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WorksheetsEcon Section 1 Test Practice Problems
Total questions: 70
Worksheet time: 49mins
Which of the following would most likely increase the demand for peanut butter?
a decrease in the price of jelly, a good that is often used with peanut butte
the discovery that excessive consumption of peanut butter is harmful to one's health
crop failures that raise the price of peanuts
the invention of a new product that consumers think is a good substitute for peanut butter
Producers are willing to offer greater quantities for sale at higher prices because
they have the incentive to pay the increasing opportunity cost of resources necessary to attract them from alternative uses
they will decrease their profits by expanding production at higher prices
the government orders them to do so
lower prices attract new firms, which have higher costs of production
If DeShawn only pays $25,000 to purchase a new car even though he would have been willing to pay as much as $35,000 for the car, this indicates that
DeShawn is an irrational consumer.
The seller earned a $10,000 profit on the sale of the car.
DeShawn reaped $10,000 of consumer surplus from the transaction.
The seller received $10,000 worth of producer surplus on the transaction.
The number of people willing to buy tickets to the Super Bowl is invariably greater than the number of tickets (and seats) available. This is evidence that the price of the tickets is
higher than the equilibrium price.
equal to the equilibrium price since the number of tickets bought equals the number sold.
lower than the equilibrium price.
higher than the equilibrium price when the demand is inelastic but lower when the demand is elastic.
"A reduction in gasoline prices caused the demand for gasoline to increase. The lower gas prices also led to an increase in demand for large cars, causing their prices to rise." These statements
are essentially correct.
contain one error; the lower gasoline prices would cause an increase in the quantity demanded of gasoline, not an increase in demand.
contain one error; the lower gasoline prices would increase the quantity demanded of large cars, not the demand.
contain two errors; the lower gasoline prices would cause the quantity of gasoline demanded (rather than the demand) to increase, and the lower gasoline price would cause an increase in quantity demanded (rather than the demand) for large cars.
A cold spell in Florida extensively reduced the orange crop, and as a result, California oranges commanded a higher price. Which of the following statements best explains the situation?
The supply of Florida oranges fell, causing the supply of California oranges to increase as well as their price.
The supply of Florida oranges fell, causing the supply of California oranges to decrease and their price to increase.
The supply of Florida oranges fell, causing their price to increase and the demand for California oranges to increase.
The demand for Florida oranges was reduced by the freeze, causing an increase in the price of California oranges and a greater demand for them.
When the market for a good is in equilibrium,
consumer surplus will equal producer surplus.
the total value created for consumers will equal the total cost of production for business firms.
all units valued more highly than the opportunity cost of production will be supplied.
all units that have value will be produced, regardless of their cost of production.
Assume that corn and soybeans are alternatives that could be grown by most farmers. An increase in the price of corn will
increase the supply of corn.
increase the supply of soybeans.
decrease the supply of soybeans.
decrease the supply of corn.
If cable TV service and satellite TV service are substitutes,
a decrease in the price of cable will decrease the demand for satellite TV.
an increase in the price of cable will decrease the demand for satellite TV.
an increase in the price of cable will generally have no effect on the demand for satellite TV.
an increase in the price of cable will shift the demand curve for satellite TV to the left.
The invisible hand principle indicates that competitive markets can help promote the efficient use of resources
only if buyers and sellers really care, personally, about economic efficiency.
even when each market participant cares only about their own self interest rather than about the overall efficiency of resource use.
even if business firms fail to produce goods efficiently.
if, and only if, businesses recognize their social obligation to keep costs low and use resources wisely.
Which of the following sayings best reflects the concept of opportunity cost?
"You can't teach an old dog new tricks."
"Time is money."
"I have a baker's dozen."
"There's no business like show business."
Suppose the price of an airline ticket from Dallas to Boston costs $600. A bus ticket costs $150. Traveling by plane takes 6 hours compared with 51 hours by bus. Other things constant, an individual would gain by choosing air travel if, and only if, his time were valued at more than
$6 per hour.
$8 per hour.
$10 per hour.
$15 per hour.
