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Introduction to Economics: Pre-assessment
Name:
Date:
Q1. Which of the following statements is true about a market economy?
(a) With a large enough computer, central planners could guide production more efficiently than markets
(b) Market participants act as if guided by an invisible hand to produce outcomes that maximize social welfare
(c) The strength of a market system is that it tends to distribute resources evenly across consumers
(d) Taxes help prices communicate costs and benefits to producers and consumers
Q2. In a free-market economy the allocation of resources is determined by:
(a)
(b)
(c)
(d)
votes taken by consumers
a central planning authority
By consumer preferences
the level of profits of firms
Q3. Fill in the gaps in the paragraph below using the word bank. The paragraph describes how a market
economy allocates resources.
allocative efficiency - prices - supply - demand - profitable - consumer sovereignty - firms - equilibrium demand - supply - supply
A market economy uses _______________ as the principal means of allocating resources. Prices are
determined by the interaction of _____________ and _____________. Consumers express their preferences
through their demand for goods and services. This is known as _______________. If consumers increase their
purchases of a good and the level of ______________ exceeds ________________ then prices will tend to
rise. This will make the production of this good more ___________________ and attract more
________________ into the market. This extra __________________ of the good will bring prices down and
restore ________________ in the market. If markets work perfectly throughout the economy, then this should
ensure _____________________.
Q4. Which of the following is not a factor of production?
(a) Labour
(b) Land
(c) Money
(d) Capital
(e) All of these answers are factors of production
Q5. Economic models are:
(a) Usually made of wood and plastic.
(b) Built with assumptions.
(c) Useless if they are simple.
(d) Created to duplicate reality.
IB Econ SL / Unit 1 / Pre-assessment / 2010-2011 / Page 1 of 4
Q6. Which of the following would be considered a disadvantage of allocating resources using a market system?
(Select one or more answers)
(a)
(b)
(c)
(d)
Income will tend to be unevenly distributed
Significant unemployment may occur
It cannot prevent the wastage of scarce economic resources
A misallocation of resources may occur where there is a discrepancy between private and social costs
Q7. Which of the following statements would you consider to be a normative one?
(a) Faster economic growth should result if an economy has a higher level of investment
(b) Changing the level of interest rates is a better way of managing the economy than using taxation and
government expenditure
(c) Higher levels of unemployment will lead to higher levels of inflation
(d) The average level of growth in the economy was faster in the 1990s than the 1980s
Q8. Trade-offs are required because wants are unlimited and resources are:
(a) Economical
(b) Unlimited
(c) Efficient
(d) Marginal
(e) Scarce
Q9. Which letter on the graph represents a bundle of goods that could not be produced with the resources the
economy currently has available? __________
Q10. Raising taxes and increasing welfare payments:
(a) reduces market power.
(b) proves that there is such a thing as a free lunch
(c) improves efficiency at the expense of equity
(d) improves equity at the expense of efficiency
IB Econ SL / Unit 1 / Pre-assessment / 2010-2011 / Page 2 of 4
Q11. Which of the following goods or services would not be provided by a pure free-market economy?
(a)
(b)
(c)
(d)
Public transport system
Pensions
National Defense
Education
Q12. Which of the following are considered to be essential characteristics of a public good?
(Select one or more answers)
(a)
(b)
(c)
(d)
It must be provided by the government
Consumption by one person does not diminish the quantity available for others
Once the good is provided, it is not possible to exclude people from consuming it
It must benefit the whole economy
Q13. Which of the following might be considered to be a characteristic of a planned economy?
(a)
(b)
(c)
(d)
All income is completely evenly distributed
Price is relatively unimportant as a means of allocating resources
Goods and services produced reflect consumer sovereignty
There is no incentive for people to work hard
Q14. What is meant by allocative efficiency?
(a) Getting the right goods to the right people at the right price
(b) Producing using the optimum factor combination
(c) Ensuring that sufficient is spent on research and development to ensure the development of new goods
and services
(d) Giving appropriate incentives for firms and consumers
Q15. Economic growth is depicted by
(a)
(b)
(c)
(d)
a shift in the production possibilities frontier outward
a movement from inside the curve toward the curve
a shift in the production possibilities frontier inward
a movement along a production possibilities frontier toward capital goods
Q16. Which of the following will not shift a country's production possibilities frontier outward?
(a)
(b)
(c)
(d)
an advance in technology
an increase in the labour force
an increase in the capital stock
a reduction in unemployment
IB Econ SL / Unit 1 / Pre-assessment / 2010-2011 / Page 3 of 4
Q17. Which of the following is part of the opportunity cost of going on holiday?
(a)
(b)
(c)
(d)
the money you spent on a theatre show
the money you could have made if you had stayed at home and worked
the money you spent on airline tickets
the money you spent on food
Q18. Positive statements are
(a)
(b)
(c)
(d)
macroeconomics
microeconomic
statements of description that can be tested
statements of prescription that involve value judgments
Q19. Which of the following statements about microeconomics and macroeconomics is not true?
(a)
(b)
(c)
(d)
The study of very large industries is a topic within macroeconomics
Macroeconomics is concerned with economy-wide phenomena
Microeconomics is a building block for macroeconomics
Microeconomics and macroeconomics cannot be entirely separated
Source: http://www.bized.co.uk/learn/economics/qbank/micro.htm
IB Econ SL / Unit 1 / Pre-assessment / 2010-2011 / Page 4 of 4