Download District Test Review – answers are at the end of the test

District Test Review – answers are at the end of the test
Multiple Choice
Identify the choice that best completes the statement or answers the question.
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1. Cars and automobile insurance are examples of:
a. Complimentary goods
c. Economic models
b. Substitute goods
2. In response to rising car traffic, demand for bicycles has increased. The new equilibrium point will
show
a. more bicycles sold, but at a higher
price
b. fewer bicycles sold, but at a higher
price
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c. more bicycles sold, but at a lower price
d. fewer bicycles sold, but at a higher
price
3. If the price for a product is set above equilibrium a ______ will occur.
a. Surplus
c. Price increase
b. Shortage
d. None of these
4. Due to a major chemical spill in a country’s largest fishing grounds, 40% of the countries fish supply has been
destroyed.
Which of the following would correctly describe the consequences of the above statement?
a. The sale of beef will decrease
c. The sale of chickens will increase
b. The sale of fishing supplies will remain
d. The sale of fishing boats will increase
the same
5. As the Phoenix Area has grown in population, land which was used in the production of oranges is now being
used for houses, apartments, shopping centers and parking lots.
Which of the following changes in the price and quantity of oranges will result from this action?
a. price increase, quantity increase
c. price decrease, quantity increase
b. price increase, quantity decrease
d. price decrease, quantity decrease
6. One of the major airline carriers (Southwest Airlines) had its mechanics go out on strike.
Which of the following changes in the price and quantity of airline tickets will result from this action?
a. price increase, quantity increase
c. price decrease, quantity increase
b. price increase, quantity decrease
d. price decrease, quantity decrease
7. The President’s tax reform plan calls for a 1200 dollar tax rebate to all families.
Which of the following changes in the price and quantity of DVD players will result from this action?
a. price increase, quantity increase
c. price decrease, quantity increase
b. price increase, quantity decrease
d. price decrease, quantity decrease
8. How is the future price related to current demand?
a. If the price is expected to rise the current c. If the price is expected to rise, the current
demand will drop
demand will rise
b. If the price is expected to fall, the current d. Future price is not related to demand
demand will rise
9. What does it mean when the demand for a product is inelastic?
a. People will not buy any of that product
c. Customers are sensitive to the price of the
when the price goes up
product
b. A price increase does not have a
d. There are very few satisfactory substitutes
significant impact on buying habits
for the product.
10. A government set maximum price that can be charged for goods and services is:
a. rationing
c. surplus of the good
b. an equilibrium price
____ 11. ‘Scarcity’ is an economic problem
a. Only for poor families.
d. a price ceiling
c. Only for people who live in less
developed countries.
b. Even for wealthy families.
d. For individuals and families, but not
for governments and nations
____ 12. Which of the following is not one of the four “needs” according to lecture.
a. Food
c. Shelter
b. Money
d. Education
____ 13. The resources used to make all goods and services are the
a. production possibilities.
c. production trade-offs.
b. factors of production.
d. opportunity costs.
____ 14. What does a production possibilities frontier show?
a. scarce and less scarce resources
b. global trade-offs and costs of doing business
c. an economy that is producing but not at the maximum
d. the maximum amount that an economy can produce
____ 15. All countries today have this type of economic system.
a. Command
c. Mixed
b. Market
d. Traditional
____ 16. Under this type of economic system the question of what to produce is determined through a combination of
government decisions and the sale of goods and services.
a. Command
c. Traditional
b. Market
d. Mixed
____ 17. In 2007, many computer companies went out of business because they were not making the kind of product at
the right prices that consumers wanted. This was caused by free competition. Which of the following
economic systems is being described?
a. Market
c. Traditional
b. Command
d. Mixed
____ 18. Wilfred Estonia will grow corn in his field as he always has for the last forty years. His father and
Grandfather also grew corn in the same field using the same methods he uses today. Which of the following
economic systems is being described?
a. Market
c. Traditional
b. Command
d. Mixed
____ 19. Which of the following is NOT characteristic of a centrally planned economy?
a. The central government owns all land and capital.
b. The central government makes all economic decisions.
c. Each collective or factory sets its own goals.
d. Each person is assigned a job.
____ 20. Why does even a free market economy need some government intervention?
a. to provide for things that the marketplace does not address
b. to ensure that the government has the freedom to tax as necessary
c. to make sure that the government can fulfill its needs for military personnel
d. so that the government has some control over factor resources
____ 21. What does the process of specialization do for an economy?
a. It eliminates unemployment.
c. It fosters competition.
b. It makes it more efficient.
d. It makes it easier to control.