The opportunity cost of an option
measures the undesirable aspects of the option.
includes only the monetary cost of the option.
is the highest-valued alternative that must be given up as the result of choosing the option.
is objective, and it will be the same for all individuals.
Which of the following will most likely occur under a system of clearly defined and enforced private property rights?
Resource owners will fail to conserve vital resources, even if they expect their supply to be highly limited in the future.
Resource owners will ignore the wishes of others, including others who would like to use the resource that is privately owned.
Resource owners will fail to consider the wishes of potential future buyers when they decide how to employ privately owned resources.
Resource owners will gain by discovering and employing their resources in ways that are highly valued by others.
If an economy is operating at a point inside the production possibilities curve,
its resources are not being used efficiently.
the curve will begin to shift inward.
the curve will begin to shift outward.
This is a trick question because an economy cannot produce at a point inside the curve.
The primary benefit that results when a nation employs its resources in accordance with the principle of comparative advantage is
an expansion in investment resulting from a reallocation of resources away from consumption.
a larger output resulting from a more efficient use of resources.
greater equality of income resulting from an increase in the number of workers.
an increase in the profitability of business enterprises resulting from an increase in investment.
"Now that Terrance paints the broad surfaces and I do the trim work, we can paint a house in three-fourths the time that it took for each of us to do both." This statement most clearly reflects
the importance of secondary effects.
the fallacy of composition.
the law of comparative advantage.
behavior inconsistent with economizing.
With voluntary exchange,
both the buyer and seller will be made better off.
the buyer will be made better off, while the seller will be made worse off.
the seller will be made better off, while the buyer will be made worse off.
both the buyer and the seller will be made worse off.
Three basic decisions must be made by all economies. What are they?
how much will be produced, when it will be produced, and how much it will cost
what the price of each good will be, who will produce each good, and who will consume each good
what will be produced, how goods will be produced, and for whom goods will be produced
how the opportunity cost principle will be applied, if and how the law of comparative advantage will be utilized, and whether the production possibilities constraint will apply
If a firm or a nation desires to maximize its output, each productive assignment should be carried out by those persons who
have the highest opportunity cost.
have a comparative advantage in the productive activity.
can complete the productive activity most rapidly.
least enjoy performing the productive activity.
What do economists mean when they state that a good is scarce?
There is a shortage or insufficient supply of the good at the existing price.
It is impossible to expand the availability of the good beyond the current amount.
People will want to buy more of the good regardless of the price of the good.
The amount of the good that people would like exceeds the supply freely available from nature.
Economic choice and competitive behavior are the result of
basic human greed.
poverty.
private ownership of resources.
scarcity.
Economic analysis assumes that
individuals act only out of selfish motives.
although individuals are at times selfish and at times unselfish, only their selfish actions may be predicted.
people are basically humanitarian, and their actions are, therefore, impossible to predict.
changes in the personal benefits and costs associated with a choice will exert a predictable influence on human behavior.
Jacob and Mason go to a diner that sells burritos for $5 and tacos for $3. They agree to split the lunch bill evenly. Mason chooses a taco. The marginal cost to Jacob of ordering a burrito instead of a taco is
$1.
$2.
$2.50.
$3.
The expression, "There's no such thing as a free lunch," implies that
everyone has to pay for his own lunch.
the person consuming a good must always pay for it.
opportunity costs are incurred when resources are used to produce goods and services.
no one has time for a good lunch anymore.
Which one of the following states a central element of the economic way of thinking?
Scarce goods are priceless.
Incentives matter--human choice is influenced in predictable ways by changes in personal costs and benefits.
The realism of the assumptions is the best test of an economic theory.
When deciding how to allocate time, the concept of opportunity cost is meaningless.
Which of the following is most clearly consistent with the basic postulate of economics regarding the reaction of people to a change in incentives.
Farmers produce fewer bushels of wheat in response to an increase in the price of wheat.
People will buy more milk at a price of $2 per gallon than at $1 per gallon.
People will buy less gas if the price of gas increases by $.20 per gallon.
People will consume more beef if the price increases from $1 to $2 per pound.
