Econ Final Review

Which factor is used to determine a person’s credit worthiness?

• work ethic

• home location

• yearly income

• level of education

Use the scenario to answer the question. Ron Statler is the single owner of Hi-Tech Computers. Its store sells computers to the general public. Ron Statler is the president and runs the company; his son Jason works in the store. Digital World, a national chain whose stock trades on the stock market, opened a new store near Hi-Tech Computers. Based on the scenario, which statement BEST describes the two companies?

• Hi-Tech Computers is a partnership, and Digital World is a corporation.

• Hi-Tech Computers is a sole proprietorship, and Digital World is a corporation.

• Digital World is a partnership of investors, and Hi-Tech Computers is a family partnership.

• Digital World is a sole proprietorship of entrepreneurs, and Hi-Tech Computers is incorporated.

Use the information to answer the question. Brazil grows coffee efficiently, and coffee is the country’s largest agricultural product. Brazil also has an automobile industry but does not efficiently manufacture automobiles. The United States efficiently manufactures automobiles and grows a small amount of coffee in Hawaii. Which statement BEST explains this relative trading relationship?

• Brazil has a capital advantage over the United States in the growing of coffee.

• Brazil has a comparative advantage over the United States in the growing of coffee.

• Brazil has a technological advantage over the United States in the manufacturing of automobiles.

• Brazil has an absolute advantage over the United States in the growing of coffee and the manufacturing of automobiles.

Opportunity cost means individuals

• pay sales taxes to make a purchase.

• replace land and labor with capital resources.

• make purchases that require them to consider the environmental impact.

• make decisions that require them to give up the next best alternative.

Use the scenario to answer the question. Consumers make rational decisions about what they purchase every day. For example, Esther went to the supermarket to buy apples to make two pies. She needed at least five apples for each pie. Golden Delicious apples cost 25 cents each; a bag of 16 Golden Delicious apples costs $3.25. She bought the bag of Golden Delicious apples, even though she would have six apples left after making the pies. Which statement BEST describes Esther’s choice?

• Esther decided the marginal benefit of having six more apples exceeded the marginal cost of paying 75 cents extra.

• Esther decided the marginal benefit of having six more Golden Delicious apples did not exceed the marginal cost of paying 75 cents extra.

• Esther compared the price per apple and decided the most expensive apples would be the best buy, so she bought the bag.

• Esther compared the prices of the individual apples and the bag of apples and bought exactly the number of apples she needed to make two pies.

In the U.S. economy, a few firms dominate the wireless telephone provider industry. Which type of market structure does this represent?

• oligopoly

• monopoly

• pure competition

• monopolistic competition

Which statement BEST describes the difference between monetary policy and fiscal policy?

• Monetary policy reflects the Federal Reserve’s authority to change the money supply; fiscal policy reflects the government’s power to influence the economy through taxes, expenditures, and borrowing.

• Monetary policy reflects the Federal Reserve’s authority to change tax rates; fiscal policy reflects the government’s power to influence the money supply by lowering the discount rate for loans to banks.

• Monetary policy refers to the Federal Reserve’s influence in the economy through borrowing and creating a deficit; fiscal policy refers to the government’s authority to increase spending.

• Monetary policy refers to the Federal Reserve’s authority to increase spending; fiscal policy refers to the government’s authority to increase the discount rate for loans to banks.

If the Federal Reserve wanted to stimulate the U.S. economy and reduce unemployment, it would

• cause interest rates to decrease because low interest rates encourage business growth and expansion.

• cause interest rates to rise because high interest rates encourage business growth and expansion.

• increase the discount rate it charges banks, which would increase the money supply.

• increase consumer spending by reducing the money supply

What is the MOST LIKELY result of an increase in the value of the U.S. dollar against the Chinese currency?

• U.S. workers in the United States would benefit.

• Chinese importers of U.S. goods would benefit.

• U.S. consumers of Chinese goods would benefit.

• Chinese consumers of Chinese goods would benefit.

A bank charges 6% interest on personal loans and pays 3% interest on individual savings accounts. Why is there a difference in the two amounts of interest?

• The bank wants to make a profit.

• The government regulates interest rates.

• The bank wants to encourage people to save.

• The government allows a system of credit buying.