Download Exam Review - Valencia College

Exam Review
1. When economists say that people act rationally in their self interest, they mean that
individuals:
A. look for and pursue opportunities to increase their utility.
B. generally disregard the interests of others.
C. are mainly creatures of habit.
D. are unpredictable.
2. A person should consume more of something when its marginal:
A. benefit exceeds its marginal cost.
B. cost exceeds its marginal benefit.
C. cost equals its marginal benefit.
D. benefit is still positive.
3. Economics may best be defined as the:
A. interaction between macro and micro considerations.
B. social science concerned with how individuals, institutions, and society make optimal choices
under conditions of scarcity.
C. empirical testing of value judgments through the use of logic.
D. use of policy to refute facts and hypotheses.
4. Which of the following most closely relates to the idea of opportunity costs?
A. tradeoffs.
B. economic growth.
C. technological change.
D. capitalism.
5. The term "other things equal" means that:
A. the associated statement is normative.
B. many variables affect the variable under consideration.
C. a number of relevant variables are assumed to be constant.
D. when variable X increases so does related variable Y.
6. Macroeconomics can best be described as the:
A. analysis of how a consumer tries to spend income.
B. study of the large aggregates of the economy or the economy as a whole.
C. analysis of how firms attempt to maximize their profits.
D. study of how supply and demand determine prices in individual markets.
7. Which of the following is a distinguishing feature of a command system?
A. private ownership of all capital.
B. central planning.
C. heavy reliance on markets.
D. wide-spread dispersion of economic power.
1
8. Broadly defined, competition involves:
A. private property and freedom of expression.
B. independently acting buyers and sellers and freedom to enter or leave markets.
C. increasing opportunity costs and diminishing marginal utility.
D. capital goods and division of labor.
9. The invisible-hand concept suggests that:
A. changes in product demands are only randomly reflected in changes in the demands for
resources.
B. profit maximization is inconsistent with an efficient allocation of resources.
C. government action is necessary to correct for market failures.
D. when firms maximize their profits, society's output will also be maximized.
10. In the resource market:
A. businesses borrow financial capital from households.
B. businesses sell services to households.
C. households sell resources to businesses.
D. firms sell raw materials to households.
11. The law of demand states that:
A. price and quantity demanded are inversely related.
B. the larger the number of buyers in a market, the lower will be product price.
C. price and quantity demanded are directly related.
D. consumers will buy more of a product at high prices than at low prices.
12. If two goods are complements:
A. they are consumed independently.
B. an increase in the price of one will increase the demand for the other.
C. a decrease in the price of one will increase the demand for the other.
D. they are necessarily inferior goods.
13. Which of the following will cause the demand curve for product A to shift to the left?
A. population growth that causes an expansion in the number of persons consuming A.
B. an increase in money income if A is a normal good.
C. a decrease in the price of complementary product C.
D. an increase in money income if A is an inferior good.
14. An increase in product price will cause:
A. quantity demanded to decrease.
B. quantity supplied to decrease.
C. quantity demanded to increase.
D. the supply curve to shift to the right.
2
15. The upward slope of the supply curve reflects the:
A. principle of specialization in production.
B. law of supply.
C. fact that price and quantity supplied are inversely related.
D. law of diminishing marginal utility.
16. Refer to the above diagram. The equilibrium price and quantity in this market will be:
A. $1.00 and 200.
B. $1.60 and 130.
C. $.50 and 130.
D. $1.60 and 290.
17. Refer to the above diagram. A surplus of 160 units would be encountered if price was:
A. $1.10, that is, $1.60 minus $.50.
B. $1.60.
C. $1.00.
D. $.50.
18. Refer to the above diagram. A shortage of 160 units would be encountered if price was:
A. $1.10, that is, $1.60 minus $.50.
B. $1.60.
C. $1.00.
D. $.50.
19. The personal distribution of income refers to the:
A. division of income between personal taxes, consumption expenditures, and saving.
B. division of income on the basis of industry sources, for example, agriculture, transportation,
and mining.
C. distribution of income to basic resource classes, that is, wages, rents, interest, and profits.
D. way income is distributed among specific households or spending units.
3
20. The functional distribution of income refers to the:
A. division of income between personal taxes, consumption expenditures, and saving.
B. division of income on the basis of industry sources, for example, agriculture, transportation,
mining, etc.
C. distribution of income to basic resource classes, that is, wages, rents, interest, and profits.
D. way income is distributed among specific households or spending units.
21. Households in the aggregate use the largest share of their total income to:
A. pay taxes.
B. consume.
C. save.
D. buy capital goods.
22. The majority of personal consumption expenditures go to purchase:
A. nondurable goods.
B. durable goods.
C. capital goods.
D. services.
23. Which form of business enterprise accounts for the largest number of firms in the United
States?
A. corporations
B. proprietorships
C. partnerships
D. cooperatives
24. An owner's liability for the debts of a business is:
A. limited in a corporation to the assets of preferred stockholders.
B. limited in a corporation to the assets of bondholders.
C. limited to the owner's investment in a single proprietorship.
D. unlimited in a partnership.
25. Positive externalities benefits refer to:
A. benefits that accrue to parties other than the producer and buyer of a good.
B. the benefits that resource suppliers obtain from the production and sale of a good.
C. the benefit that a consumer receives from buying a good.
D. the combined benefits that buyer and seller receive from a voluntary market transaction.
4
Exam Review Key
1. A
2. A
3. B
4. A
5. C
6. B
7. B
8. B
9. D
10. C
11. A
12. C
13. D
14. A
15. B
16. A
17. B
18. D
19. D
20. C
21. B
22. D
23. B
24. D
25. A
5