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Unit 2 Economics - Microeconomics

Total questions: 81

Worksheet time: 1hrs 15mins

Name
Class
Date
1.
The graph represents: Demand or Supply?
a)
Demand
b)
Supply
2.
Law of demand says if the price of pizza falls, the demand for pizza will what?
a)
Increase
b)
Decrease
3.
What kind of graph is this?
a)
Supply
b)
Demand
4.
The Law of Supply states:
a)
as price increases, supply increases
b)
as prices decrease, demand increases
5.
The Market for labor would be considered a ______________ market.
a)
Product
b)
Factor
c)
Wage
d)
Monopolistic
6.
Amy is excited because she just opened her own consulting firm. Amy loves being her own boss and not having to consult with anyone else before she makes decisions.  Eventually, She even hopes to incorporate and enjoy some additional tax advantages. The only downside is t that she has invested all the money herself.  If the business fails, she could go bankrupt. What kind of business does Amy own? 
a)
Sole Proprietorship
b)
Partnership
c)
Cooperative
d)
Corporation
7.
An industry dominated by a few large firms is
a)
Monoplistic
b)
Monopolistic-ally competitive
c)
Oligopolistic
d)
Perfectly competitive
8.
Darren owns his own plumbing business. He spends some of his company's profits on new pipes and tools.  Jennifer then hires Darren and his assistant to install a new septic tank in her back yard.  Which of the following statements is  TRUE?
a)
Darren is labor and Jennifer is entrepreneur
b)
Darren is the entrepreneur, Jennifer's yard is the land, and Darren's assistant represents capital
c)
Darren bought his tools in a factor/Resource market and Jennifer paid for his services in a product market
d)
Darren's company reprsents a household
9.
Taylor is thinking of leaving the big corporation he works for and starting his own firm.  He comes to you for advice and asks you what you think.  As a friend, you might want to warn Taylor that starting his own firm will mean that he has
a)
no risk
b)
to be prepared to sell stock in his company
c)
unlimited liability
d)
no way to get a loan
10.
Susan, Phil, Robert, and Martina are all lawyers.  After several years of working for big firms, they decide to pull their resources and start their own law practice together.  The four of them will make all their business decisions together and will share all of the profits and financial risk. Their new law firm is a 
a)
Sole proprietorship
b)
Major corporation
c)
Partnership
d)
Franchise
11.
What is the main difference between pure competition and monopolistic competition?
a)
Firms in pure competition make more profits
b)
Firms in pure competition rely more heavily on advertising
c)
Firms in pure competition have no substitutes to their goods
d)
Firms in pure competition are selling nearly identical, rather than differentiated goods
12.
Which is not a type of business organization?
a)
Monopoly 
b)
Partnerhsip
c)
Corporation
d)
Sole-Proprietorship
13.
The buildings, structures, and machines used in the production process are called
a)
Consumer Goods
b)
Capital Goods
c)
Land
d)
Labor
14.
Households = 
a)
sellers in the factor market
b)
buyers in the product market
c)
consumers in the product market
d)
all of the above.
15.
Firms = 
a)
Businesses
b)
Sellers in the resources market
c)
Sellers in the product market
d)
Both Businesses and Sellers in the Output market
16.
In the circular flow model, the product market describes _____.
a)
stores that sell goods and services to households
b)
the government paying for public goods
c)
households selling their labor to businesses
d)
households receive income from businesses
17.

Where do factors of production (land, labor, etc) come from in the circular flow model?

a)

Factor Market

b)

Product Market

c)

Firms

d)

Individuals

18.

How do individuals contribute to the circular flow of economic activity? (SSEMI1)

a)

Business purchase productive resources in product markets.

b)

Individuals provide labor for factor markets and buy goods in product markets.

c)

Individuals buy productive resources from factor markets and provide labor for products markets.

d)

Businesses purchase productive resources in product markets.

19.

What is a major advantage of a business that is a partnership rather than a sole proprietorship? (SSEMI3)

a)

The responsibility for the business is shared

b)

The business is easy to set up

c)

The partners are not responsible for business debts

d)

The business is easy to sell

20.