While waiting in line to buy two tacos at 75 cents each, and a medium drink for 80 cents, Emma notices that the restaurant has a value meal containing three tacos and a medium drink all for $2.50. For Emma, the marginal cost of purchasing the third taco would be
zero.
20 cents.
75 cents.
80 cents.
Which one of the following is a positive economic statement?
An increase in the minimum wage will reduce employment.
The minimum wage should be increased.
Social justice will be served by increasing the minimum wage.
Thoughtful people oppose an increase in the minimum wage.
The basic difference between macroeconomics and microeconomics is that
macroeconomics is concerned with the forest (aggregate markets), while microeconomics is concerned with the individual trees (subcomponents).
macroeconomics is concerned with policy decisions, while microeconomics applies only to theory.
microeconomics is concerned with the forest (aggregate markets), while macroeconomics is concerned with the trees (subcomponents).
Which of these is a basic choice of what economists should decide to do:
what will be produced
when it will be produced
how many will be produced
How does an increase in customer income affect the market for steak dinners at restaurants?
There will be a/ an (a) in demand.
How does an increase in customer income affect the market for steak dinners at restaurants?
At the old equilibrium point of PI, there will be a ________ because the quantity demanded is ______(greater/less)_______ than the quantity supplied.
(a)
How does an increase in customer income affect the market for steak dinners at restaurants?
To correct a shortage, sellers will begin to ______ prices.
raise
lower
Determine if the following is positive or normative:
The seller ought to raise prices.
positive
normative
Determine if the following is positive or normative:
The seller is increasing prices to combat loss of stock.
positive
normative
Which of the following goods are scarce (as opposed to limited)
food
leisure time
Human resources
technology
Which of the following goods are limited (as opposed to scarce)
education
national defense
land
natural resources
Which of the following are means of rationing
price
quantity
first come first serve
time of purchase
(a) necessitates rationing
The highest valued alternative that must be sacrificed is the (a) of the choice
(a) : gaining a specific benefit at the least possible cost
(a) matter: As personal benefits (costs) from choosing an option increase, a person will be more (less) likely to choose that option.
Economic reasoning focuses on the impact of (a) changes.
In economic reasoning, decisions will be based on _______ costs, and _______ benefits.
(a)
Although information can help us make better choices, its acquisition is (a) .
In addition to their initial impact, economic events often generate (a) effects that may be felt only with the passage of time.
The value of a good is (a) and varies with individual preferences.
The test of an economic theory is its ability to _____ and _____ events in the real world
(a)
Violation of the ceteris paribus condition can lead to erroneous conclusions.
Ceteris paribus means: (a)
Good intentions do not (a) desirable outcomes.
Association is NOT (a)
The fallacy of (a) is the erroneous view that what is true for the individual is also true for the group.
______ ______: The highest valued alternative that must be given up as a result of making a choice
(a)
(a) gain is the value of trade.
(a) costs are the time effort and other resources needed to search out, negotiate, and consummate an exchange.
A key to prosperity is clearly defined and enforced private (a) rights.
This is called the PPC, or the:
(a)
Which of the following shift the PPC?
an increase in resource base
an improvement in the rules
an advancement in technology
foreign investments
_______ and the division of labor increase output
skills
specialization
motivation
humanity
The law of ________ _______: The proposition that the joint output of trading partners will be greatest when each good is being produced by the low opportunity cost producer.
(a)
Capitalism is a type of market (a)
The law of demand is the inverse relationship between the price of a good and the quantity consumers are willing to purchase
true
false
The difference between the amount consumers are willing to pay and the amount they HAVE to pay for a good is (a) surplus
An (a) demand means a change in price leads to relatively large change in quantity demanded
A shift in the entire demand curve is a:
change in demand
change in quantity demanded
A movement along the same demand curve in response to a change in its price is a:
change in demand
change in quantity demanded
______often ignores the cost of resources owned by the firm when they calculate a firm's cost.
accounting cost
economic cost
The law of supply states there is a inverse relationship between the price of a product and the amount of it that will be supplied.
false
true
(a) will occour where the quantity demanded equals the quantity supplied.