____ 22. What incentive motivates a manufacturer to sell a product?
____ 23.
____ 24.
____ 25.
____ 26.
____ 27.
a. making profits on sales
c. pleasing the consumer
b. putting others out of business
d. popularity of the product
Which of the following is characteristic of a traditional economy?
a. Communities tend to be fast-growing.
b. They are usually based on light industrial production.
c. They have a high standard of living.
d. Children tend to have the same jobs as their parents did.
In what kind of an economy does the government make all the decisions?
a. socialist
c. centrally planned
b. laissez faire
d. free enterprise
What is the difference between seasonal unemployment and structural unemployment?
a. Seasonal unemployment occurs because of schedules, whereas structural occurs because
people lack skills.
b. Seasonal unemployment is rare in a modern society, whereas structural is not.
c. Seasonal unemployment occurs only in the summer, whereas structural can occur all year
round.
d. Seasonal unemployment is generally among low-paid workers, whereas structural is
among the highly paid.
When the economy is working properly, what is the unemployment rate?
a. 0 to 3 percent
c. 8 to 10 percent
b. 4 to 6 percent
d. 10 to 12 percent
Which of the following is most likely to be worried about high inflation?
a. a factory worker
c. a doctor with a suburban practice
b. a shopkeeper
d. a retired couple on a fixed income
____ 28. Of the following, which is the best example of structural unemployment?
a. A computer programmer who quits his c. An auto worker who loses her job
job to move to a warmer climate.
b. A construction worker who loses his
during a recession
d. A steel worker who is replaced by a
job in the winter
robot
____ 29. Erin loses her job at a shoe factory when the economy falls into a recession. What best describes
Erin?
a. frictionally unemployed
c. seasonally unemployed
b. cyclically unemployed
d. structurally unemployed
____ 30. What is an example of inflation caused by cost-push?
a. Airlines hire more security to search
c. The Federal Reserve buys bonds
passengers’ bags
b. The new, smaller PS2 is the hot toy for d. The discount rate is decreased by
the holidays
.25%.
____ 31. An example of cost-push inflation would be:
a. Prices increase over time
c. The price of oil causes an increase in
all prices
b. Prices increase because a product is
popular
d. Prices increase because of the need for
a complimentary good
____ 32. Suppose a drop in consumer confidence results in an economic contraction, such as the recession of
2001. What should be done to move the economy out of the recession?
a. Government spending should be
c. The money supply should be increased
decreased
b. Taxes should be increased
d. Interest rates should be increased
____ 33. Which of these statements is an important part of supply side economics?:
a. The federal government should protect
economic growth by balancing budget
every year
c. The best way to get out of a recession is to
increase government spending
b. The government should promote
economic growth by reduce taxes
d. The government should allow the free
market to regulate itself
____ 34. The consumer price index rose 11% last quarter.
Which of the following actions by the government, in theory, would correct the above situation?
a. increase discount rate
c. increase in government spending
b. decrease in reserve rate
d. no government action
____ 35. Due to worries about future profits; businesses have released a great number of people.
Which of the following actions by the government, in theory, would correct the above situation?
a. decrease in government spending
c. increase the reserve rate
b. decrease the discount rate
d. no government action
____ 36. Business executives, worried about global economic conditions, cut back on business spending and
investments. This resulted in layoffs in the capital goods industry, reducing consumer spending by the laid off
workers.
Which of the following actions by the government, in theory, would correct the above situation?
a. Decrease taxes
c. Decrease in government spending
b. Increase discount rate
d. No change in government policy
____ 37. Many poeple decide to leave cold weather states and move to warmer weahter states and look for new and
better jobs.
Which of the following actions by the government, in theory, would correct the above situation?
a. Decrease taxes
c. Decrease in government spending
b. Increase government bond sales
d. No change in government policy
____ 38. The reserve rate is:
a. the interest rate the government charges
c. the amount of deposits a bank must keep
banks to borrow money.
and not use for loans or investments
b. the allowable rate of inflation before it is d. a tool used by the government when
considered a problem
implementing fiscal policy
____ 39. The discount rate is:
a. the interest rate the government charges
c. the amount of deposits a bank must keep
banks to borrow money.
