1) What is the term in economics by which a group of buyers and sellers of a product come together to trade?
A. cooperative
B. market
C. trade-off
D. collective
2) Consider a good whose consumption takes place publicly. On what factors would your decision to buy that good depend?
A. only on the characteristics of the good itself and not on other people/s actions.
B. only on how many other people buy the good, and not on the good itself.
C. only on the price of the good, and not on other factors, such as other people’s actions.
D. both on the characteristics of the product and on how many other people are buying it.
3) Why do consumers have to make tradeoffs in deciding what to consume?
A. the prices of goods vary.
B. they are limited by a budget constraint.
C. there are not enough of all goods produced.
D. not all goods give them the same amount of satisfaction.
4) Which of the following statements describes the actions of producers in the circular flow model?
A. and households spend earnings from resource sales on goods and services in the factor market.
B. hire resources sold by households in the factor market.
C. spend earnings from resource sales on goods and services in the product market.
D. sell goods and services in the input market.
5) Which of the following is an example of spending on goods and services in the circular flow model?
A. Javier buys 800 square feet of wood flooring for his vacation home.
B. Celeste buys fresh herbs at the farmers’ market to use in her restaurant.
C. Timmy purchases a new examination table for use in his veterinary clinic.
D. Belinda purchases a new computer for her tax-preparation business.
6) What might you call an outward shift of a nation’s production possibilities frontier?
A. rising prices of the two goods on the production possibilities frontier model.
B. an impossible situation.
C. a situation in which a country produces more of one good and less of another.
D. economic growth.
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. perfectly elastic.
B. relatively inelastic.
C. unit-elastic.
D. relatively elastic.
8) A demand curve which is ________ represents perfectly inelastic demand, and a demand curve which is ________ represents inelastic demand.
A. horizontal; downward sloping
B. vertical; downward sloping
C. downward sloping; vertical
D. upward sloping; horizontal
9) Price elasticity of demand measures
A. how responsive sales are to changes in the price of a related good.
B. how responsive quantity demanded is to a change in price. C. how responsive suppliers are to price changes.
D. how responsive sales are to a change in buyers’ incomes.
10) Which of the following is the correct way to describe equilibrium in a market?
A. At equilibrium, quantity demanded equals quantity supplied.
B. At equilibrium, market forces no longer apply.
C. At equilibrium, demand equals supply.
D. At equilibrium, scarcity is eliminated.
11) Which of the following is evidence of a surplus of bananas?
A. The price of bananas is lowered in order to increase sales.
B. The equilibrium price of bananas rises due to an increase in demand.
C. Firms raise the price of bananas.
D. The quantity demanded of bananas is greater than the quantity supplied.
12) If, for a product, the quantity supplied exceeds the quantity demanded, the market price will fall until
A. quantity demanded equals quantity supplied. The equilibrium price will then be lower than the market price.
B. all consumers will be able to afford the product.
C. the quantity demanded exceeds the quantity supplied. The market will then be in equilibrium.
D. quantity demanded equals quantity supplied. The market price will then equal the equilibrium price.
13) At low wages, the labor supply curve for most people slopes upward because
A. as wages increase the opportunity cost of leisure increases.
B. as wages increase income also increases unless hours worked decrease.
C. the supply of labor is perfectly inelastic at low wages.
D. the demand for labor is perfectly elastic at low wages.
14) Firms use information on labor’s marginal revenue product to determine
A. how many workers to hire at each wage rate.
B. how much marginal product to produce at each wage rate. C. how much to produce at each output price. D. how much labor services to supply at each wage rate.
15) Marginal revenue product of labor for a competitive seller is
A. equal to the marginal product of labor multiplied by the output price.
B. the marginal revenue of the product multiplied by the output price.
C. the change in total product from hiring one more worker.
D. the output price multiplied by the quantity sold.
16) The labor supply for an industry would decrease if
A. the percentage of the population from age 16 to 65 decreases.
B. a greater percentage of women want to work outside the home.
C. the wage rate falls.
D. the government welcomes foreign workers into the country.
17) A decrease in the wage rate causes
A. a rightward shift of the firm’s labor demand curve.
B. a decrease in labor’s productivity.
C. an increase in the quantity of labor demanded.
D. a leftward shift of the firm’s labor demand curve.
18) How will an increase in population affect the labor market?
A. It will cause a decrease in the quantity of labor demanded.
B. It will increase the opportunity cost of leisure.
C. It will shift the market supply curve.
D. It will increase the supply of jobs.
19) Private costs
A. are borne by consumers of a good while social costs are borne by government.
B. are borne by producers of a good while social costs are borne by those who cannot afford to purchase the good.
C. are borne by producers of a good while social costs are borne by government.
D. are borne by producers of a good while social costs are borne by society at large.
20) Which of the following displays these two characteristics: nonrivalry and nonexcludability in consumption?
A. private goods
B. common resources
C. public goods
D. quasi-public goods
21) Which of the following displays these two characteristics: rivalry and nonexcludability?
A. a private good
B. a common resource
C. a public good
D. a quasi-public good
22) The key characteristics of a monopolistically competitive market structure include
A. all sellers sell a homogeneous product.
B. many small (relative to the total market) sellers acting independently.
C. sellers have no incentive to advertise their products.
D. barriers to entry are strong.
23) The reason that the coffeehouse market is monopolistically competitive rather than perfectly competitive is because
A. there are many firms in the market.
B. barriers to entry are very low.
C. entry into the market is blocked.
D. products are differentiated.
24) A characteristic found only in oligopolies is
A. interdependence of firms.
B. break even level of profits.
C. products that are slightly different.
D. independence of firms.
25) Gross domestic product understates the total production of final goods and services because of the omission of
A. intermediate goods.
B. the underground economy.
C. exports.
D. inflation.
26) Gross domestic product is calculated by summing up
A. the total quantity of goods and services produced in the economy during a period of time.
B. the total quantity of goods and services in the economy.
C. the total market value of final goods and services produced in the economy during a period of time.
D. the total market value of goods and services in the economy.
27) The Philippines and Vietnam have roughly the same size population. Suppose the GDP of the Philippines is $1,000 billion and the GDP of Vietnam is $10,000 billion. You should conclude
A. a typical person in Vietnam is more than 10 times as well off as the typical person in the Philippines.
B. a typical person in Vietnam is 10 times as well off as the typical person in the Philippines.
C. it is not possible to make a good comparison of the economic well being of a typical individual in the 2 countries without additional information.
D. a typical person in Vietnam is less than 10 times as well off as the typical person in the Philippines.