Test of Economic Knowledge

Quiz by suihcta
Last updated: July 3, 2022
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First submittedJuly 3, 2022
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1. The economic problem of scarcity means that for individuals, governments, and societies the
supply of goods and services is greater than the demand for them.
costs of producing goods and services are greater than the benefits of having them.
wants for goods and services are greater than the available resources to meet them.
prices of goods and services are greater than the value of consuming them.
2. One consequence of scarcity is that
people have to make choices among alternatives.
there is full employment of resources.
products which are plentiful have relatively high prices.
the production of goods and services is constant.
3. The opportunity cost of a decision is the
total benefit expected from all forgone opportunities.
money spent making a choice.
value of the next best alternative not chosen.
worst choice that could have been made.
4. Which of the following is typically true?
People do not respond to incentives.
Voluntary trade causes winners and losers.
People’s choices have consequences for the future.
Correct choices have no costs.
5. It will cost Amanda an extra $30 to purchase a warranty for a $400 new camera that she is buying. If Amanda decides to buy the warranty she has concluded that the
benefit of the warranty is greater than its cost.
cost of the warranty is greater than its benefit.
cost of the camera is greater than the cost of the warranty.
benefit of the camera is greater than the benefit of the warranty.
6. There is little government ownership of farms and businesses in the country of Mala. People may change jobs and start new businesses. The government does not control prices and wages. What type of economy is Mala?
Command economy.
Market economy.
Traditional economy.
Political economy.
7. Which is true about who gets the goods and services that are produced?
All methods of distributing goods and services will satisfy everyone.
All societies use the same method for distributing goods and services.
No method of distributing goods and services will satisfy everyone.
Most societies have an equal distribution of goods and services.
8. What is the most likely reason why a business would cut the price of a product it sells?
To reduce the economic profit.
To decrease the number of workers.
To encourage more people to purchase the product.
To increase investment in other business operations.
9. Expansion of international trade usually
decreases worldwide living standards.
increases worldwide unemployment.
increases worldwide production.
decreases worldwide interdependence.
10. If a high tariff was placed on steel shipped into the U.S.,
U.S. consumers would pay more for steel.
the price of steel would go down.
U.S. reserves of iron ore would last a longer time.
foreigners would buy more goods from the U.S.
11. Specialization and trade lead to
fewer exchanges of goods and services.
fewer choices of goods and services.
less economic interdependence.
lower costs of goods and services.
12. In the United States, prices for most goods and services are determined by the actions of
consumers and the government.
businesses and the government.
workers and labor unions.
businesses and consumers.
13. Why are diamonds more expensive than water even though water is necessary for life and diamonds are not?
The supply of diamonds is increasing.
Diamonds are more scarce than water.
The demand for water is decreasing.
Water is more scarce than diamonds.
14. At the end of winter, retail clothing stores still have many winter coats for sale. The retail store owner can eliminate the
shortage by raising the price.
surplus by lowering the price.
shortage by lowering the price.
surplus by raising the price.
15. A market-clearing price occurs when
total assets equal total liabilities.
shortages equal surpluses.
quantity demanded equals quantity supplied.
deficits equal surpluses.
16. Chicken and fish are substitutes for each other. If the cost of raising chickens increases, then the price of chicken will
increase and people will buy less fish.
increase and people will buy more fish.
decrease and people will buy less fish.
decrease and people will buy more fish.
17. If there is a large decrease in demand for corn and no change in supply,
consumers will pay a higher price for corn.
consumers will pay a lower price for corn.
there will be no change in the amount of corn sold.
there will be no change in the price of corn.
18. The price of DVDs will decrease if the
supply of DVDs increases.
demand for DVDs increases and the supply decreases.
supply of DVDs decreases.
demand for DVDs increases.
19. There used to be one producer of a good in a market and now there are many competing producers. What is most likely to be the result?
Less output produced in the market.
Lower product quality.
Lower product price.
Less service.
20. Which is most likely to influence the level of competition in markets?
The number of buyers and sellers.
The market-clearing price of a product.
The size of the government budget.
The amount of wages and salaries.
21. Banks make most of their profits by charging
fees for using automatic teller machines (ATMs).
fees for advice on investments in stocks.
higher rates of interest to borrowers than they pay depositors.
lower rates of interest to borrowers than they pay depositors.
22. Jody bought shares of stock in a company. She and the other stockholders voted to elect its board of directors. The company is a
23. Amy is saving ten percent of her income a month. The money she saved is primarily functioning as a
unit of account.
terms of trade.
medium of exchange.
store of value.
24. Which one of the following is correct?
Money is useful for saving, but not investing.
Most nations create their own currency for use as money.
Trade is more difficult with money compared with barter.
It just takes money to produce goods and services.
25. Most wages and salaries in the United States are determined by
supply and demand.
savers and investors.
lawyers and bankers.
imports and exports.
26. Which will result from an increase in the demand for construction workers?
An increase in unemployed construction workers.
A decrease in the supply of housing.
An increase in the wage of construction workers.
A decrease in the price of housing.
27. Workers’ wages usually increase when
demand for the products they produce increases.
the supply of workers increases.
businesses face more competition in selling their product.
the unemployment rate increases.
28. Most entrepreneurs start a new business because they expect to
decrease work hours.
earn a profit.
avoid risk.
increase their human capital.
29. Advances in technology result in
an increase in prices.
a decrease in output.
an increase in productivity.
a decrease in wages.
30. What usually causes the standard of living in a country to increase over time?
Increased output per worker.
High tariffs.
High taxes.
Conservation of natural resources.
31. In what way is a fireworks display a public good?
It causes pollution and noise.
It can be provided by several businesses.
It requires expenditures for public safety.
It can be seen by those who do not pay for it.
32. A major economic role that government is supposed to perform in a market economy is to
guarantee profits.
establish production targets.
set wages and salaries.
maintain competition.
33. A sales tax is a tax on
34. What does the gross domestic product (GDP) measure?
The wages and salaries paid for productive work done during a year.
The market value of final goods and services produced in a year.
The market value of products government buys each year.
The total assets and liabilities of a nation.
35. When comparing the standard of living in one nation’s economy to another nation’s economy, GDP is typically adjusted in each nation by dividing GDP by a nation’s
inflation rate.
unemployment rate.
square miles.
36. Inflation is the term used to describe
a decrease in interest rates.
a general decrease in prices.
a general increase in prices.
an increase in interest rates.
37. Which of the following people would the U.S. government count as unemployed?
A part-time cashier who is unhappy with her wage and looking for a full-time position.
A retired scientist who is living on her pension.
A college student who decides not to work during the school year.
A high school graduate who has not yet found a job but continues looking.
38. To know if an increase in wages over a period of time has led to an increase in the standard of living, we must also look at changes in
prices on the stock market.
prices of goods and services.
government spending and taxes.
interest rates.
39. Government spending less than taxes collected during a year is called
the balanced budget.
a budget deficit.
a budget surplus.
the national debt.
40. The control of the money supply is the main responsibility of the
Federal Reserve System.
Internal Revenue Service.
Federal Trade Commission.
Department of Commerce.
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