Font size
WorksheetsEconomics Fundamentals Quiz
Total questions: 100
Worksheet time: 50mins
What is your opportunity cost of attending college?
The price of tuition.
The price of books.
The price of housing.
The foregone wages that you could earn in a full-time job.
A marginal change is one that:
is not important for public policy.
incrementally alters an existing plan.
makes an outcome inefficient.
does not influence incentives.
Governments may intervene in a market economy in order to:
protect property rights.
correct a market failure due to externalities.
achieve a more competitive environment.
All of the above.
A point inside the production possibilities frontier is:
efficient but not feasible.
feasible but not efficient.
both efficient and feasible.
neither efficient nor feasible.
The slope of the production possibility frontier is the:
marginal cost.
transactional cost.
sunk cost.
opportunity cost.
The producer who can create more output with the same inputs has a:
comparative advantage.
relative advantage.
absolute advantage.
no advantage.
The producer with the lowest opportunity cost has a:
comparative advantage.
relative advantage.
absolute advantage.
no advantage.
Successful trade decreases opportunity cost and increases comparative advantage through:
utilization.
specialization.
facilitation.
degradation.
If the marginal benefit is greater than the marginal cost, then you should:
do nothing.
do more.
do less.
do a dance.
In the Circular Flow Model, the two decision-makers are:
households and firms.
producers and consumers.
buyers and sellers.
workers and employers.
A positive statement describes the world “how it is” and a __________ statement describes the world “how it should be.”
normative
descriptive
factual
theoretical
The demand curve has a __________ slope and the supply curve has a __________ slope.
downward; upward
upward; downward
flat; steep
steep; flat
A point that is exactly on the production possibility frontier is considered __________, while a point that is inside of the production possibility frontier is considered __________.
efficient; inefficient
inefficient; efficient
feasible; infeasible
infeasible; feasible
The demand curve represents the marginal benefit or marginal cost of a buyer’s willingness to buy or willingness to produce.
marginal benefit
marginal cost
total benefit
total cost
An increase in technology will shift the supply curve:
to the right/out
to the left/in
not at all
up
If income increases, we expect supply or demand for normal goods to shift:
right/out
left/in
not at all
up
If income decreases, we expect supply or demand for inferior goods to shift:
right/out
left/in
not at all
up
If the price of a complement decreases, we expect supply or demand for the existing good to shift:
right/out
left/in
not at all
up
If the price of a substitute increases, we expect supply or demand for the existing good to shift:
right/out
left/in
not at all
up
If a country allows trade and, for a certain good, the domestic price without trade is lower than the world price, the country will be:
an exporter of the good.
an importer of the good.
neither an exporter nor an importer.
unable to trade.
When a country allows trade and becomes an exporter of a good:
domestic producers gain and domestic consumers lose.
domestic producers lose and domestic consumers gain.
domestic producers and domestic consumers both gain.
domestic producers and domestic consumers both lose.
When a country allows trade and becomes an importer of a good, what happens to consumer surplus and producer surplus?
consumer surplus and producer surplus both increase.
consumer surplus and producer surplus both decrease.
consumer surplus increases and producer surplus decreases.
consumer surplus decreases and producer surplus increases.
If a paper manufacturer does not bear the entire cost of the dioxin it emits, what will happen?
emit a lower level of dioxin than is socially efficient.
emit a higher level of dioxin than is socially efficient.
emit an acceptable level of dioxin.
not emit any dioxin than is socially efficient.
Which of the following represents a way that a government can help the private market to internalize an externality?
taxing goods that have negative externalities
subsidizing goods that have positive externalities
The government cannot improve upon the outcomes of private markets.
Both a and b are correct
The difference between social cost and private cost is a measure of the:
loss in profit to the seller as the result of a negative externality.
cost of an externality.
cost reduction when the negative externality is eliminated.
cost incurred by the government when it intervenes in the market.
Internalizing a positive externality will cause the demand curve to:
shift up.
shift down.
become more elastic.
remain unchanged.
Both public goods and common resources are:
rival in consumption.
nonrival in consumption.
excludable.
nonexcludable.
A free rider is a person who:
will only purchase a product on sale.
receives the benefit of a good without paying for it.
can produce a good at no cost.
takes advantage of tax loop-holes to lower his taxes.
If the use of a common resource is not regulated, what is likely to happen?
it cannot be used by anyone.
the economy will end up with too much of a good thing.
it becomes a private good.
it will be overused.
The firm's efficient scale is the quantity of output that minimizes:
average total cost.
average fixed cost.
average variable cost.
marginal cost.
Marginal cost is equal to average total cost when:
average variable cost is falling.
average fixed cost is rising.
marginal cost is at its minimum.
average total cost is at its minimum.
Whenever marginal cost is greater than average total cost, what happens?
marginal cost is rising.
marginal cost is falling.
average total cost is rising.
average total cost is falling.
