Economics Practice Test

Multiple Choice

a group of buyers and sellers

• productivity

• Market

• economy

• none of these choices

Multiple Choice

study of economy-wide phenomena, including inflation, unemployment, and economic growth

• market economy

• mircoeconomics

• market

• macroeconomics

Multiple Choice

a resource the economy uses to produce goods & services

• efficiency

• incentive

• factor of production

• macroeconomics

Multiple Choice

attempt to prescribe how the world should be

• Normative statements

• positive statements

• market failure

• equity

Multiple Choice

sustained upward movement in the overall price level of goods and services in an economy

• market failure

• externality

• inflation

• incentive

Multiple Choice

when the production or consumption of a good affects bystanders

• market failure

• externality

• inflation

• incentive

• none of these choices

Multiple Choice

when the market fails to allocate society’s resources efficiently

• marginal change

• market power

• market failure

• comparative advantage

Multiple Choice

a single buyer or seller has substantial influence on market price

• marginal change

• market power

• market failure

• comparative advantage

Multiple Choice

marginal changes refer

• market failures due to externalities

• how people make decisions by comparing costs and benefits of doing a little bit more or less of something

• how people are motivated by incentives

• none of these choices

Multiple Choice

the circular flow diagram shows

• how market failures are due to externalities

• how people make decisions by comparing costs and benefits of doing a little bit more or less of something

• how people are motivated by incentives

• how dollars flow through markets among households and firms

Multiple Choice

something that induces a person to act, i.e. the prospect of a reward or punishment.

• market failure

• externality

• inflation

• incentive

Multiple Choice

comparative advantage refers to

(not on vocab section but you need to know it)

• goods produced domestically and sold abroad

• goods produced abroad and sold domestically

• the ability to produce a good using fewer inputs than another producer

• the ability to produce a good at a lower opportunity cost than another producer

Open Ended

OUr first five principles are....

1) People Face Tradeoffs 

2) The Cost of Something Is What You Give Up to Get It (Opportunity cost) 

3) People Respond to Incentives 

4) Rational People Think at the Margin 

5) Trade Can Make Everyone Better Off

The following exemplifies which of our first five principles - EXPLAIN YOUR ANSWER:

A plane is about to taked off with 10 empty seats, which were sold at 1000 dollars a piece, but cost the airline 500 dollars to support.. A standby passenger is waiting at the gate, willing to pay 300 dollars. The airline sells the ticket to the standby passenger.

Open Ended

OUr first five principles are....

1) People Face Tradeoffs 

2) The Cost of Something Is What You Give Up to Get It (Opportunity cost) 

3) People Respond to Incentives 

4) Rational People Think at the Margin 

5) Trade Can Make Everyone Better Off

The following exemplifies which of our first five principles - EXPLAIN YOUR ANSWER:

I told my son this weekend that if he practices piano for 10 minutes, I'll given him 30 minutes of IPad time.

Open Ended

OUr first five principles are....

1) People Face Tradeoffs 

2) The Cost of Something Is What You Give Up to Get It (Opportunity cost) 

3) People Respond to Incentives 

4) Rational People Think at the Margin 

5) Trade Can Make Everyone Better Off

The following exemplifies which of our first five principles - EXPLAIN YOUR ANSWER: A family of four are debating between going to a film in the theater, which costs 12.99 a person (x4 for four peopl), or watching the same film at home at a cost of $29.99.

Open Ended

OUr first five principles are....

1) People Face Tradeoffs 

2) The Cost of Something Is What You Give Up to Get It (Opportunity cost) 

3) People Respond to Incentives 

4) Rational People Think at the Margin 

5) Trade Can Make Everyone Better Off

The following exemplifies which of our first five principles - EXPLAIN YOUR ANSWER:

The Boston Red Sox weigh signing Xander Bogarts, their homegrown star, to an eleven year contract worth 280 million.

Open Ended

Provide a scenario for me, using the model below, for the travel of a single dollar from one household to another. Be sure to have the path travel full around the diagram (either along the red or green path).

Open Ended

Explain to me how the graph reveals what is possible, but inefficient, efficient and possible, and impossible if the two are not trading with each other?

Multiple Choice

Who has a higher opportunity cost for making pork?

• US

• CANADA

• NEITHER

Multiple Choice

Who has the comparative advantage in making aircraft?

• US

• Canada

• Neither

Multiple Choice

Who has the absolute advantage in making aircraft?

• US

• Canada

• Neither

Multiple Choice

Tom Brady can mow his lawn in 2 hours. In that same time, he can film a tv commercial and earn 20,000 dollars. By contrast, Forrest Gump his next door neighbor can mow his lawn in four hours, or earn 60 dollars working for an extra shift at Stop n Shop. Who has the comparative advantage in mowing lawns?

• Tom Brady

• Forrest Gump

• Neither

Open Ended

NOT ON TEST.

Tom Brady can mow his lawn in 2 hours. In that same time, he can film a tv commercial and earn 20,000 dollars. By contrast, Forrest Gump his next door neighbor can mow his lawn in four hours, or earn 60 dollars working for an extra shift at Stop n Shop.

What could tom brady do to make sure the trade has made everyone better off?

Open Ended

This question will be worth 10/40 pts on test, or 20/80 on the online version. For some reason, it won't let me edit to show that so I am telling you...

Write a longer response answering the following question:

Is the method we chose to decide who gets the T-shirt (picking a random name out of a hat) the best method to do so, with the goals of fairness, efficiency, and productivity in mind?

In your answer, you should do and demonstrate the following:

1) An understanding of how scarcity applies in the situation

2) An understanding of fairness as it relates to equality and equity

3) An understanding of efficiency

4) An understanding of productivity

If you say yes, you need to defend the class choice on all three goals in comparison/contrast with a strong alternative.

If you say no, you need to explain why, and put forth an alternative choice and justify it.