WorksheetsEconomics Quiz
Total questions: 92
Worksheet time: 51mins
The term used to describe a situation in which markets do not allocate resources efficiently is
Refer to Table 2-2. What is the opportunity cost to Batterland of increasing the production of pancakes from 150 to 300?
Which of the following would most likely serve as an example of a monopoly?
(a)
The term used to describe a situation in which markets do not allocate resources efficiently is
economic meltdown
market failure
equilibrium
the effect of the invisible hand
Prices direct economic activity in a market economy by
influencing the actions of buyers and sellers
reducing scarcity of the goods and services produced
eliminating the need for government intervention
allocating goods and services produced in the most equitable way
The term market failure refers to
a. a situation in which the market on its own fails to allocate resources efficiently.
b. an unsuccessful advertising campaign which reduces demand for a product.
c. a situation in which competition among firms becomes ruthless.
d. a firm which is forced out of business because of losses.
The terms equality and efficiency are similar in that they both refer to benefits to society. However they are different in that
equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources
equality refers to maximizing benefits from scarce resources and efficiency refers to uniform distribution of those benefits
equality refers to everyone facing identical tradeoffs and efficiency refers to the opportunity cost of the benefits
equality refers to the opportunity cost of the benefits and efficiency refers to everyone facing identical tradeoffs
When economists make normative statements, they are
a. speaking as scientists.
b. speaking as policy advisers.
c. making claims about how the world is.
d. revealing that they are very liberal in their views of how the world works.
An increase in the overall level of prices in an economy is referred to as
a. economic growth.
b. inflation.
c. monetary policy.
d. supply shocks.
When economists attempt to simplify the real world and make it easier to understand they make
a. assumptions.
b. mistakes in judgment.
c. predictions.
d. evaluations.
Communist countries worked on the premise that economic well-being could be best attained by
a market economy
a strong reliance on prices and individuals' self-interests
a system of large privately-owned firms
the actions of government central planners
The invisible hand refers to
a. how central planners made economic decisions.
b. how the decisions of households and firms lead to desirable market outcomes.
c. the control that large firms have over the economy.
d. government regulations without which the economy would be less efficient.
The slope of a line is equal to
a. the change in the value of x divided by the change in the value of y.
b. the change in the value of y divided by the change in the value of x.
c. the horizontal distance divided by the vertical distance.
d. the value of y divided by the value of x.
Households and economies have each of the following in common EXCEPT both
a. must allocate scarce resources.
b. face many decisions.
c. must allocate the goods and services they produce.
d. must have a central decision maker.
Senator Smart, who understands economic principles, is trying to convince workers in her district that trade with other countries is beneficial. Senator Smart should argue that trade can be beneficial
a. only if it allows us to obtain things that we couldn't make for ourselves.
b. because it allows specialization, which increases total output.
c. to us if we can gain and the others involved in the trade lose.
d. in only a limited number of circumstances because others are typically self-interested.
In considering how to allocate its scarce resources among its various members, a household considers
a. (i) each member's abilities.
b. (ii) each member's efforts.
c. (iii) each member's desires.
d. all of (i), (ii), and (iii).
Moira decides to spend two hours taking a nap rather than attending her classes. Her opportunity cost of napping is
a. the value of the knowledge she would have received had she attended class.
b. the $30 she could have earned if she had worked at her job for those two hours.
c. the value of her nap less the value of attending class.
d. nothing, since she would valued sleep more than attendance at class.
The production possibilities frontier is a graph that shows the various combinations of output that an economy
a. should produce.
b. wants to produce.
c. can produce.
d. demands.
Which of the following is not correct?
a. Economists use some familiar words in specialized ways.
b. Economics has its own language and its own way of thinking, but few other fields of study do.
c. Supply, demand, elasticity, comparative advantage, consumer surplus, and deadweight loss are all terms that are part of the economist's language.
d. The value of the economist's language lies in its ability to provide you with a new and useful way of thinking about the world in which you live.
