) Economics does not study correct or incorrect behaviors, but rather it assumes that economic agents make the best decisions given their knowledge of the costs and benefits. What term best describes this behavior?

A.  equitably

B.   rationally

C.   emotionally

D.   selfishly

 

2) According to economics, what causes us to have to make choices?

A.   unemployment.

B.   scarcity.

C.   greed.

D.   unlimited resources.

 

3) What is the term in economics by which a group of buyers and sellers of a product come together to trade?

A.   collective

B.   cooperative

C.   market

D.   trade-off

 

4) If a commercial dairy farm wants to raise funds to purchase feeding troughs, in which market does it do so?

A.   output market.

B.   product market.

C.   factor market.

D.   dairy products market.

 

5) Which of the following is an example of spending on goods and services in the circular flow model?

A.   Belinda purchases a new computer for her tax-preparation business.

B.   Javier buys 800 square feet of wood flooring for his vacation home.

C.   Celeste buys fresh herbs at the farmers’ market to use in her restaurant.

D.   Timmy purchases a new examination table for use in his veterinary clinic.

 

6) What might you call an outward shift of a nation’s production possibilities frontier?

A.   economic growth.

B.   rising prices of the two goods on the production possibilities frontier model.

C.   an impossible situation.

D.   a situation in which a country produces more of one good and less of another.

 

7) If a 35 percent increase in price of golf balls led to an 42 percent decrease in quantity demanded, then the demand for golf balls is

A.   unit-elastic.

B.   perfectly elastic.

C.   relatively inelastic.

D.   relatively elastic.

 

8) Suppose the value of the price elasticity of demand is -3. What does this mean?

A.   A 1 percent increase in the price of the good causes quantity demanded to increase by 3 percent.

B.   A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent.

C.   A 3 percent increase in the price of the good causes quantity demanded to decrease by 1 percent.

D.   A $1 increase in price causes quantity demanded to fall by 3 units.

 

9) Price elasticity of demand measures

A.   how responsive suppliers are to price changes.

B.   how responsive quantity demanded is to a change in price.

C.   how responsive sales are to a change in buyers’ incomes.

D.   how responsive sales are to changes in the price of a related good.

 

10) Which of the following is evidence of a surplus of bananas?

A.   Firms raise the price of bananas.

B.   The equilibrium price of bananas rises due to an increase in demand.

C.   The quantity demanded of bananas is greater than the quantity supplied.

D.   The price of bananas is lowered in order to increase sales.

 

11) Which of the following is the correct way to describe equilibrium in a market?

A.   At equilibrium, demand equals supply.

B.   At equilibrium, market forces no longer apply.

C.   At equilibrium, scarcity is eliminated.

D.   At equilibrium, quantity demanded equals quantity supplied.

 

12) A decrease in the price of GPS systems will result in

A.   a smaller quantity of GPS systems supplied.

B.   a decrease in the demand for GPS systems.

C.   an increase in the supply of GPS systems.

D.   a larger quantity of GPS systems supplied.

13) Marginal revenue product of labor for a competitive seller is

A.   the change in total product from hiring one more worker.

B.   the output price multiplied by the quantity sold.

C.   the marginal revenue of the product multiplied by the output price.

D.   equal to the marginal product of labor multiplied by the output price.

 

14) Let MP = marginal product, P = output price, and W = wage, then the equation that represents the condition where a competitive firm would hire another worker is

A.   P × MP = W.

B.   P × MP > W.

C.   P × W > MP.

D.   P × MP < W.

 

15) Marginal revenue product for a perfectly competitive seller is equal to

A.   the output price multiplied by the total product of labor.

B.   the change in total revenue that results from hiring another worker.

C.   the marginal cost of production.

D.   the output price multiplied by the number workers hired.

 

16) An individual’s labor supply curve shows

A.   the maximum wage rates offered to that individual by various potential employers.

B.   the relationship between the quantity of hours worked and total income earned by that individual.

C.   the relationship between wages and the quantity of labor that a firm is willing to employ.

D.   the relationship between wages and the quantity of labor that she is willing to supply.

 

17) The labor supply for an industry would decrease if

A.   the wage rate falls.

B.   a greater percentage of women want to work outside the home.

C.   the government welcomes foreign workers into the country.

D.   the percentage of the population from age 16 to 65 decreases.