1) By definition, what is economics the study of?

A.  the choices people make to attain their goals, given their scarce resources.
B.  how to make money in a market economy.
C.  supply and demand.
D.  how to make money in the stock market.
2) 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.  emotionally
B.  rationally
C.  selfishly
D.  equitably
3) What is the term in economics by which a group of buyers and sellers of a product come together to trade?

A.  market
B.  trade-off
C.  collective
D.  cooperative
4) If a commercial dairy farm wants to raise funds to purchase feeding troughs, in which market does it do so?

A.  factor market.
B.  dairy products market.
C.  output market.
D.  product market.
5) Which of the following statements describes the actions of producers in the circular flow model?

A.  hire resources sold by households in the factor market.
B.  spend earnings from resource sales on goods and services in the product market.
C.  sell goods and services in the input market.
D.  and households spend earnings from resource sales on goods and services in the factor market.
6) Which of the following is not a critical function of the government in facilitating the operation of a market economy?

A.  ensuring an equal distribution of income to all citizens.
B.  enforcing contracts.
C.  protecting private property.
D.  enforcing property rights.
7) A demand curve which is ________ represents perfectly inelastic demand, and a demand curve which is ________ represents inelastic demand.

A.  vertical; downward sloping
B.  upward sloping; horizontal
C.  downward sloping; vertical
D.  horizontal; downward sloping
8) Economists in general

A.  Do not believe that people’s tastes determine demand and therefore they ignore the subject of tastes.
B.  Incorporate tastes into economic models only to the extent that tastes determine whether pairs of goods are substitutes or complements.
C.  Do not try to explain people’s tastes, but they do try to explain what happens when tastes change.
D.  Believe that they must be able to explain people’s tastes in order to explain what happens when tastes change.
9) 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.  relatively inelastic.
B.  relatively elastic.
C.  unit-elastic.
D.  perfectly elastic.
10) At a product’s equilibrium price

A.  the quantity of the product demanded is less than the quantity of the product supplied.
B.  the product’s demand curve is the same as the product’s supply curve.
C.  the quantity of the product demanded is greater than the quantity of the product supplied.
D.  the product’s demand curve crosses the product’s supply curve.
11) Which of the following is the correct way to describe equilibrium in a market?

A.  At equilibrium, market forces no longer apply.
B.  At equilibrium, demand equals supply.
C.  At equilibrium, quantity demanded equals quantity supplied.
D.  At equilibrium, scarcity is eliminated.
12) Which of the following is evidence of a surplus of bananas?

A.  The equilibrium price of bananas rises due to an increase in demand.
B.  Firms raise the price of bananas.
C.  The price of bananas is lowered in order to increase sales.
D.  The quantity demanded of bananas is greater than the quantity supplied.