Suppose an economy produces two goods, food and machines. This economy always operates on its production possibilities frontier. Last year, it produced 50 units of food and 30 machines. This year it experienced a technological advance in its machine-making industry. As a result, this year the society wants to produce 55 units of food and 30 machines. Which of the following statements is correct?
a. Because the technological advance occurred in the machine-making industry, it will not be possible to increase food production without reducing machine production below 30.
b. Because the technological advance occurred in the machine-making industry, increases in output can only occur in the machine industry.
c. In order to increase food production in these circumstances without reducing machine production, the economy must reduce inefficiencies.
d. The technological advance reduced the amount of resources needed to produce 30 machines, so these resources could be used to produce more food.
The slope of a steep upward-sloping line will be a
small positive number.
large positive number.
small negative number.
large negative number.
The two basic reasons why economists often appear to give conflicting advice to policymakers are differences in
a. opinions and education.
b. opinions and values.
c. scientific judgments and education.
d. scientific judgments and values.
A tradeoff exists between a clean environment and a higher level of income in that
studies show that individuals with higher levels of income actually pollute less than low-income individuals
to pay for pollution clean-up, the government must increase taxes which lowers income
laws that reduce pollution raise costs of production and reduce incomes
by employing individuals to clean up pollution, employment and income both rise
Productivity is defined as the
amount of goods and services produced from each unit of labor input
number of workers required to produce a given amount of goods and services
amount of labor that can be saved by replacing workers with machines
actual amount of effort workers put into an hour of working time
Suppose a typical worker in France can produce 32 units of product in an eight-hour day, while a typical worker in Germany can produce 30 units of product in a 10-hour day. We can conclude that
a. worker productivity in Germany is higher than in France.
b. the standard of living will likely be higher in France than in Germany.
c. productivity is 4 units per hour for the German worker and 3 units per hour for the French worker.
d. there will be no difference between the standard of living in France and Germany.
In a market economy, who makes the decisions that guide most economic activities?
firms only
households only
firms and households
government
Trade between countries tends to
reduce both competition and specialization.
reduce competition and increase specialization.
increase competition and reduce specialization.
increase both competition and specialization.
In considering how to allocate its scarce resources among its various members, a household considers
(i) each member's abilities
(ii) each member's efforts
(iii) each member's desires
all of (i), (ii), and (iii)
Mitch has $100 to spend and wants to buy either a new amplifier for his guitar or a new mp3 player to listen to music while working out. Both the amplifier and the mp3 player cost $100, so he can only buy one. This illustrates the basic concept that
a. trade can make everyone better off.
b. people face trade-offs
c. rational people think at the margin.
d. people respond to incentives.
Factors of production are
a. used to produce goods and services.
b. also called output.
c. abundant in most economies.
d. assumed to be owned by firms in the circular-flow diagram.
Another term for factors of production is
inputs.
output.
goods.
services.
The phenomenon of scarcity stems from the fact that
most economies' production methods are not very good.
in most economies, wealthy people consume disproportionate quantities of goods and services.
governments restrict production of too many goods and services.
resources are limited.
If Japan chooses to engage in trade, it
will only benefit if it trades with countries that produce goods Japan cannot produce
cannot benefit if it trades with less developed countries
should first attempt to produce the good itself
can benefit by trading with any other country
Refer to Figure 2-7. In order to reach point C, the economy would have to
a. (i) acquire more resources or experience a technological advance.
b. (ii) begin using its available resources more efficiently than it is currently using them.
c. (iii) shift resources away from the production of ribeye steaks and toward production of books.
d. None of (i), (ii), and (iii) are correct; the economy will never be able to reach point C.
Which of the following principles is not one of the four principles of individual decision making?
People face tradeoffs
Trade can make everyone better off
People respond to incentives
Rational people think at the margin
The business cycle is measured by the
(i) production of goods and services.
(ii) number of people employed.
(iii) the interest rate.
both (i) and (ii).
A model can be accurately described as a
a. theoretical abstraction with very little value.
b. device that is useful only to the people who created it.
c. realistic and carefully constructed theory.
d. simplification of reality.
As a result of a successful attempt by government to cut the economic pie into more equal slices
it is easier to cut the pie, and therefore the economy can produce a larger pie
those who earn more income pay less in taxes
the pie gets smaller, and there will be less pie overall
government will spend too much time cutting and it causes the economy to lose the ability to produce enough pie for everyone
Economics deals primarily with the concept of
a. scarcity.
b. money.
c. poverty.
d. banking.
