Download Econ Practice Test Unit I

Econ Practice Test Unit I
1. Joe sold gold coins for $1000 that he bought a year ago for $1000. He says, "At least I didn't lose any money on my financial
investment." His economist friend points out that in effect he did lose money, because he could have received a 3 percent return on the
$1000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of:
A. opportunity costs.
B. marginal benefits that exceed marginal costs.
C. imperfect information.
D. normative economics.
2. 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.
3. In deciding whether to study for an economics quiz or go to a movie, one is confronted by the idea(s) of:
A. scarcity and opportunity costs.
B. money and real capital.
C. complementary economic goals.
D. full production.
4. The term "ceteris paribus" means:
A. that if event A precedes event B, A has caused B.
B. that economics deals with facts, not values.
C. other things equal.
D. prosperity inevitably follows recession.
5. Macroeconomics approaches the study of economics from the viewpoint of:
A. the entire economy.
B. governmental units.
C. the operation of specific product and resource markets.
D. individual firms.
6. Microeconomics is concerned with:
A. the aggregate or total levels of income, employment, and output.
B. a detailed examination of specific economic units that make up the economic system.
C. positive economics, but not normative economics.
D. the establishing of an overall view of the operation of the economic system.
7. The four factors of production are:
A. land, labor, capital, and money
B. land, labor, capital, and entrepreneurial ability
C. labor, capital, technology, and entrepreneurial ability
D. labor, capital, entrepreneurial ability, and money
8. The production possibilities curve illustrates the basic principle that:
A. the production of more of any one good will in time require smaller and smaller sacrifices of other goods.
B. an economy will automatically obtain full employment of its resources.
C. if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced.
D. an economy's capacity to produce increases in proportion to its population size.
9. If the production possibilities curve is a straight line:
A. the two products will sell at the same market prices.
B. economic resources are perfectly substitutable between the production of the two products.
C. the two products are equally important to consumers.
D. equal quantities of the two products will be produced at each possible point on the curve.
10. A production possibilities curve shows:
A. that resources are unlimited.
B. that people prefer one of the goods more than the other.
C. the maximum amounts of two goods that can be produced assuming the full use of available resources.
D. combinations of capital and labor necessary to produce specific levels of output.
11. A nation's production possibilities curve is bowed out from the origin because:
A. resources are not equally efficient in producing every good.
B. the originator of the idea drew it this way and modern economists follow this convention.
C. resources are scarce.
D. wants are virtually unlimited.
Answer the next question(s) on the basis of the data given in the following production possibilities table:
12. Refer to the above table. A total output of 3 units of capital goods and 4 units of consumer goods:
A. is irrelevant because the economy is capable of producing a larger total output.
B. will result in the maximum rate of growth available to this economy.
C. would involve an inefficient use of the economy's scarce resources.
D. is unobtainable in this economy.
13. Assume an economy is operating at some point on its production possibilities curve, which shows civilian and military goods. If
the output of military goods is increased, the output of civilian goods:
A. will remain unchanged.
B. may be either increased or decreased.
C. must be decreased.
D. must also be increased.
14. Refer to the above tables. Opportunity costs are:
A. constant in both Duckistan and Herbania.
B. larger in Duckistan than in Herbania.
C. increasing in both Duckistan and Herbania.
D. increasing in Duckistan and constant in Herbania.
15. The production possibilities curve shows:
A. the various combinations of two goods that can be produced when society employs all of its scarce resources.
B. the minimum outputs of two goods that will sustain a society.
C. the various combinations of two goods that can be produced when some resources are unemployed.
D. the ideal, but unattainable, combinations of two goods that would maximize consumer satisfactions.
16. In drawing a production possibilities curve we hold constant:
A. the money supply.
B. the consumer price index.
C. both technology and resource supplies.
D. resource supplies only.
17. Refer to the above diagram. If society is currently producing the combination of bicycles and computers shown by point D, the
production of 2 more units of bicycles:
A. cannot be achieved because resources are fully employed.
B. will cost 1 unit of computers.
C. will cost 2 units of computers.
D. will cause some resources to become unemployed.
18. 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.
19. Which of the following is a distinguishing feature of a market system?
A. public ownership of all capital.
B. central planning.
C. wide-spread private ownership of capital.
D. a circular flow of goods, resources, and money.
20. Which of the following is not a characteristic of the market system?
A. private property.
B. freedom of enterprise.
C. government ownership of the major industries.
D. competition in product and resource markets.
21. In a market economy the distribution of output will be determined primarily by:
A. consumer needs and preferences.
B. the quantities and prices of the resources that households supply.
C. government regulations that provide a minimum income for all.
D. a social consensus as to what distribution of income is most equitable.
22. Consumer sovereignty refers to the:
A. fact that resource prices are higher than product prices in capitalistic economies.
B. idea that the pursuit of self-interest is in the public interest.
C. idea that the decisions of producers and resource suppliers with respect to the kinds and amounts of goods produced must be
appropriate to consumer demands.