If a firm produces nothing, which of the following costs will be zero?
total cost
fixed cost
opportunity cost
variable cost
Marginal cost is equal to average total cost when:
average variable cost is falling.
average fixed cost is rising.
marginal cost is at its minimum.
average total cost is at its minimum.
In calculating the economic profit of her catering business, the $25,000 income that Susan gave up is counted as part of the catering firm's:
total revenue.
opportunity costs.
explicit costs.
marginal costs.
In general, elasticity is a measure of:
the extent to which advances in technology are adopted by producers.
the extent to which a market is competitive.
how firms’ profits respond to changes in market prices.
how much buyers and sellers respond to changes in market conditions.
If the quantity demanded of a certain good responds only slightly to a change in the price of the good, then the:
demand for the good is said to be elastic.
demand for the good is said to be inelastic.
law of demand does not apply to the good.
demand curve for the good shifts only slightly in response to a change in price.
If a price ceiling is not binding (or effective), then:
the equilibrium price is above the price ceiling.
the equilibrium price is below the price ceiling.
it has no legal enforcement mechanism.
None of the above is correct because all price ceilings must be binding.
Which of the following observations would be consistent with the imposition of a binding price ceiling on a market? After the price ceiling becomes effective,
a smaller quantity of the good is bought and sold.
a smaller quantity of the good is demanded.
a larger quantity of the good is supplied.
the price rises above the previous equilibrium.
Consumer surplus is:
the amount a buyer is willing to pay minus the amount the buyer actually pays for it.
the amount a buyer is willing to pay minus the cost of producing the good.
the amount the quantity supplied of a good exceeds the quantity demanded of the good.
a buyer's willingness to pay for a good plus the price of the good.
Total Social Surplus is maximized when:
price floors ensure producers receive high prices.
governments intervene in markets.
resources are efficiently allocated.
price ceilings ensure consumers pay low prices.
When a government removes a tax on a good, then the quantity of the good sold will:
increase.
decrease.
not change.
All of the above are possible.
The relative share of the tax burden depends on:
who the government wants to tax.
the amount of deadweight loss.
the relative elasticities of supply and demand.
the size of the tax.
If the price elasticity of demand is less than 1, you can increase or decrease price and expect that the total revenue will:
increase.
decrease.
stay the same.
not be affected.
If the price elasticity of demand is greater than 1, you can increase or decrease price and expect that the total revenue will:
increase.
decrease.
stay the same.
not be affected.
A price floor (that is binding) will create a:
surplus.
shortage.
equilibrium.
deadweight loss only.
A price ceiling (that is binding) will create a:
surplus.
shortage.
equilibrium.
deadweight loss only.
As a government policy maker, you can always increase the size of a tax to increase the size of tax revenue. True OR False.
True
False
Only if demand is elastic
Only if supply is inelastic
If you seek to reduce deadweight loss, then you should tax an elastic OR inelastic good.
Elastic
Inelastic
Both equally
Neither
When thinking about income elasticity, if the percent change of income increased then we expect that the percent change in quantity demanded of an inferior good would:
increase
decrease
stay constant
become negative
When thinking about cross price elasticity, if the percent change in the price of one good negatively affects quantity demanded of another good then we would say the goods are:
substitutes
complements
unrelated
inferior
When thinking about income elasticity, if the percent change of income increased then we expect that the percent change in quantity demanded of a normal good would:
increase
decrease
stay constant
become negative
When thinking about cross price elasticity, if the percent change in the price of one good positively affects quantity demanded of another good then we would say the goods are:
substitutes
complements
unrelated
inferior
When a tax is levied, the price consumers pay (Pd) is higher OR lower than the original market price, and the price suppliers receive (Ps) is higher OR lower than the original market price.
Pd is higher, Ps is higher
Pd is higher, Ps is lower
Pd is lower, Ps is higher
Pd is lower, Ps is lower
What is the definition of inflation?
A decrease in the general price level of goods and services
An increase in the general price level of goods and services
A government policy to reduce unemployment
A rise in the value of currency
Which of the following is considered a factor of production?
Money
Labor
Stocks
Advertising
What does GDP stand for?
Gross Domestic Product
General Demand Price
Government Debt Percentage
Global Development Plan
What is a market economy?
An economy where the government controls all production
An economy where supply and demand determine prices
An economy with no private ownership
An economy based only on agriculture
What is opportunity cost?
The cost of producing one more unit of a good
The value of the next best alternative foregone
The total money spent on goods and services
The profit made from selling a product
What is the first principle of economics?
People face trade-offs
Markets are always efficient
Government controls the economy
Money is unlimited
The principle that “people respond to incentives” means:
People ignore costs
People change behavior when costs or benefits change
People always act irrationally
People never change their behavior
What does "opportunity cost" refer to?