When two variables have a positive correlation,
(i) when the x-variable increases, the y-variable decreases.
(ii) when the x-variable decreases, the y-variable increases.
(iii) when the x-variable increases, the y-variable increases.
More than one of (i), (ii), and (iii) is correct.
Positive statements are
a. prescriptive.
b. claims about how the world should be.
c. claims about how the world is.
d. made by economists speaking as policy advisers.
Which of the following statements best represents the principle represented by the adage, "There is no such thing as a free lunch"?
a. Melissa can attend the concert only if she takes her sister with her.
b. Greg is hungry and homeless.
c. Brian must repair the tire on his bike before he can ride it to class.
d. Kendra must decide between going to Colorado or Cancun for spring break.
To promote good economic outcomes, policymakers should strive to enact policies that
(i) enhance productivity
(ii) enhance individuals' market power
(iii) result in a rapidly-growing quantity of money
All of (i), (ii), and (iii) are correct
In an economy in which decisions are guided by prices and individual self-interest, there is
a. the potential to achieve efficiency in production.
b. a strong need for government intervention in the market.
c. less efficiency than would be observed in a centrally-planned economy.
d. more need for a strong legal system to control individual greed than would be needed in a centrally-planned economy.
The field of economics is traditionally divided into two broad subfields,
a. national economics and international economics.
b. consumer economics and producer economics.
c. private sector economics and public sector economics.
d. microeconomics and macroeconomics.
The production possibilities frontier is a graph that shows the various combinations of output that an economy
a. should produce.
b. wants to produce.
c. can produce.
d. demands.
In the circular-flow diagram, which of the following items flows from households to firms through the markets for the factors of production?
a. goods and services
b. land, labor, and capital
c. dollars spent on goods and services
d. wages, rent, and profit
Factors of production are
a. the mathematical calculations firms make in determining their optimal production levels.
b. social and political conditions that affect production.
c. the physical relationships between economic inputs and outputs.
d. inputs into the production process.
Most economists believe that an increase in the quantity of money results in
(i) an increase in the demand for goods and services
(ii) lower unemployment in the short run
(iii) higher inflation in the long run
All of (i), (ii), and (iii) are correct
When society requires that firms reduce pollution, there is
a tradeoff because of reduced incomes to the firms' owners and workers
a tradeoff only if some firms are forced to close
no tradeoff, since the cost of reducing pollution falls only on the firms affected by the requirements
no tradeoff, since everyone benefits from reduced pollution
A demand curve shows the relationship
a. between income and quantity demanded.
b. between price and income.
c. between price and quantity demanded.
d. among income, price, and quantity demanded.
Economists build economic models by
a. generating data.
b. conducting controlled experiments in a lab.
c. making assumptions.
d. reviewing statistical forecasts.
Economists use models in order to
a. learn how the economy works.
b. make their profession appear more precise.
c. make economics difficult for students.
d. make sure that all of the details of the economy are included in their analysis.
Who gets scarce resources in a market economy?
a. the government
b. whoever the government decides gets them
c. whoever wants them
d. whoever is willing and able to pay the price
Refer to Figure 2-2. Alisha regularly buys fruits and vegetables at a grocery store. Santo regularly pays a lawn-care company to mow his lawn. If the flow of fruits and vegetables from the grocery store to Alisha is represented by an arrow from Box C to Box B of this circular-flow diagram, then the money paid by Santo to the lawn-care company is represented by an arrow
a. from Box A to Box D.
b. from Box B to Box C.
c. from Box C to Box B.
d. from Box D to Box A.
Suppose that Carolyn receives a pay increase. We would expect
a. to observe Carolyn moving down and to the right along her given demand curve.
b. Carolyn's demand for inferior goods to decrease.
c. Carolyn will go shopping at a clothing store worse than before.
d. Carolyn's demand for normal goods to decrease.
The tradeoff between inflation and unemployment
(i) implies that policies designed to reduce unemployment also reduce inflation
(ii) was eliminated by improved economic policies in the 1900s
(iii) is a long-run tradeoff, persisting for decades, according to most economists
None of (i), (ii), and (iii) are correct
In a market economy, supply and demand determine
both the quantity of each good produced and the price at which it is sold.
the quantity of each good produced, but not the price at which it is sold.
the price at which each good is sold, but not the quantity of each good produced.
neither the quantity of each good produced nor the price at which it is sold.