D. fact that a Federal agency exists to protect consumers from harmful and defective products.
23. Two major virtues of the market system are that it:
A. allocates resources efficiently and allows economic freedom.
B. results in an equitable personal distribution of income and always maintains full employment.
C. results in price level stability and a fair personal distribution of income.
D. eliminates discrimination and minimizes environmental pollution.
24. Innovation lagged in the centrally planned economies because:
A. there was too much domestic business competition.
B. there was too much competition from foreign firms.
C. enterprises resisted innovation in fear that their production targets would be raised.
D. exports had to equal imports for the plan to work.
25. The failure of Soviet central planning was reflected in:
A. a declining growth rate.
B. poor quality goods.
C. the failure to provide promised consumer goods.
D. all of these.
26. The simple circular flow model shows that:
A. households are on the buying side of both product and resource markets.
B. businesses are on the selling side of both product and resource markets.
C. households are on the selling side of the resource market and on the buying side of the product market.
D. businesses are on the buying side of the product market and on the selling side of the resource market.
27. 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.
28. In terms of the circular flow diagram, households make expenditures in the _____ market and receive income through the _____
market.
A. product; financial
B. resource; product
C. product; resource
D. capital; product
29. In the circular flow model:
A. households sell resources to firms.
B. households receive income through the product market.
C. households spend income in the resource market.
D. businesses neither buy nor sell resources.
30. The demand curve shows the relationship between:
A. money income and quantity demanded.
B. price and production costs.
C. price and quantity demanded.
D. consumer tastes and the quantity demanded.
31. The relationship between quantity supplied and price is _____ and the relationship between quantity demanded and price is
_____.
A. direct, inverse
B. inverse, direct
C. inverse, inverse
D. direct, direct
32. When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes:
A. the cost effect.
B. the inflationary effect.
C. the income effect.
D. the substitution effect.
33. In presenting the idea of a demand curve economists presume that the most important variable in determining the quantity
demanded is:
A. the price of the product itself.
B. consumer income.
C. the prices of related goods.
D. consumer tastes.
34. When the price of a product rises, consumers shift their purchases to other products whose prices are now relatively lower. This
statement describes:
A. an inferior good.
B. the rationing function of prices.
C. the substitution effect.
D. the income effect.
35. In the past few years, the demand for donuts has greatly increased. This increase in demand might best be explained by:
A. an increase in the cost of making donuts.
B. an increase in the price of coffee.
C. consumers expecting donut prices to fall.
D. a change in buyer tastes.
36. Which of the following will not cause the demand for product K to change?
A. a change in the price of close-substitute product J
B. an increase in consumer incomes
C. a change in the price of K
D. a change in consumer tastes
37. Which of the following would not shift the demand curve for beef?
A. a widely publicized study that indicates beef increases one's cholesterol
B. a reduction in the price of cattle feed
C. an effective advertising campaign by pork producers
D. a change in the incomes of beef consumers
38. An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for
bicycles. This prediction is based on the assumption that:
A. there are many goods that are substitutes for bicycles.
B. there are many goods that are complementary to bicycles.
C. there are few goods that are substitutes for bicycles.
D. bicycles are normal goods.
39. DVD players and DVDs are:
A. complementary goods.
B. substitute goods.
C. independent goods.
D. inferior goods.
40. If the price of product L increases, the demand curve for close-substitute product J will:
A. shift downward toward the horizontal axis.
B. shift to the left.
C. shift to the right.
D. remain unchanged.
41. If X is a normal good, a rise in money income will shift the:
A. supply curve for X to the left.
B. supply curve for X to the right.
C. demand curve for X to the left.
D. demand curve for X to the right.
42. The demand curve for a product might shift as the result of a change in:
A. consumer tastes.
B. consumer incomes.
C. the prices of related goods.
D. all of these.
43. An inferior good is:
A. one whose demand curve will shift rightward as incomes rise.
B. one whose price and quantity demanded vary directly.
C. one which has not been approved by the Federal Food and Drug Administration.
D. not accurately defined by any of the above statements.
44. 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.
