ECONOMICS– QUESTIONS FOR REVIEW
Answer the following multiple-choice questions:
Q1. Economics is the study of how societies use —— resources to produce —— and distribute them among different people.
a. abundant; tires b. scarce; commodities c. scarce; tires d. abundant; commodities
Q2. The situation in which there is not enough of something to satisfy all desires for that thing is called:
a. abundance b. scarcity c. demand d. plethora
Q3A. The situation in which limited resources are being used most effectively is called:
a. efficient b. economic c. abundant d. scarce.
Q3B. Implicit costs are the opportunity costs of using the resources of ———————————————
Q4. The study of the behavior of firms, individual markets, and households is called:
a. normative economics b. positive economics c. macroeconomics d. microeconomics
Q5. The study of the behavior of the overall economy is called:
a. normative economics b. positive economics c. macroeconomics d. microeconomics
Q6. The extreme case of a market economy is one in which government does not intervene in economic decisions. This kind of market economy is called a ———————————————–market.
a. command b. mixed c. weak d. laissez-faire
Q7. The three broad categories of inputs to production are:
a. earth, wind, and fire b. earth, water, and fire c. land, labor, and capital d. land, labor, and money
Q8. The ——————- of a decision is the value of the good or service forgone.
a. opportunity cost b. efficiency c. economics d. scarcity
Q9. Productive ———— exists when an economy cannot produce more of one good without producing less of another good.
a. Scarcity b. economics c. efficiency d. opportunity cost
Q10. Which of the following shows the relationship between the price of a good and the amount of that good that consumers want at that price?
a. supply curve b. demand curve c. supply schedule d. production possibilities frontier
Q11. The law of downward-sloping demand states that:
a. as price increases, quantity demanded increases b. as price decreases, quantity demanded increases
c. as price increases, quantity demanded decreases d. as price decreases, demand increases
Q12. When the price of good (A) increase and consumers preferred good B to good A, we call that the:
a. Income effect b. backwards effect c. substitution effect d. demand effect
Q13. Other things held equal, if demand increases, equilibrium price will ——– and equilibrium quantity will ——————-.
However, if supply increases, equilibrium price will ——- and equilibrium quantity will ————————————————-
a. decrease; decrease; increase; increase b. increase; increase; decrease; increase
c. decrease; decrease; increase; decrease d. increase; increase; decrease; decrease
Q14A. The forces of demand and supply determine:
a. What is produced? b. For whom goods are produced c. How goods are produced d. All of them
Q14B. According to ————————–, when price decreases, demand rises, and when price increases, demand falls.
a. the Law of Diminishing returns b. Adam Smith c. the Law of Demand d. the elasticity of demand
Q15A. Problems faced by all economic systems include which of the following?
I. How to allocate scarce resources among unlimited wants II. How to decentralize markets III. How to decide what to produce, how to produce, and for whom to produce. IV. How to set government production quotas
(A) I only (B) I and III only (C) II and III only (D) I, II, and III only (E) I, IL III, and IV
Q15B. An increase in which of the following will cause an increase in the demand for a certain good?
(A) The price of the good (B) The number of sellers of the good (C) The price of a complementary good (D) The cost of purchasing the good (E) The number of buyers of the good
Q16. The equilibrium price and quantity are that price and quantity at which:
a. both the quantity demanded, and the quantity supplied is equal b. the supply and demand curves cross c. both a and b d. neither a nor b
Q17. According to the economic perspective,———————————————-
a. Human material wants are limited, while resources used to satisfy them are limited
b. Human material wants are unlimited, while resources used to satisfy them are also unlimited
c. Human material wants are unlimited, while resources used to satisfy them are limited
d. Human material wants are limited, while the resources used to satisfy them are unlimited.
Q18. People who have well-defined goals and try to fulfill those goals are known as —————–
a. rational b. macroeconomist c. smart buyers d. frugal
Q20. The law of demand states that the quantity demanded of a good will change, other things being equal, when ———————
a. the price of the good changes. b. consumer income changes. c. Other goods prices change. d. a change occurs in the quantities of other goods purchase
Q21. If beef and seafood are substitutes, a decrease in the price of seafood will cause the demand curve for beef
a. to shift to the left as consumers switch from beef to seafood. b. to shift to the right as consumers switch from beef to seafood c. to remain unchanged, since beef and seafood are sold in separate markets. d. none of the above.
Q22. When the market is at equilibrium,
a. there can be shortages, but not surpluses. b. there can be surpluses, but not shortages. c. there can be both shortages and surpluses. d. there can be neither shortages nor surpluses.