Which of the following transactions does not take place in the markets for factors of production in the circular-flow diagram?
a landowner leases land to a farmer
a farmer hires a teenager to help with harvest
a retired farmer sells his combine to a new farmer
a woman buys corn for dinner
Refer to Figure 2-9, Panel (a). In order to gain 2 radios by moving from point S to point T, society must sacrifice
a. (i) 6 televisions.
b. (ii) employment.
c. (iii) efficiency.
d. More than one of (i), (ii), and (iii) is correct.
Other things equal, when the price of a good falls, the
quantity demanded of the good decreases.
supply decreases.
quantity supplied of the good decreases.
demand increases.
An economic theory about international trade that is based on the assumption that there are only two countries trading two goods
is useless, since the real world has many countries trading many goods.
can be useful only in situations involving two countries and two goods.
can be useful in the classroom, but is useless in the real world.
can be useful in helping economists understand the complex world of international trade involving many countries and many goods.
Which of the following is not held constant in a demand schedule?
Income
Tastes
Price
Expectations
A movement downward and to the left along a supply curve is called
an increase in supply.
a decrease in supply.
a decrease in quantity supplied.
an increase in quantity supplied.
In a market economy,
supply determines demand and demand, in turn, determines prices.
demand determines supply and supply, in turn, determines prices.
the allocation of scarce resources determines prices and prices, in turn, determine supply and demand.
supply and demand determine prices and prices, in turn, allocate the economy's scarce resources.
Refer to Figure 2-2. Boxes C and D represent
a. households and firms.
b. the goods and services market and the factors of production market.
c. the goods and services market and the financial market.
d. households and government.
Which of these statements best represents the law of demand?
When buyers' tastes for a good increase, they purchase more of the good.
When income levels increase, buyers purchase more of most goods.
When the price of a good decreases, buyers purchase more of the good.
When buyers' demands for a good increase, the price of the good increases.
Today's demand curve for gasoline could shift in response to
(i) a change in today's price of gasoline.
(ii) a change in the expected future price of gasoline.
(iii) a change in the number of sellers of gasoline.
All of (i), (ii), and (iii) are correct.
Which of the following is not an example of a positive, as opposed to normative, statement?
a. Higher gasoline prices will reduce gasoline consumption.
b. Equality is more important than efficiency.
c. Trade restrictions lower our standard of living.
d. If a nation wants to avoid inflation, it will restrict the growth rate of the quantity of money.
Two goods are substitutes if a decrease in the price of one good
a. increases the demand for the other good.
b. reduces the demand for the other good.
c. reduces the quantity demanded of the other good.
d. increases the quantity demanded of the other good.
What will happen in the rice market now if sellers expect higher rice prices in the near future?
The supply of rice will increase.
The supply of rice will decrease.
The supply of rice will be unaffected.
The demand for rice will decrease.
You are considering staying in college another semester so that you can complete a major in economics. In deciding whether or not to stay you should
compare the total cost of your education to the total benefits of your education.
compare the total cost of your education to the benefits of staying one more semester.
compare the cost of staying one more semester to the benefits of staying one more semester.
compare the total benefits of your education to the cost of staying one more semester.
When a society cannot produce all the goods and services people wish to have it is said that the economy is experiencing
scarcity
communism
externalities
market failure
In a market economy, supply and demand are important because they
a. (i) play a critical role in the allocation of the economy's scarce resources.
b. (ii) determine how much of each good gets produced.
c. (iii) can be used to predict the impact on the economy of various events and policies.
d. All of (i), (ii), and (iii) are correct.
The forces that make market economies work are
work and leisure.
politics and religion.
supply and demand.
taxes and government spending.
In a market economy, supply and demand determine
both the quantity of each good produced and the price at which it is sold.
the quantity of each good produced, but not the price at which it is sold.
the price at which each good is sold, but not the quantity of each good produced.
neither the quantity of each good produced nor the price at which it is sold.