Advantages of this business type are that the owner is their own boss and gets to keep all the profits. (SSEMI3)

a)

Partnership

b)

Sole Proprietorship

c)

Corporation

d)

Franchise

21.

Dan has $5,000. He wants to invest his money in the type of business that has the least amount of liability. In which type of business should he invest? (SSEMI3)

a)

corporation

b)

partnership

c)

proprietorship

22.

A business partnership has ___________ who share the risks and the profits. (SSEMI3)

a)

One owner

b)

No more than three owners

c)

Two or more owners

d)

Five or more owners

23.
In which market structure is there the MOST competition?
a)
Monopoly
b)
Oligopoly
c)
Monopolistic Competition
d)
Perfect Competition
24.

Which of these shows a decrease in the quantity demanded?

a)
b)
c)
d)
25.

The desire to have some good or service and the ability to pay for it

a)

supply

b)

equilibrium

c)

demand

d)

quantity demanded

26.

Which of these shows an increase in the quantity demanded?

a)
b)
c)
d)
27.
Iceberg & romaine are two different types of lettuce. For most consumers, iceberg and romaine are 
a)
complements
b)
substitutes
c)
inferior goods
d)
resources
28.
Which of the following best describes the Law of Demand?
a)
As price goes down, demand goes down. (and vice versa).
b)
As price goes down, demand goes up (and vice versa).
c)
As demand goes down, supply goes up.
d)
As demand goes up, price becomes elastic.
29.
A change in quantity demanded is shown
a)
at various points on the demand curve
b)
with a new demand curve drawn above or below the original demand curve
c)
with a vertical line
30.
Goods that are bought and used together are 
a)
complementary goods
b)
substitute goods
c)
income goods
d)
unrelated goods
31.
The diagram represents a
a)
increase in demand
b)
decrease in demand
32.
A new study has shown that avocados are extremely healthy. The demand for avocados has increased due to a change in
a)
market size
b)
price of a substitute good
c)
price of a complementary good
d)
tastes and preferences 
33.
The diagram represents a
a)
increase in demand
b)
decrease in demand
34.
A Fruit Shake Company just upgraded its capital equipment by buying a machine that makes fruit shakes faster and cheaper than the original machine. What effect should this have on the graph?
a)
price rises, quantity rises
b)
price drops, quantity rises
c)
price rises, quantity drops
d)
price drops, quantity drops
35.
Organizers of many high-interest sporting events such as the Super Bowl and World Cup set prices lower than equilibrium price. This would result in....
a)
a price ceiling, creating a ticket surplus
b)
a price ceiling, creating a ticket shortage
c)
a price floor, creating a ticket shortage
d)
a price floor, creating a ticket surplus
36.
If there is an increase in income for the households in this market, what is the MOST LIKELY result? 
a)
The equilibrium price will fall
b)
The demand curve will shift to the left
c)
The demand curve will shift to the right 
d)
The supply curve will become a vertical line 
37.
According to the graph, what is the equilibrium price of movie tickets?
a)
$10
b)
$600
c)
$14
d)
$20
38.
Of the following, which situation could cause the shift of the demand curve from D1 to D2 in the graph above?
a)
Yogurt prices rise due to a milk shortage.
b)
Yogurt prices fall due to a milk surplus.
c)
A new health report says that yogurt makes you sick.
d)
A new health report says that yogurt keeps you healthy. 
39.
Suppose that the government set the price of chocolate at $6 per pound. Which of the following statements best describes an effect of this price control? 
a)
There would be a surplus of 40 pounds of chocolate 
b)
Less chocolate would be demanded at $4 than at $6 
c)
Producers of chocolate would want the price set at $4 
d)
There would be a shortage of 20 pounds of chocolate 
40.
In which of the following statements are the terms demand, supply, quantity demanded, and quantity supplied used correctly? 
a)
if the demand rises, supply rises 
b)
changes in demand and supply will not cause changes in the equilibrium price 
c)
changes in price decreases qu
d)
decreases in quantity demanded and quantity supplied often occur simultaneously 
41.

Which provides the greatest incentive for entrepreneurs to take risks

a)

prices

b)

inflation

c)

interest

d)

profits

42.