The money spent on a purchase
The value of the next best alternative foregone
The total cost of production
The profit earned
Positive economics deals with:
What ought to be
What is and can be tested
Moral judgments
Government policies only
Normative economics involves:
Objective facts
Value judgments about what should be
Scientific experiments
Market equilibrium
Interdependence in economics means:
Individuals and countries rely on each other
Everyone is independent
Markets don’t interact
Trade is harmful
Gains from trade occur because:
Everyone produces everything themselves
Specialization increases efficiency and total output
Trade reduces total output
Trade causes shortages
Price elasticity of demand measures:
How quantity demanded changes when price changes
Total sales revenue
Consumer satisfaction
Government intervention
If two goods are complements, a decrease in the price of one will:
Increase demand for the other
Decrease demand for the other
Have no effect
Increase supply
Substitute goods are:
Goods used together
Goods that can replace each other
Goods with no relation
Goods that cause negative externalities
A price ceiling set below equilibrium causes:
Surplus
Shortage
No effect
Increased supply
A price floor set above equilibrium causes:
Surplus
Shortage
No effect
Decreased demand
Consumer surplus is:
The difference between what consumers are willing to pay and what they actually pay
The total revenue of producers
The cost of production
Government tax revenue
Producer surplus is:
The difference between the price producers receive and their cost
The consumer’s gain
The total market supply
The government’s profit
Deadweight loss occurs when:
Markets are perfectly efficient
There is a loss of total surplus due to market distortions
Consumer surplus is maximized
Producers earn maximum profit
Total surplus is:
The sum of consumer and producer surplus
Only consumer surplus
Only producer surplus
Government revenue
Private goods are:
Rival and excludable
Non-rival and non-excludable
Rival and non-excludable
Non-rival and excludable
Club goods are:
Non-rival but excludable
Rival and non-excludable
Rival and excludable
Non-rival and non-excludable
A negative externality is:
A benefit to a third party
A cost imposed on a third party
A government subsidy
A private cost
A positive externality is:
A cost to society
A benefit to a third party
A tax
A monopoly profit
Which is an example of a third party in economics?
Producer
Consumer
Someone affected but not directly involved in a transaction
Government official
The government can correct negative externalities by:
Imposing taxes on producers
Ignoring the problem
Increasing subsidies
Removing regulations
Costs of production include:
Only fixed costs
Fixed and variable costs
Only variable costs
Government taxes only
Economies of scale occur when:
Costs per unit increase as output increases
Costs per unit decrease as output increases
Production is inefficient
Monopolistic competition is characterized by:
Many firms selling identical products
Many firms selling differentiated products
One firm controlling the market
Firms cooperating to set prices
A monopoly is:
A market with many sellers
A single seller with no close substitutes
What does the principle "People Face Trade-offs" mean?
People can have everything they want without sacrificing anything
To get one thing, people must give up something else
People always make irrational decisions
Trade-offs only apply to businesses
The principle "The Cost of Something Is What You Give Up to Get It" refers to:
Monetary price only
Opportunity cost
Market value
Production cost
According to the principle "Rational People Think at the Margin," decisions are made by:
Considering the total cost and benefit
Comparing marginal benefits and marginal costs
Ignoring costs
Random choice
The principle "People Respond to Incentives" implies:
People never change their behavior
Behavior changes when costs or benefits change
Incentives are irrelevant
People always act irrationally
"Trade Can Make Everyone Better Off" means:
Trade benefits only the rich
Trade allows specialization and increases total production
Trade decreases overall wealth
Trade is always harmful
The principle "Markets Are Usually a Good Way to Organize Economic Activity" suggests:
Governments should always control markets
Markets allocate resources efficiently through prices
Markets are never efficient
Prices have no role in markets
"Governments Can Sometimes Improve Market Outcomes" means:
Government intervention is always harmful
Government can correct market failures like externalities
Governments should control all markets
Markets never fail
Positive economics deals with:
What ought to be
What is and can be tested
Opinions and values
Government policies only
Normative economics involves:
Objective analysis
Value judgments about what should be
Scientific experiments
Data collection only
Specialization and trade allow countries to:
Produce less efficiently
Consume beyond their production possibilities
Avoid trade deficits
Produce everything themselves
Price elasticity of demand measures:
How quantity demanded changes with income
How quantity demanded changes with price
How supply changes with price
How price changes with demand
If demand is elastic, a price increase will:
Increase total revenue
Decrease total revenue
Have no effect on total revenue
Increase quantity demanded
Cross-price elasticity between two goods is negative, they are:
Substitutes
Complements
Unrelated
Inferior goods
Income elasticity of demand measures:
Change in quantity demanded with price
Change in quantity demanded with income
Change in price with income
Change in supply with income
If the price of coffee rises and the demand for tea increases, coffee and tea are:
Complements
Substitutes
Unrelated
Inferior goods
