WorksheetsEconomics Principles Worksheet
Total questions: 95
Worksheet time: 48mins
Households and societies face many decisions because
resources are scarce.
goods and services are not scarce.
incomes fluctuate with business cycles.
people, by nature, tend to disagree.
The study of how society manages its scarce resources is known as
production methods.
Economics.
how households decide who performs which tasks.
the interaction of business and government.
The word “equality” is used to describe a situation in which
each member of society has the same income.
each member of society has access to abundant quantities of goods and services, regardless of his or her income.
society is getting the maximum benefits from its scarce resources.
society's resources are used efficiently.
The property of society getting the most it can from its scarce resources is called
equity.
efficiency.
equality.
efficacy.
People say that "There is no such thing as a free lunch" means
even people on welfare have to pay for food.
the cost of living is always increasing.
people face tradeoffs.
all costs are included in the price of a product.
The term opportunity cost is known as
the number of hours needed to earn money to buy the item.
what you give up to get that item.
usually less than the dollar value of the item.
the dollar value of the item.
A rational decision maker takes an action only if the
marginal benefit is less than the marginal cost.
marginal benefit is greater than the marginal cost.
average benefit is greater than the average cost.
marginal benefit is greater than both the average cost and the marginal cost.
“When the price of an apple rises, people decide to eat fewer apples” means people respond to
laws.
incentives.
punishments more than rewards.
rewards more than punishments.
Which of the following statements about trade is true EXCEPT?
Trade increases competition.
With trade, one country wins and one country loses.
Bulgaria can benefit, potentially, from trade with any other country.
Trade allows people to buy a greater variety of goods and services at lower cost.
The invisible hand is found by
Isaac Newton.
Adam Smith.
Philip Kotler.
Karl Marx.
Market failure causes
externalities and market power.
market power and incorrect forecasts of consumer demand.
externalities and foreign competition.
incorrect forecasts of consumer demand and foreign competition.
Increasing the amount of money in the economy results in
the income effect.
inflation.
deflation.
the substitution effect.
Which following factor explains differences in living standards across countries?
the quantity of money
the level of unemployment
productivity
equality
What is the most correct statement about the relationship between inflation and unemployment?
In the short run, falling inflation is associated with falling unemployment.
In the short run, falling inflation is associated with rising unemployment.
In the long run, falling inflation is associated with falling unemployment.
In the long run, falling inflation is associated with rising unemployment.
Economists like mathematicians, physicists, and biologists because they
make use of the scientific method.
try to address their subject with a scientist’s objectivity.
devise theories, collect data, and then analyze these data in an attempt to verify or refute their theories.
All of the above are correct.
Economists make assumptions to (0.2 point)
study the earth’s gravity.
simplify a complex world easier to understand.
make it easier to teach economic concepts and analysis.
illustrate and evaluate economic theories.
Unlike plastic manikins, economic models (0.2 point)
are not useful because they omit many real-world details.
consists of diagrams and equations.
are useful because they do not omit any real-world details.
are plastic representations of the economy.
The circular-flow diagram (0.2 point)
is a visual model.
includes two types of decision makers: households and firms.
shows the flows of inputs, outputs, and dollars.
All of the above are correct.
Which of the following is not correct statement about production possibilities frontiers? (0.2 point)
An economy can produce any point on the production possibilities frontier.
An economy can produce at any point outside a production possibilities frontier.
An economy can produce at any point inside the production possibilities frontier.
An economy can not produce at any point outside the production possibilities frontier.
Which of the following statements is not correct about the roles of economists EXCEPT? (0.2 point)
Economists are best viewed as policy advisers.
Economists are best viewed as scientists.
In trying to explain the world, economists are policy advisers; in trying to improve the world, they are scientists.
In trying to explain the world, economists are scientists; in trying to improve the world, they are policy advisers.