Q23. Assume that the price of product Y decreases by 5% and the quantity supplied decreases by 2%. The coefficient of price elasticity of supply for good Y is:
A. negative and therefore Y is an inferior good. B. less than one and therefore supply is inelastic. C. more than one and therefore supply is elastic. d. negative and therefore the supply curve is down sloping.
Q24. Demand is inelastic if ———————————————
a. the quantity demanded changes less than the price does. c. the ratio less than one. b. the demand for a product is not sensitive to price changes. d. All the above
Q25. Unit elasticity occurs when ————————————–
a. the quantity demanded changes the same percent that the price does. b. the price and quantity are about the same c. the price changes by one unit, the quantity demanded also changes by a unit d. All the above.
Q26. ———————————————- is the willingness to buy a product and the ability to pay for it.
a. Quantity b. Demand c. The Law of Demand d. Elasticity
Q27. If Diana decides to study for economics exam on Tuesday rather than attend a movie with Mark —————
a. The marginal benefit of studying is greater than the marginal benefit of attending the movie
b. The marginal benefit of studying for the test is equal to the marginal cost of studying for the test
c. The marginal cost of studying is greater than the marginal benefit of studying for the test
d. The marginal benefit of studying is greater than the marginal cost of studying for the test
Q28. Demand is elastic if —————————————-
a. the quantity demanded changes more than the price does. b. the ratio more than onec. % change in the quantity demanded is greater than % change in price d. All of the above
Q30. An economist is observing the relationship between goods A and B. She notices that an increase in the price of good A tends to be associated with a decrease in the demand for good B. Goods A and B are likely—————
a. Substitutes b. Complements c. Normal goods d. Inferior goods
Q31. When economists say there is no such thing as a free lunch, they mean that ————-
a. we must pay money for everything we get b. it is against the law to accept goods or services without paying for them c. the more lunch a person eats the more weight the person will gain d. every choice we make involves a trade off.
Q32. Suppose that a 2% increase in income in the economy decreases the quantity of gadgets demanded by 1% at every possible price. This implies that ————————————–
a. the supply of gadgets is elastic. b. income elasticity is positive, and gadgets are a normal good. c. income elasticity is negative, and gadgets are a normal good. d. income elasticity is negative, and gadgets are an inferior good.
Q33. Play Station 3 and XBOX 360 are substitutes. If the price of Play Station 3 increases what will happen to the quantity demanded for XBOX 360? a. The quantity demand for XBOX 360 will decrease b. The quantity demand for XBOX 360 will not change c. The quantity demand for XBOX 360 will increase d. All the above e. none of the above.
Q34. Milk and chocolate chip cookies are complementary goods. If the price of milk decreases what will happen to the quantity demanded for chocolate chip cookies?
a. The quantity demand for cookies will decrease b. The quantity demand for cookies will not change c. The quantity demand for cookies will increase d. I don’t know
Q35. Demand is ————– when a change in price leads to a relatively larger change in the quantity demanded. On the other hand, demand is —————–when a change in price leads to a relatively smaller change in the quantity demanded.
a. increasing; decreasing b. decreasing; increasing c. elastic; inelastic d. inelastic; elastic
Q36. If the State of Oregon imposed a $0.02 per kilowatt tax on electricity to fund restoration of salmon habitat harmed by hydroelectric dams, and if the price elasticity of demand for electricity in Oregon is 0.05, then are producers or consumers most likely to bear the greater burden of this tax?
a. Producers. b. Consumers. c. both consumers and producers d. None of the above
Q37. A product that has lots of competition is likely to be price elastic. a. True b. False
38. A product with a strong brand loyalty is likely to have —————————-
a. unitary elastic b. elastic demand c. inelastic demand d. many substitutes
Q38. How is the responsiveness of quantity demanded to a change in price measured?
a. By multiplying the percentage change in the product’s price by the percentage change in the quantity demanded
b. By dividing the percentage change in the product’s price by the percentage change in the quantity demanded
c. By multiplying the percentage change in the quantity demanded by the percentage change in the product’s price.
d. By dividing the percentage change in the quantity demanded by the percentage change in the product’s price.
Q39. If a 10% increase in price leads to a 12% decrease in quantity demanded, demand is————————–
Q40. Refer to the table below. What is the marginal cost and marginal benefit of the second, third, and fourth slices of pizza?
| Slices of Pizza | Total cost | Total Benefit | Marginal Cost | Marginal Benefit |
| 1 | $2.75 | $5.00 | ||
| 2 | $4.50 | $8.00 | ||
| 3 | $6.25 | $10.00 | ||
| 4 | $8.00 | $12.50 | ||
| 5 | $10.50 | $14.75 |