Russell spends an hour studying instead of playing tennis. The opportunity cost to him of studying is
a. the improvement in his grades from studying for the hour.
b. the improvement in his grades from studying minus the enjoyment of playing tennis.
c. the enjoyment and exercise he would have received had he played tennis.
d. zero. Since Russell chose to study rather than to play tennis, the value of studying must have been greater than the value of playing tennis.
Hue decides to spend three hours working overtime rather than watching a video with her friends. She earns $8 an hour. Her opportunity cost of working is
the $24 she earns working.
the $24 minus the enjoyment she would have received from watching the video.
the enjoyment she would have received had she watched the video.
nothing, since she would have received less than $24 of enjoyment from the video.
What will happen to the equilibrium price of new textbooks if more students attend college, paper becomes cheaper, textbook authors accept lower royalties, and fewer used textbooks are sold?
a. Price will rise.
b. Price will fall.
c. Price will stay exactly the same.
d. The price change will be ambiguous.
Which of the following is correct?
a. A horizontal line has an infinite slope, and a vertical line has a zero slope.
b. A horizontal line has a slope of 1, and a vertical line has a slope of -1.
c. A horizontal line has a zero slope, and a vertical line has an infinite slope.
d. A horizontal line has a slope of -1, and a vertical line has a slope of 1.
Two goods are complements when a decrease in the price of one good
decreases the quantity demanded of the other good.
decreases the demand for the other good.
increases the quantity demanded of the other good.
increases the demand for the other good.
In a competitive market, the quantity of a product produced and the price of the product are determined by
(i) buyers.
(ii) sellers.
(iii) both buyers and sellers.
None of (i), (ii), and (iii) is correct.
The slope of a line is equal to
a. the change in the value of x divided by the change in the value of y.
b. the change in the value of y divided by the change in the value of x.
c. the horizontal distance divided by the vertical distance.
d. the value of y divided by the value of x.
If the price of a good is low,
a. firms would increase profit by increasing output.
b. the quantity supplied of the good could be zero.
c. the supply curve for the good will shift to the left.
d. firms can and should raise the price of the product.
In the circular-flow diagram, firms produce
a. (i) goods and services using factors of production.
b. (ii) output using inputs.
c. (iii) factors of production using goods and services.
d. Both (i) and (ii) are correct.
Which of the following statements is correct?
a. Buyers determine supply and sellers determine demand.
b. Buyers determine demand and sellers determine supply.
c. Buyers determine both demand and supply.
d. Sellers determine both demand and supply.
Which of the following events would cause the price of oranges to fall?
(i) There is a shortage of oranges.
(ii) An article is published in which it is claimed that tangerines cause a serious disease, and oranges and tangerines are substitutes.
(iii) The price of land throughout Florida decreases, and Florida produces a significant proportion of the nation's oranges.
All of (i), (ii), and (iii) are correct.
The law of demand states that, other things equal,
an increase in price causes quantity demanded to increase.
an increase in price causes quantity demanded to decrease.
an increase in quantity demanded causes price to increase.
an increase in quantity demanded causes price to decrease.
The marginal benefit John gets from eating a fourth cheeseburger at a picnic is
a. the total benefit John gets from eating four cheeseburgers minus the total benefit John gets from eating three cheeseburgers.
b. the same as the total benefit of eating four cheeseburgers.
c. less than the marginal cost of eating the fourth cheeseburger since he chose to eat the fourth cheeseburger.
d. the total benefit John gets from eating five cheeseburgers minus the total benefit John gets from eating four cheeseburgers.
Two goods are substitutes when a decrease in the price of one good
decreases the demand for the other good.
decreases the quantity demanded of the other good.
increases the demand for the other good.
increases the quantity demanded of the other good.
In the circular-flow diagram,
a. (i) firms own the factors of production.
b. (ii) the factors of production are labor, land, and capital.
c. (iii) the factors of production are also called 'output.'
d. All of (i), (ii), and (iii) are correct.
An increase in the price of rubber coincides with an advance in the technology of tire production. As a result of these two events,
(i) the demand for tires decreases and the supply of tires increases.
(ii) the demand for tires is unaffected and the supply of tires decreases.
(iii) the demand for tires is unaffected and the supply of tires increases.
None of (i), (ii), and (iii) is necessarily correct.