Which examples would be transactions that take place in the product market of the circular flow of business? (Select 2)

a)

Bob buys a shirt from a department store in the mall.

b)

Jennie purchases a new delivery truck for her flower shop.

c)

Ronald gets his eyes checked at the optometrist.

d)

Susan hires a new stylist at her salon.

43.

In the circular flow model, households pay firms for goods and services. Firms supply households with goods and services. The purchase and supply of goods and services takes place in the

a)

After market

b)

Product market

c)

Traditional market

d)

Factor market

44.

With respect to the circular flow model, businesses provide households with which of the following?

a)

Goods, services, and incomes

b)

Labor and taxes

c)

Taxes and interest

d)

Public goods and transfer payments

45.

The circular flow model shows

a)

How we make the products in the factor market.

b)

How taxes and profits are related

c)

How government and households interact in the product and factor markets

d)

How money, resources, and goods flow between households and businesses

46.

A Broadway musical receives a very bad review. The musical’s popularity declines and the demand for tickets decrease causing the demand curve to shift

a)

To the left

b)

To the right

47.

What is the basic principle of the law of demand?

a)

The higher the price, the more people will want the good.

b)

Services are of interest in the same way that goods are.

c)

Everyone has a limited income that they will spend.

d)

When a good’s price is lower, people will buy more of it.

48.

Which graph illustrates the Law of Demand.

a)

Graph A

b)

Graph B

c)

Graph D

d)

Graph C

49.

When the income in households increases, what is the likely result?

a)

The demand curve shifts to the right

b)

The supply curve will shift to the left.

c)

The supply curve becomes vertical.

d)

The demand curve shifts to the left.

50.

When economists refer to “demand,” they mean which of the following?

a)

How much people want the product if it is free

b)

How much sellers will supply at a particular price

c)

How much satisfaction buyers receive from a purchase

d)

How much consumers will purchase at different prices

51.

A national advertising campaign by a toy company generates interest for a new robotic kitten. What will happen to the demand curve for robotic kittens?

a)

To the right

b)

To the left

52.

The price of movie tickets in a town has risen from $7 to $9. What is the most likely effect of the change in price?

a)

The quantity demanded of movie tickets will decrease.

b)

The demand curve for movie tickets will move left.

c)

The quantity demanded of movie tickets will increase.

d)

The demand curve for movie tickets will move right.

53.

If the price of an item increases, demand for its substitutes

a)

there is no way to tell

b)

is unaffected

c)

increases

d)

decreases

54.

If consumers’ incomes rise, the demand curve will shift.

a)

To the right.

b)

To the left.

55.

Which of these events would not cause a shift, but indicates a movement along a supply curve for batteries?

a)

A new law requires battery manufacturers to spend more money on environmentally sound trash disposal.

b)

Battery manufacturers raise the price of eight AA batteries from $3.50 to $3.95 a set.

c)

A new trade agreement enables stores to import foreign batteries.

d)

Workers at a major battery factory go on strike and stop production

56.

Which explains why a Supply Curve is upward sloping?

a)

the Law of Supply compares marginal costs and marginal benefits in a constant rate

b)

the Law of Supply states there is a direct relationship between price and quantity

c)

the Law of Demand states there is an indirect relationship between price and quantity

d)

the Law of Demand shows a positive relationship between two goods, creating the slope

57.

The change seen in the graph would have been caused by

a)

an increase in the number of consumers.

b)

a decrease in the price of productive resources used by producers

c)

an increase in business taxes and regulation.

d)

a decrease in technology.

58.

According to the law of supply, when the selling price of a good goes up, what happens to the quantity supplied?

a)

There is no relationship between the two.

b)

The profit made on each item goes down.

c)

The cost of production goes down.

d)

Quantity supplied will also go up

59.

If new pollution regulations are imposed on companies who make chicken nuggets, the supply of chicken nuggets will

a)

Increase

b)

Stabilize

c)

Decrease

d)

Fluctuate

60.

Which of the following is the best example of the law of supply?

a)

A food producer increases the number of acres of wheat he grows to supply a milling company.

b)

A milling company builds a new factory to process flour to export.

c)

A sandwich shop increases the number of sandwiches they supply every day when the price is increased.

d)

A catering company buys a new dishwasher to make their work easier.

