Test of Economic Knowledge

Quiz by suihcta
Last updated: July 3, 2022
First submittedJuly 3, 2022
Times taken20
Average score77.5%
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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.
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.
costs of producing goods and services are greater than the benefits of having them.
2. One consequence of scarcity is that
products which are plentiful have relatively high prices.
the production of goods and services is constant.
there is full employment of resources.
people have to make choices among alternatives.
3. The opportunity cost of a decision is the
money spent making a choice.
value of the next best alternative not chosen.
total benefit expected from all forgone opportunities.
worst choice that could have been made.
4. Which of the following is typically true?
People do not respond to incentives.
Correct choices have no costs.
People’s choices have consequences for the future.
Voluntary trade causes winners and losers.
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
cost of the camera is greater than the cost of the warranty.
cost of the warranty is greater than its benefit.
benefit of the camera is greater than the benefit of the warranty.
benefit of the warranty is greater than its cost.
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?
Traditional economy.
Market economy.
Command economy.
Political economy.
7. Which is true about who gets the goods and services that are produced?
Most societies have an equal distribution of goods and services.
All societies use the same method for distributing goods and services.
All methods of distributing goods and services will satisfy everyone.
No method of distributing goods and services will satisfy everyone.
8. What is the most likely reason why a business would cut the price of a product it sells?
To encourage more people to purchase the product.
To decrease the number of workers.
To increase investment in other business operations.
To reduce the economic profit.
9. Expansion of international trade usually
decreases worldwide interdependence.
decreases worldwide living standards.
increases worldwide production.
increases worldwide unemployment.
10. If a high tariff was placed on steel shipped into the U.S.,
the price of steel would go down.
U.S. consumers would pay more for steel.
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
less economic interdependence.
lower costs of goods and services.
fewer exchanges of goods and services.
fewer choices of goods and services.
12. In the United States, prices for most goods and services are determined by the actions of
businesses and the government.
businesses and consumers.
workers and labor unions.
consumers and the government.
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.
The demand for water is decreasing.
Water is more scarce than diamonds.
Diamonds are more scarce than water.
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 lowering the price.
surplus by lowering the price.
shortage by raising the price.
surplus by raising the price.
15. A market-clearing price occurs when
quantity demanded equals quantity supplied.
total assets equal total liabilities.
deficits equal surpluses.
shortages 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.
decrease and people will buy more fish.
decrease and people will buy less fish.
increase 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 price of corn.
there will be no change in the amount of corn sold.
18. The price of DVDs will decrease if the
supply of DVDs increases.
demand for DVDs increases and the supply decreases.
demand for DVDs increases.
supply of DVDs decreases.
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?
Lower product quality.
Less output produced in the market.
Lower product price.
Less service.
20. Which is most likely to influence the level of competition in markets?
The size of the government budget.
The amount of wages and salaries.
The market-clearing price of a product.
The number of buyers and sellers.
21. Banks make most of their profits by charging
higher rates of interest to borrowers than they pay depositors.
lower rates of interest to borrowers than they pay depositors.
fees for using automatic teller machines (ATMs).
fees for advice on investments in stocks.
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
store of value.
unit of account.
medium of exchange.
terms of trade.
24. Which one of the following is correct?
Trade is more difficult with money compared with barter.
Money is useful for saving, but not investing.
It just takes money to produce goods and services.
Most nations create their own currency for use as money.
25. Most wages and salaries in the United States are determined by
lawyers and bankers.
savers and investors.
imports and exports.
supply and demand.
26. Which will result from an increase in the demand for construction workers?
An increase in the wage of construction workers.
A decrease in the supply of housing.
An increase in unemployed construction workers.
A decrease in the price of housing.
27. Workers’ wages usually increase when
the supply of workers increases.
demand for the products they produce increases.
businesses face more competition in selling their product.
the unemployment rate increases.
28. Most entrepreneurs start a new business because they expect to
earn a profit.
avoid risk.
increase their human capital.
decrease work hours.
29. Advances in technology result in
a decrease in output.
a decrease in wages.
an increase in productivity.
an increase in prices.
30. What usually causes the standard of living in a country to increase over time?
High tariffs.
High taxes.
Increased output per worker.
Conservation of natural resources.
31. In what way is a fireworks display a public good?
It causes pollution and noise.
It can be seen by those who do not pay for it.
It can be provided by several businesses.
It requires expenditures for public safety.
32. A major economic role that government is supposed to perform in a market economy is to
maintain competition.
set wages and salaries.
establish production targets.
guarantee profits.
33. A sales tax is a tax on
34. What does the gross domestic product (GDP) measure?
The market value of final goods and services produced in a year.
The wages and salaries paid for productive work done during 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.
square miles.
unemployment rate.
36. Inflation is the term used to describe
a general increase in prices.
a general decrease in prices.
an increase in interest rates.
a decrease in interest rates.
37. Which of the following people would the U.S. government count as unemployed?
A high school graduate who has not yet found a job but continues looking.
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.
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
interest rates.
government spending and taxes.
prices on the stock market.
prices of goods and services.
39. Government spending less than taxes collected during a year is called
a budget surplus.
the balanced budget.
a budget deficit.
the national debt.
40. The control of the money supply is the main responsibility of the
Federal Trade Commission.
Internal Revenue Service.
Federal Reserve System.
Department of Commerce.
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