease in prices of goods that are substitutes in production

c. An increase in the price of the good

d. An increase in input prices

24. A decrease in supply can be caused by

a. a decrease in input prices

b. a decrease in the number of sellers in the market

c. suppliers’ expectations of higher future prices

d. an advancement in the technology for producing the good

25. When the price of corn is rising, we would expect

a. the quantity demanded for corn to be rising

b. the quantity supplied of corn to be rising

c. the demand for corn to be shifting left

d. the supply of corn to be shifting right

26. Which of the following is most likely to shift the supply of milk to the right?

a. a tax on each gallon of milk produced

b. a decrease in the price of feed given to dairy cows

c. an increase in household income

d. the bankruptcy of many small dairy farmers

27. A surplus occurs when

a. quantity demanded equals quantity supplied

b. the quantity demanded exceeds the quantity supplied

c. the price is below the equilibrium

d. the price is above the equilibrium price

28. If the supply and demand curves intersect at a price of $47, a price set at $40 would lead to a(n)

a. shortage

b. surplus

c. equilibrium

d. increase in demand

29. A farmer finds that when he produces more corn, he also has more corn stalks that he can then sell as decorative ornaments. To the farmer, corn and corn stalks are

a. complements in production

b. substitutes in production

c. unrelated

d. luxury goods in production

30. The price of DVD players falls and the quantity of DVD players sold increases. This set of observations can be the result of the

a. demand for DVD players shifting to the right

b. demand for DVD players shifting to the left

c. supply of DVD players shifting to the right

d. supply of DVD players shifting to the left

31. Which of the following is a normative statement?

a. The women’s labor force participation rate has increased during the past 100 years.

b. The federal minimum wage is higher today than it was in 1990.

c. Children in the U.S. are required to go to school until they reach a certain age.

d. The best way to encourage growth in the economy is through government spending.

32. The opportunity cost of something is

a. greater during periods of rising prices

b. equal to the money cost

c. what is given up to acquire it

d. equal to zero if it was a gift

33. Microeconomics deals with

a. the working of the entire economy or large sectors of it

b. economic growth

c. decisions of individuals and firms

d. gross domestic policy

34. The primary emphasis in macroeconomics is on

a. how firms set prices

b. the national economy

c. bits and pieces of the economy

d. the employment of individual workers

35. Scarcity in economics means

a. the needs of people are limited

b. the wants of people are limited

c. there must be poor people in rich countries

d. not having sufficient resources to produce all the goods and services people want

36. We have to make choices because

a. we have unlimited income

b. resources are scarce

c. choices involve a trade-off

d. resources are scarce and choices involve a trade-off

37. Which is not an example of a resource?

a. land

b. labor

c. capital

d. production

e. oil reserves

38. Khalil is offered a free ticket to a concert. His opportunity cost of going to the opera is

a. zero-the tickers were free

b. the price listed on the ticket

c. whatever Khalil would have done had he not gone to the opera

d. the price listed on the ticket plus whatever Khalil would have done had he not gone to the opera

39. Which of the following is a positive statement?

a. Current tax policy will lead to an increasing budget deficit.

b. A high rate of economic growth is good for a country

c. Everyone in the country needs to save money for retirement

d. Basketball players should not be paid higher salaries than teachers.

e. Yes, they should.

40. A business cycle is

a. a very deep and prolonged economic downturn

b. a period in which output and employment are rising

c. a period in which output and employment are falling

d. an alteration between economic upturns and downturns

41. Technological improvements will

a. leave the PPC unchanged

b. shift the PPC left

c. shift the PPC right

d. lead to increased unemployment

42. An economy that has the lowest opportunity cost for producing a particular good is said to have a(n)

a. technological advantage

b. comparative advantage

c. absolute advantage

d. increasing opportunity cost

43. If Eastland can produce 100 oranges or 100 peaches and Westland can produce 50 oranges or 200 peaches, Eastland has an absolute advantage in producing

a. oranges only

b. a combination of oranges and peaches

c. both oranges and peaches

d. neither oranges nor peaches

44. If Eastland can produce 100 oranges or 100 peaches and Westland can produce 50 oranges or 200 peaches, Westland has a comparative advantage in producing

a. oranges only

b. peaches only

c. both oranges and peaches

d. neither oranges nor peaches

45. If Eastland can produce 100 oranges or 100 peaches and Westland can produce 50 oranges or 200 peaches, Eastland has a comparative advantage in producing

a. Oranges only

b. Peaches only

c. Both oranges and peaches

d. Neither oranges nor peaches

46. If Eastland can produce 100 oranges or 100 peaches and Westland can produce 50 oranges or 200 peaches, Westland has an absolute advantage in producing

a. oranges only

b. a combination of oranges and peaches

c. both oranges and peaches

d. peaches only

47. If Eastland can produce 100 oranges or 100 peaches and Westland can produce 50 oranges or 200 peaches, the opportunity cost of producing 1 orange for Eastland is

a. 1 peach

b. ¼ peach

c. 4 peaches

d. 10 peaches

48. If Eastland can produce 100 oranges or 100 peaches and Westland can produce 50 oranges or 200 peaches, the opportunity cost of producing 1 orange for Westland is

a. 1 peach

b. ¼ peach

c. 4 peaches

d. 10 peaches

49. If Eastland can produce 100 oranges or 100 peaches and Westland can produce 50 oranges or 200 peaches, the opportunity cost of producing 1 peach for Westland is

a. 1 orange

b. ¼ orange

c. 4 oranges

d. 10 oranges

50. In a single day, George can bake 10 cakes while Greta can bake 5 cakes.

a. George has a comparative advantage in baking cakes.

b. George has an absolute advantage in baking cakes

c. Greta has a comparative advantage in baking cakes

d. Gera has an absolute advantage in baking cakes

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