Microeconomics is the study of (0.2 point)
how money affects the economy.
how households and firms make decisions.
how households and firms interact in markets.
b & c are correct.
Macroeconomics is the study of (0.2 point)
decisions of household.
trade off.
economy-wide phenomena.
opportunity cost.
Normative statements are (0.2 point)
prescriptive about how the world ought to be.
made by scientists.
backward-looking.
forward-looking.
Positive statements are (0.2 point)
prescriptive.
descriptive.
claims about how the world is.
b & c are correct.
Which of the following is a reason people choose to depend on others for goods and services EXCEPT? (0.2 point)
to improve their lives
to allow them to enjoy a greater variety of goods and services
to consume more of each good without working any more hours
to allow people to produce outside their production possibilities frontiers
Absolute advantage is found by comparing different producers’ (0.2 point)
marginal cost.
output requirements per unit of input.
input requirements per unit of output.
production outputs.
Alex and Mark are two woodworkers who both make tables and chairs. In one month, Alex can make 4 tables or 20 chairs, while Mark can make 6 tables or 18 chairs. Given this, we know that (0.2 point)
Alex has an absolute advantage in chairs
Alex has a comparative advantage in tables
Mark has an absolute advantage in chairs
Mark has a comparative advantage in chairs
Specialization and trade related to (0.2 point)
absolute advantage
comparative advantage
trade off
division of the economic pie
Which of the following factor is related to comparative advantage? (0.2 point)
output per hour
opportunity cost
efficiency
bargaining strength in international trade
Assume that Linda and Tom can switch between producing wheat and producing beef at a constant rate. In 20 minutes, Linda can make 1 Bushel of Wheat and 1 Pound of Beef in 12 minutes. Tom can make 1 Bushel of Wheat in 15 minutes and 1 Pound of Beef in 10 minutes. What is Linda’s opportunity cost of producing one pound of beef? (0.2 point)
3/5 bushel of wheat
6/5 bushel of wheat
4/3 bushel of wheat
5/3 bushel of wheat
Assume that Linda and Tom can switch between producing wheat and producing beef at a constant rate. In 20 minutes, Linda can make 1 Bushel of Wheat and 1 Pound of Beef in 12 minutes. Tom can make 1 Bushel of Wheat in 15 minutes and 1 Pound of Beef in 10 minutes. What is Linda’s opportunity cost of producing one bushel of wheat? (0.2 point)
3/5 pound of beef
6/5 pound of beef
4/3 pound of beef
5/3 pound of beef
Assume that Linda and Tom can switch between producing wheat and producing beef at a constant rate. In 20 minutes, Linda can make 1 Bushel of Wheat and 1 Pound of Beef in 12 minutes. Tom can make 1 Bushel of Wheat in 15 minutes and 1 Pound of Beef in 10 minutes. What is Tom’s opportunity cost of producing one bushel of wheat? (0.2 point)
2/3 pound of beef
3/4 pound of beef
5/6 pound of beef
3/2 pound of beef
Assume that Linda and Tom can switch between producing wheat and producing beef at a constant rate. In 20 minutes, Linda can make 1 Bushel of Wheat and 1 Pound of Beef in 12 minutes. Tom can make 1 Bushel of Wheat in 15 minutes and 1 Pound of Beef in 10 minutes. What is Tom’s opportunity cost of producing one pound of beef? (0.2 point)
2/3 bushel of wheat
3/4 bushel of wheat
5/6 bushel of wheat
3/2 bushel of wheat
The opportunity cost of an item is
the number of hours that one must work in order to buy one unit of the item
what you give up to get that item
always less than the dollar value of the item
always greater than the cost of producing the item
Suppose a gardener produces both green beans and corn in her garden. If she must give up 14 bushels of corn to get 5 bushels of green beans, then her opportunity cost of 1 bushel of green beans is
0.36 bushel of corn
2.8 bushels of corn
14 bushels of corn
70 bushels of corn
Mike and Sandy are two woodworkers who both make tables and chairs. In one month, Mike can make 4 tables or 20 chairs, while Sandy can make 6 tables or 18 chairs. Given this, we know that
Mike has an absolute advantage in chairs
Mike has a comparative advantage in tables
Sandy has an absolute advantage in chairs
Sandy has a comparative advantage in chairs
If Shawn can produce donuts at a lower opportunity cost than Sue, then
Shawn has a comparative advantage in the production of donuts
Sue has a comparative advantage in the production of donuts
Shawn should not produce donuts
Shawn is capable of producing more donuts than Sue in a given amount of time
Comparative advantage is related most closely to which of the following?