and not use for loans or investments
b. the allowable rate of inflation before it is d. a tool used by the government when
considered a problem
implementing fiscal policy
____ 40. An example of an expansionary monetary policy would be:
a. lowering the reserve requirement
c. lowering the tax rate
b. Decreasing government spending
d. increasing government spending
____ 41. The government becomes concerned due to a dramatic rise in unemployment and a decrease in the GDP for
the third quarter. Which of the following government actions would be the most appropriate for this situation?
a. Raise income taxes
c. Raise the reserve rate
b. Decrease government spending
d. Decrease the discount rate
____ 42. After the election of John McCain the people of America feel that a new age has begun and begin to buy at
record levels. These purchases move the U.S. out of the current recession but unfortunately cause an increase
in the CPI. Which of the following governmental action would be appropriate in this situation?
a. decrease taxes
c. decrease the reserve rate
b. decrease government spending
d. decrease the discount rate
____ 43. In the last 6 months sales of most consumer goods have decreased, causing store owners to layoff
workers. Which of the following actions, in theory, would help correct this problem?
a. decrease the reserve rate
b. increase the discount rate
c. increase the sale of government securities
d. no government action needed
____ 44. Canada had long been a producer of cheap wheat, but the U.S. had a high tariff on it to
protect American farmers. Recently a trade agreement was concluded which lowered
the tariff. Which of the following would result from the change in the tariff for natural
resources?
c. The standard of living will decrease
a. The quantity of wheat will increase
d. The price of wheat will increase
b. The quantity of wheat will decrease
____ 45. Japan has increases its tariff on American made cars by 50% in retaliation, the U.S. increases its
tariff on Japanese steel by 50%. Which of the following would result from change in tariff on cars
and steel?
a. Consumer standard of living in Japan c. Consumer standard of living in both
would increase
countries would increase
d. Consumer standard of living in both
b. Consumer standard of living in the
U.S. would remain the same
nations would decrease
____ 46. Americans purchase 73% of their tires from Canadian manufacturers. Goodyear pressures Congress
to enact a law, which increases the tire tariff by 34.3%. Which of the following would result from
change in tariff on tires?
a. The Canadian standard of living would c. The American standard of living
remain unchanged
would decrease
b. The Canadian standard of living would d. The American standard of living
increase
would increase
____ 47. Japan now produces over half of the wrist watches available for sale in the United States. Suppose
the United States government places a quota on foreign watches. Which of the following would
result from change in quota on wristwatches?
c. The price of watches will be
a. The price of watches will increase
eliminated
d. price of watches will decrease
b. The price of watches will be
unchanged
____ 48. After the death of Fidel Castro Cuba and the United States begin normalizing relations. This normalization
begins with the ending of the 40 year embargo between the two nations.
Which of the following would result from change in the embargo.
a. Interdependence between the two nations
will increase
b. The price of products traded between the
two countries will increase
c. The quantity of products traded between
the two countries will decrease
d. The standard of living in the U.S. will
decrease
____ 49. Americans currently purchase very few medical supplies from other nations. The tariffs on foreign
produced medical supplies are 28% of their value, making them non-competitive. Congress passes a
law removing the tariff on these foreign produced medical supplies. Which of the following would
result from change in tariff on foreign produced medical supplies?
c. The price of medical supplies would
a. The price of medical supplies would
stay the same
decrease
d. The price of medical supplies would
b. The price of medical supplies would
triple
increase
____ 50. The largest builder of pools in Arizona announced a price reduction in December. Within two weeks, the
three other pool builders in Arizona announced similar price deceases.
Which of the following market structures uses this method in determining prices?
a. monopoly
c. monopolistic competition
b. oligopoly
d. perfect competition
____ 51. Recently, the only meat market in the town of Blue Hill raised all of its prices by 10%. Very few people in the
town stopped buying meat.
Which of the following market structures uses this method in determining prices?
____ 52.
____ 53.
____ 54.
____ 55.
a. monopoly
c. monopolistic competition
b. oligopoly
d. perfect competition
One goal of government is the US has been to
a. Promote monopolies
c. promote mergers
b. discourage competition in the economy
d. encourage competition in the economy
Which of the following is NOT a form of nonprice competition?
a. location
c. advertising
b. physical characteristics
d. discounts
Which of the following is NOT a condition for perfect competition?
a. Many buyers and sellers participate in the market.
b. Sellers offer a wide variety of products.
c. Buyers and sellers are well informed about products.
d. Sellers are able to enter and exit the market freely.
How much control over price do companies in a perfectly competitive market have?
a. none
c. some
b. very little
d. total control
District Test Review
Answer Section
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