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Spring 2011 Economics Mid-Term
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____ 1. Which of the following countries did the U.S. approve to join the World Trade
Organization in 2000?
a. United States
c. South Korea
b. France
d. China
____ 2. Another term for a capitalist system is a
a. command economy.
c. mixed economy.
b. market economy.
d. laissez-faire system.
____ 3. Generally, the more substitutes there are for a good, the
a. more elastic the demand.
c. more complements there are.
b. less valuable it is.
d. less prices change.
____ 4. When the price of a good is too high for consumers, they look for
a. inelastic demand.
c. inflation.
b. substitutes.
d. luxury items.
____ 5. According to the law of demand, when the price of an item goes up, the
quantity demanded
a. stays at the same level.
c. falls.
b. rises.
d. adjusts.
____ 6. A government-set maximum price that can be charged for goods and services
is
a. a price ceiling.
c. an equilibrium price.
b. a price floor.
d. rationing.
____ 7. What goods and services should be produced, how they should be produced,
and who should share in what is produced are three basic questions addressed
by
a. market economies.
c. mixed economies.
b. command economies.
d. all economies.
____ 8. Diminishing marginal utility refers to the fact that
a. demand declines as income falls.
b. additional satisfaction declines as additional units of an item are
consumed.
c. people have unlimited needs.
d. in equilibrium, supply equals demand.
____ 9. Scarcity always exists because
a. stores cannot stock enough merchandise to keep up with
customer demand.
b. factories sometimes have difficulty producing enough goods.
c. there is not enough of all goods and services to satisfy
everyone's needs and wants.
d. natural disasters, such as hurricanes and floods, destroy goods
and property.
____ 10. A major characteristic of a pure market economy is
a. unrestricted competition.
c. strong government planning.
b. an oversupply of labor.
d. regulated prices.
____ 11. Adam Smith's "invisible hand" refers to the role of
a. the government.
c. customs and beliefs.
b. the market.
d. factors of production.
____ 12. Which of the following countries has a command economy?
a. France
c. North Korea
b. Taiwan
d. South Korea
____ 13. Economics is primarily concerned with which of the following?
a. future costs of goods
c. use of resources
b. values and objectives of a
d. methods of production
society
____ 14. If the price of a product is above its equilibrium price, the result is a
a. demand.
c. shortage.
b. surplus.
d. black market.
____ 15. Entrepreneurship refers to the ability to
a. manage other people.
b. adapt technology efficiently.
c. start new businesses, introduce new products and processes, and
improve management techniques.
d. borrow capital successfully and expand an existing business to
meet customer demand.
____ 16. The value of the next best alternative that has to be given up for the action
that is chosen is the
a. factor of production.
c. opportunity cost.
b. trade-off.
d. productivity.
____ 17. Factors of production include which of the following?
a. land, labor, and capital
b. technology products and entrepreneurship
c. goods and services
d. all of the products produced in an economy
____ 18. According to the law of supply, higher prices prompt producers to
a. increase demand.
c. produce less.
b. maintain current production.
d. produce more.
____ 19. When quantity supplied and quantity demanded increase due to improved
technology,
a. manufacturers will stop making the product.
b. prices will increase.
c. consumers will stop buying the product.
d. prices will decrease.
____ 20. As part of its economic reforms, China's leaders have
a. increased state ownership of enterprises.
b. allowed farmers to take responsibility for their own plots of land.
c. established five-year plans, which state concrete goals for the
economy.
d. abandoned central planning.
____ 21. According to Karl Marx, history is a continual struggle between
a. countries.
c. owners of capital.
b. classes.
d. workers.
____ 22. The word "equity" means
a. profitability.
b. fairness.
c. equality.
d. expansion.
____ 23. Farmers in China lack the incentives that American farmers have because
a. they lease land owned by the government.
b. farming is less desirable a profession in China than it is in the
United States.
c. prospects for the future are bleak.
d. they are allowed to plant a smaller variety of crops.
____ 24. When prices are above the equilibrium price,
a. suppliers produce more than consumers want to purchase.
b. consumers purchase more of the items supplied.
c. suppliers have less incentive to supply as much as is desired.
d. consumers purchase none of the items supplied.
____ 25. The point at which the quantity demanded equals the quantity supplied is
called the
a. elasticity measure.
c. surplus.
b. equilibrium price.
d. shortage.
____ 26. A company's fleet of trucks represents which kind of factor of production?
a. land
c. capital
b. labor
d. machinery
____ 27. Sweden can be described as a
a. capitalist country.
b. communist country.
c. welfare state.
d. command economy.
____ 28. According to Adam Smith,
a. the role of the government is to allocate resources.
b. government should not interfere in the marketplace.
c. a mixed economy combines all of the benefits of a command and a
market economy.
d. left to themselves, individuals would mishandle the economy.
____ 29. In a command economy, decisions about production are made by
a. corporations.
c. partnerships.
b. individuals.
d. government.
____ 30. Demand for which of the following products is likely to be most inelastic?
a. insulin
c. CDs
b. blouses
d. snack food
____ 31. Which of the following is NOT true in a pure socialist system?
a. most prices are set by the state rather than by forces of supply
and demand
b. individual risk taking is not allowed
c. taxation is often used to redistribute income
d. the role of the government is limited to providing such public
goods as national defense and police protection
____ 32. A laissez-faire system is one in which
a. government controls the factors of production.
b. individuals and the government make economic decisions.
c. government interference in the economy is minimal.
d. government purchases goods and services from consumers.
____ 33. In a capitalist system, most property is
a. private property.
c. regulated by the government.
b. owned by the government.
d. owned by banks.
____ 34. A decrease in the demand for a good together with an increase in supply would
cause
a. shortage of the good.
c. increase in production.
b. surplus of the good.
d. equilibrium price.
Spring 2011 Economics Mid-Term
Answer Section
MULTIPLE CHOICE
1. D
2. B
3. A
4. B
5. C
6. A
7. D
8. B
9. C
10. A
11. B
12. C
13. C
14. B
15. C
16. C
17. A
18. D
19. D
20. B
21. B
22. B
23. A
24. A
25. B
26. C
27. C
28. B
29. D
30. A
31. D
32. C
33. A
34. B