output per hour
opportunity cost
efficiency
bargaining strength in international trade
Specialization and trade are closely linked to
absolute advantage
comparative advantage
gains to some traders that exactly offset losses to other traders
shrinkage of the economic pie
The forces that make market economies work are (0.2 point)
price and quality.
price ceiling and floor.
supply and demand.
taxes and policies.
The quantity demanded of a good is the amount of good that buyers are (0.2 point)
able to purchase.
willing, able, and need to purchase.
willing and able to purchase.
willing to purchase.
Other things equal, the law of demand states that a fall in (0.2 point)
price causes quantity demanded to increase.
price causes quantity demanded to decrease
quantity demanded causes price to increase
quantity demanded causes price to decrease
A table shows the relationship between ……… is known as a demand schedule (0.2 point)
quantity demanded and quantity supplied.
income and quantity demanded.
price and quantity demanded.
price and income.
The demand curve for a good is a line that shows relationship between (0.2 point)
price and quantity demanded.
income and quantity demanded.
quantity demanded and quantity supplied.
price and income.
(0.2 point) The law of supply states an increase in the price of a good will
increase supply
decrease supply
increase quantity supplied
decrease quantity supplied
(0.2 point) Sum the individual supply curves horizontally to obtain
total supply
market supply
aggregate supply
total output
(0.2 point) The supply and demand curves intersect at a point which is called
market harmony
coincidence
equivalence
equilibrium
(0.2 point) Suppose eggs are currently selling for 50perdozen,buttheequilibriumpriceofeggsis 40 per dozen. We would expect
a shortage to exist and the market price of eggs to increase
a shortage to exist and the market price of eggs to decrease
a surplus to exist and the market price of eggs to increase
a surplus to exist and the market price of eggs to decrease
(0.2 point) Suppose eggs are currently selling for 30perdozen,buttheequilibriumpriceofeggsis 40 per dozen. We would expect
a shortage to exist and the market price of eggs to increase
a shortage to exist and the market price of eggs to decrease
a surplus to exist and the market price of eggs to increase
a surplus to exist and the market price of eggs to decrease
(0.2 point) Which of the following is determinant of the price elasticity of demand for a good EXCEPT?
the time horizon
the steepness or flatness of the supply curve for the good
the definition of the market for the good
the availability of substitutes for the good
(0.2 point) The price elasticity of demand is computed
percentage change in price divided by the percentage change in quantity demanded
change in quantity demanded divided by the change in the price
percentage change in quantity demanded divided by the percentage change in price
percentage change in quantity demanded divided by the percentage change in income
(0.2 point) If the price elasticity of demand for a good is 20.0, then a 3 percent increase in price results in
0.2 percent decrease in the quantity demanded
3.5 percent decrease in the quantity demanded
9 percent decrease in the quantity demanded
60 percent decrease in the quantity demanded
(0.2 point) When quantity demanded responds slightly to changes in price, demand is said to be
elastic
inelastic
dynamic
variable
(0.2 point) If the quantity demanded of a certain good responds strongly 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
law of demand can apply to the good
(0.2 point) When the price of a good is 4,thequantitydemandedis100units;whenthepriceis 6, the quantity demanded is 60 units. Using the midpoint method, the price elasticity of demand is
0.25
1.25
1.66
1.9
(0.2 point) A decrease in price will cause ………… when demand is elastic.
an increase in total revenue
a decrease in total revenue
no change in total revenue but an increase in quantity demanded
no change in total revenue but a decrease in quantity demanded
(0.2 point) Income elasticity of demand measures how
the quantity supplied changes as consumer income changes
the quantity demanded changes as consumer income changes
the price of a good is affected as consumer income changes
consumer can sell good as consumer income changes
(0.2 point) Which of the following could be the cross-price elasticity of demand for two goods that are complements?