61.

New technology makes the production of watches more efficient and less expensive. How will this affect the supply of watches?

a)

Decrease

b)

Fluctuate

c)

increase

d)

stablize

62.

Which statement describes the Law of Supply?

a)

As prices rise, quantity demanded decreases

b)

As prices rise, quantity supplied increases

c)

As prices rise, quantity supplied decreases

d)

As prices rise, quantity demanded increases

63.

Using the chart, determine if the quantity demanded and the quantity supplied would lead to a surplus or a shortage.

a)

shortage

b)

surplus

64.

Rent controls are set below equilibrium price. They are an example of:

a)

Market failure

b)

Price ceiling

c)

Price floor

d)

Market equilibrium price

65.

According to Figure 6.2 above, in this market, a price of $1.50 would be:

a)

The equilibrium price

b)

A subsidy

c)

A price floor

d)

A price ceiling

66.

Below is a schedule that shows the number of ink pens that are produced and demanded at different prices. At equilibrium, what will the price be for the ink pens?

a)

$ .50

b)

$3.00

c)

$4.00

d)

$2.00

67.

Refer to the table below.

What is the equilibrium price?

a)

6

b)

10

c)

8

d)

4

e)

2

68.

Price ceilings tend to result in ____________________________ while price floors tend to result in ___________________.

a)

Surpluses; shortages

b)

Shortages; surpluses

69.

According to Figure 6.2 above, at the equilibrium price, how many slices of pizza will be sold?

a)

200

b)

150

c)

250

d)

30

70.

Price ceilings are known to produce shortages in the market.

a)

True

b)

False

71.

According to Figure 6.2 above, in this market, a price of $1.00 would be

a)

A subsidy

b)

A price ceiling

c)

A price floor

d)

The equilibrium price

72.

In what type of business organization do the owners have the advantage of limited liability but the disadvantage of less control over business decisions?

a)

Perfect Competition

b)

Partnership

c)

Corporation

d)

Sole Proprietorship

73.

To set their products apart from those of their competitors, sellers in a monopolistic market use product

a)

collusion.

b)

differentiation.

c)

perfection

d)

substitution.

74.

Mr. Simpson is liable for all the debts of his company. Mr. Simpson has which type of business organization?

a)

Monopoly

b)

sole proprietorship

c)

conglomerate

d)

Corporations

75.

Darnell quits his job as a programmer and opens a bakery. He sells his computer stock, borrows additional capital from his father, rents a store and invests in ovens and mixing equipment. Darnell’s bakery is most likely an example of a:

a)

Monopoly

b)

Sole Proprietorship

c)

Partnership

d)

Corporation

76.

After working in a chain bookstore for ten years, Janice decided to leave the company and open her own bookstore. To raise capital, she sold all the stock she had bought in the chain store, rented space downtown, ordered books, stocked the shelves, and opened for business. Janice’s store is an example of

a)

a corporation

b)

sole proprietorship

c)

an oligopoly

d)

a partnership

77.

Corporations, as a separate legal entity, are subject to corporate taxes. Additionally, the stockholders in corporations are subjected to income taxes on the sale of stocks and income from dividends. This peculiar tax situation that corporations face is called

a)

"flat tax."

b)

"itemized deductions."

c)

"double taxation."

d)

"progressive income tax."

78.

Which type of business organization has the advantage of specialization but the disadvantage of unlimited liability?

a)

Corporation

b)

General Partnership

c)

Oligopoly

d)

Monopoly

79.

The shampoo market has a structure of monopolistic competition. What is one important feature of this structure?

a)

One large firm controls the market

b)

A few large firms have identical products

c)

A few large firms control the market

d)

Firms with many similar products depend on product differentiation, or branding.

80.

A market structure in which there is only one seller is known as a

a)

Monopolistic Competition

b)

Pure Competition

c)

Monopoly

d)

Oligopoly

81.

George and Jeff run a photography business as a partnership. They are trying to decide if they want to form a corporation. If they decide to incorporate, what is a disadvantage they will face?

a)

ease of startup

b)

double taxation

c)

unlimited liability

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