Economics Test Review

What happens to the price of a product when the supply increases but the demand remains the same?

• The price increases.

• The price decreases.

• The price stays the same.

• The price fluctuates randomly.

Answer explanation

When supply increases and demand remains constant, there is more of the product available. This surplus typically leads to a decrease in price as sellers lower prices to attract buyers, making the correct answer "The price decreases."

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DOK Level 2: Skill/Concept

Which of the following best describes a mixed economic system?

• An economy where the government makes all decisions.

• An economy where both private and public sectors play a role.

• An economy where only private businesses operate.

• An economy where there is no government intervention.

Answer explanation

A mixed economic system combines elements of both private and public sectors, allowing for government intervention alongside private enterprise. This distinguishes it from systems where either the government or private businesses operate exclusively.

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DOK Level 2: Skill/Concept

If the demand for a product increases and the supply remains constant, what is likely to happen to the price?

• The price will decrease.

• The price will increase.

• The price will remain unchanged.

• The price will become unpredictable.

Answer explanation

When demand for a product increases while supply remains constant, more consumers compete to purchase the product, driving the price up. Therefore, the correct answer is that the price will increase.

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DOK Level 2: Skill/Concept

Which economic system is characterized by the absence of government intervention?

• Command economy

• Mixed economy

• Market economy

• Traditional economy

Answer explanation

A market economy is characterized by minimal government intervention, allowing supply and demand to dictate production and pricing. In contrast, command economies involve significant government control.

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DOK Level 2: Skill/Concept

Why do countries import goods?

• To increase their own production costs.

• To obtain goods that are not available domestically.

• To reduce the variety of products available.

• To decrease competition in the market.

Answer explanation

Countries import goods primarily to obtain products that are not available domestically, ensuring access to a wider range of items and resources that may not be produced locally.

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DOK Level 2: Skill/Concept

What is one reason a country might export goods?

• To increase domestic consumption.

• To reduce the quality of goods.

• To earn foreign currency.

• To decrease employment opportunities.

Answer explanation

Countries export goods primarily to earn foreign currency, which can be used to purchase imports and strengthen the economy. This is a key reason for engaging in international trade.

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DOK Level 2: Skill/Concept

How does an increase in supply affect the economy if demand remains unchanged?

• It leads to higher prices.

• It leads to lower prices.

• It causes inflation.

• It has no effect on prices.

Answer explanation

An increase in supply, with demand unchanged, typically leads to lower prices. More goods available in the market means sellers may reduce prices to attract buyers, resulting in a decrease in overall price levels.

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DOK Level 2: Skill/Concept

Which factor is most likely to influence a country's decision to trade with another country?

• The color of the national flag.

• The availability of natural resources.

• The number of national holidays.

• The size of the population.

Answer explanation

The availability of natural resources is a key factor influencing trade decisions, as countries often seek to import resources they lack and export those they have in abundance, making it essential for economic growth.

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DOK Level 2: Skill/Concept

In a command economy, who primarily makes the economic decisions?

• Individual consumers

• Private businesses

• The government

• International organizations

Answer explanation

In a command economy, the government primarily makes economic decisions, controlling production, distribution, and prices, unlike in market economies where individual consumers and private businesses have more influence.

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DOK Level 2: Skill/Concept

What is the primary role of imports in an economy?

• To increase domestic production.

• To provide goods that are not produced locally.

• To reduce the number of available products.

• To increase the cost of living.

Answer explanation

The primary role of imports is to provide goods that are not produced locally, allowing consumers access to a wider variety of products and enhancing overall economic welfare.

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DOK Level 2: Skill/Concept