-1.6
0.2
0.5
1.2
(0.2 point) If a 20% change in price results in a 60% change in quantity supplied, then the price elasticity of supply is about
3.1, and supply is elastic
1.03, and supply is inelastic
0.25, and supply is elastic
1.75, and supply is inelastic
(0.2 point) Price controls are usually enacted
when policymakers believe that the market price of a good or service is fair to buyers or sellers
when policymakers believe that the market price of a good or service is unfair to buyers or sellers
when policymakers detect inefficiencies in a market
when policymakers detect market failures
(0.2 point) The price that is not allowed to rise above this level, the legal maximum is called price
floor
subsidy
support
ceiling
(0.2 point) The price that is not allowed to fall below this level, the legal minimum is called price
subsidy
floor
support
ceiling
(0.2 point) A price ceiling is not binding when it is set
above the equilibrium price and it has no effect
above the equilibrium price and causing a surplus
below the equilibrium price and causing a shortage
below the equilibrium price and causing a surplus
(0.2 point) When the government imposes a binding price floor, it is
above the equilibrium price, causing a shortage
above the equilibrium price, causing a surplus
below the equilibrium price, causing a shortage
below the equilibrium price, causing a surplus
(0.2 point) A $3.00 tax levied on the sellers of ice cream will shift the supply curve
upward by exactly $3.00
upward by less than $3.00
downward by exactly $3.00
downward by less than $3.00
(0.2 point) When government levies a tax on the buyers, they will pay
more and sellers receive more than they did before the tax.
more and sellers receive less than they did before the tax.
less and sellers receive more than they did before the tax.
less and sellers receive less than they did before the tax.
(0.2 point) If the government ......................., received price by seller will decrease.
imposes a binding price floor in that market.
decreases a binding price ceiling in that market.
decreases a tax on the good sold in that market.
increases a binding price floor in that market.
(0.2 point) If the government decreases a ............................, the quantity sold in a market will decrease.
binding price floor in that market.
binding price ceiling in that market.
tax on the good sold in that market.
All of the above are correct.
Firms in competitive market set a goal to
maximize its total revenue.
maximize its profit.
minimize its explicit costs.
minimize its total cost.
Thu Dung Company produced and sold 500 tires. The average cost of production per tire was 50.Eachtiresoldforapriceof 65. Thu Dung Company’s total profits are
$7,500.
$25,000.
$32,500.
$67,500.
A production function shows realtionship between
cost and profit.
inputs and output.
ouput and cost.
output and profit.
The marginal product of labor can be caculated
profit divided by the change in labor.
output divided by the change in labor.
labor divided by the change in output.
labor divided by the change in total cost.
Costs that do not change with the quantity of output produced are known as:
marginal costs.
average costs.
fixed costs.
explicit costs.
With firms that produces and sells cars, which the following costs would be a variable cost?
The firm pays the $30 million each year for accounting services
The cost of the steel that is used in producing cars
The firm pays rent for office space in Chicago
All of the above are correct.
Katy’s Cookie has average variable costs of 2 and average fixed costs of 3 when it produces 100 units of output (cookies). The firm's total cost is
$100.
$200.
$300.
$500.
(0.2 point) The table represents a demand curve faced by a firm in a competitive market. For a firm operating in a competitive market, the average revenue from selling 3 units is
$15.
$5.
$3.
