Semester Pre- Assessment (Economics)

1. The opportunity cost of a new public high school is the

• A. money cost of hiring teachers for the new school.
• B. cost of constructing the new school at a later date.
• C. change in the annual tax rate to pay for the new school.
• D. other goods and services that must be given up for the new school.

2. Which one of the following do economists consider to be an example of capital goods?

• A. Money in a bank
• B. Machines in an auto plant.
• C. Corporate bonds of an oil company
• D. Common stocks in a computer business

3. What is meant by the statement that every economic system faces the problem of scarcity?

• A. The additional benefits of goods and services are greater than their additional costs.
• B. There are times when some products can be purchased only at high prices.
• C. There are never enough productive resources to satisfy all human wants.
• D. All economies have recessions during which scarcities exist.

4. From an economic point of view, which approach to controlling pollution is most efficient?

• A. Abolish the use of toxic chemicals in all production.
• B. Use economic resources to eliminate all pollution.
• C. Adopt laws and regulations that prohibit economic activities that cause pollution problems.
• D. Reduce pollution as long as the additional benefits are greater than the additional costs.

5. The essential difference between a command economy and a market economy is that in a market economy

• A. shortages occur more often than surpluses.
• B. buyers and sellers determine resource allocation.
• C. central planning creates an effective incentive system for consumers and producers.
• D. the prices of products and resources are largely determined by government regulation of businesses.

6. Which is a basic economic question that must be answered by all economic systems?

• A. What will be the share of profits that go to businesses?
• B. What will be the amount of the minimum wage for workers?
• C. How will goods and services be produced?
• D. How will government collect income taxes?

7. Profits are equal to total

• A. revenue minus total cost.
• B. assets minus total liabilities.
• C. sales minus wages and salaries.
• D. sales minus taxes and depreciation.

8. If the government decides to reduce the payroll taxes on the wages and salaries of workers, then there will most likely be

• A. a decrease in saving.
• B. a decrease in investment.
• C. an increase in consumption.
• D. an increase in unemployment.

9. A high school student buys a sweatshirt from a store. The sweatshirt is on sale at a 20 percent discount off the regular price. In this exchange,

• A. the student and the store benefit.
• B. the student benefits, but the store does not.
• C. the store benefits, but the student does not.
• D. neither the student nor the store benefits.

10. If Nation A adopts public policies that restrict imports from another nation that is a major trading partner, then in Nation A

• A. the cost of producing products will decrease.
• B. job opportunities in export industries will increase.
• C. consumers will pay higher prices for products.
• D. saving and investment will increase.