$1.
(0.2 point) For a firm operating in a competitive market, the marginal revenue is
$5.
$6.
$14.
$11.
(0.2 point) To maximize profit, firms operating in competitive markets produce output levels where marginal revenue equals
price.
average revenue.
total revenue divided by output.
All of the above are correct.
(0.2 point) Firm will maximize profit if it produce at level output that
marginal revenue equals average total cost.
marginal revenue equals average variable cost.
marginal revenue equals marginal cost.
average revenue equals average total cost.
(0.2 point) In competitive marrket, firm will shut down if price is
less than average total cost.
less than average variable cost.
greater than average variable cost but less than average total cost.
greater than marginal cost.
Economists sometimes give conflicting advice because
a. they are encouraged to argue with each other.
b. they have different scientific judgment and values.
c. they act as policy advisers.
d. they have belief systems more than scientists.
Which the following changes would shift the demand curve for a good or service EXCEPT ?
a. a change in income
b. a change in the price of the good or service
c. a change in expectations about the future price of the good or service
d. a change in the price of a related good or service
THE PRICE ELASTICITY OF DEMAND MEASURES HOW WILLING COMSUMER ARE TO
BUY LESS GOOD WHEN ITS PRICE FALLS
BUY LESS GOOD WHEN ITS PRICE RISES
BUY MORE GOOD WHEN ITS PRICE FALL
B&C ARE CORRECT
Which of the following curves is part of competitive firm's short-run supply curve ?
a. marginal revenue
b. average variable cost
c. average total cost
d.marginal cost
Which of these curves is the competitive firm's short-run supply curve?
a. the average variable cost curve above marginal cost
b. the average total cost curve above marginal cost
c. the marginal cost curve above average variable cost
d. the average fixed cost curve
In a competitive marrket, firm will exit if
a. total revenue exceeds total cost.
b. the price exceeds average total cost.
c. average total cost exceeds the price.
d. Both a and b are correct.
Nikita owns a running dress store that operates in a perfectly competitive market. If running
dress sell for $130 per piece and the average total cost per piece is $135 at the profit
maximizing output level, then in the long run
a. more firms will enter the market.
b. some firms will exit from the market.
c. the equilibrium price per pair of shoes will fall.
d. average total costs will fall.
The process of entry and exit with firms in competitive market will end when
a. price equals minimum marginal cost.
b. marginal revenue equals marginal cost.
c. economic profits are zero.
d. accounting profits are zero.
Trade makes costs
higher and reduces the variety of goods and services available
higher but raises the variety of goods and services available.
lower but reduces the variety of goods and services available.
lower and raise the variety of goods and services available
The invisible hand refers to
how central planners made economic decisions.
how the decisions of households and firms lead to desirable market outcomes.
the control that large firms have over the economy
government regulations without which the economy would be less efÏcient
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.
The goal of an economist who formulates new theories is to
provide an interesting framework of analysis, whether or not the framework turns
out to be of much use in understanding how the world works.
provoke stimulating debate in scientific journals.
contribute to an understanding of how the world works.
demonstrate that economists, like other scientists, can formulate testable
theories.
Denise decides to spend three hours working overtime rather than watching a video
with her friends. She earns $10 an hour. Her opportunity cost of working is :
a. the $30 she earns working.
b. the $30 minus the enjoyment she would have received from watching the video.
c. the enjoyment she would have received had she watched the video.
nothing, since she would have received less than $30 of enjoyment from the video
With respect to how economists study the economy, which of the following
statements is most accurate?
. Economists study the past, but they do not try to predict the future.
Economists use “rules of thumb” to predict the future.
. Economists devise theories, collect data, and analyze the data to test the theories.
Economists use controlled experiments in much the same way that biologists and
physicists do
One thing economists do to help them understand how the real world works is
make assumptions.
ignore the past.
try to capture every aspect of the real world in the models they construct.
. All of the above are correct