45. The law of supply indicates that:
A. producers will offer more of a product at high prices than they will at low prices.
B. the product supply curve is downsloping.
C. consumers will purchase less of a good at high prices than they will at low prices.
D. producers will offer more of a product at low prices than they will at high prices.
46. A firm's supply curve is upsloping because:
A. the expansion of production necessitates the use of qualitatively inferior inputs.
B. mass production economies are associated with larger levels of output.
C. consumers envision a positive relationship between price and quality.
D. beyond some point the production costs of additional units of output will rise.
47. A leftward shift of a product supply curve might be caused by:
A. an improvement in the relevant technique of production.
B. a decline in the prices of needed inputs.
C. an increase in consumer incomes.
D. some firms leaving an industry.
48. The location of the product supply curve depends on:
A. production technology.
B. the number of buyers in the market.
C. the tastes of buyers.
D. the location of the demand curve.
49. Other things equal, if the price of a key resource used to produce product X falls, the:
A. product supply curve of X will shift to the right.
B. product demand curve of X will shift to the right.
C. product supply curve of X will shift to the left.
D. product demand curve of X will shift to the right.
50. A government subsidy to the producers of a product:
A. reduces product supply.
B. increases product supply.
C. reduces product demand.
D. increases product demand.
51. Refer to the above table. If demand is represented by columns (3) and (2) and supply is represented by columns (3) and (5),
equilibrium price and quantity will be:
A. $10 and 60 units.
B. $9 and 50 units.
C. $8 and 60 units.
D. $7 and 50 units.
52. 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.
53. A market is in equilibrium:
A. provided there is no surplus of the product.
B. at all prices above that shown by the intersection of the supply and demand curves.
C. if the amount producers want to sell is equal to the amount consumers want to buy.
D. whenever the demand curve is downsloping and the supply curve is upsloping.
54. If the demand and supply curves for product X are stable, a government-mandated increase in the price of X will:
A. increase the supply of X and decrease the demand for X.
B. increase the demand for X and decrease the supply of X.
C. increase the quantity supplied and decrease the quantity demanded of X.
D. decrease the quantity supplied of X and increase the quantity demanded of X.
55. Refer to the above diagram. A price of $60 in this market will result in:
A. equilibrium.
B. a shortage of 50 units.
C. a surplus of 50 units.
D. a surplus of 100 units.
56. If there is a shortage of product X:
A. fewer resources will be allocated to the production of this good.
B. the price of the product will rise.
C. the price of the product will decline.
D. the supply curve will shift to the left and the demand curve to the right, eliminating the shortage.
Answer the next question(s) on the basis of the following production possibilities tables for two countries, Latalia and Trombonia:
57. Refer to the above tables. In Latalia the domestic real cost of 1 ton of pork:
A. is 3 tons of beans.
B. diminishes with the level of pork production.
C. is 5 tons of beans.
D. is 1/5 of a ton of beans.
58. Refer to the above tables. If these two nations specialize on the basis of comparative advantage:
A. Trombonia will produce beans and Latalia will produce pork.
B. Trombonia will produce both beans and pork.
C. Latalia will produce both beans and pork and Trombonia will produce neither.
D. Latalia will produce beans and Trombonia will produce pork.
59. Refer to the above tables. Assume that before specialization and trade, Latalia produced combination C and Trombonia produced
combination B. If these two nations now specialize completely based on comparative advantage, the total gains from specialization
and trade will be:
A. 4 tons of beans.
B. 1 ton of pork and 2 tons of beans.
C. 4 tons of pork.
D. 2 tons of pork and 4 tons of beans.
60. Refer to the above diagrams. The solid lines are production possibilities curves; the dashed lines are trading possibilities curves.
The opportunity cost of producing a:
A. pizza is 2 beers in both countries.
B. beer is 1/2 a pizza in both countries.
C. pizza in East Lothian is 1 beer.
D. beer in West Lothian is 1/2 a pizza.
Econ Practice Test Unit I Key
1. Joe sold gold coins for $1000 that he bought a year ago for $1000. He says, "At least I didn't lose any money on my financial
investment." His economist friend points out that in effect he did lose money, because he could have received a 3 percent return on the
$1000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of:
A. opportunity costs.
b. marginal benefits that exceed marginal costs.
c. imperfect information.
d. normative economics.
Economics Page: 4
Learning Objective: 1-1
Macroeconomics Page: 4
McConnell - Chapter 001 #7
Microeconomics Page: 4
Topic: 1
Type: Application of Concept
2. 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.
Economics Page: 4
Learning Objective: 1-1
Macroeconomics Page: 4
McConnell - Chapter 001 #9
Microeconomics Page: 4
Status: New
Topic: 1
Type: Definition
3. In deciding whether to study for an economics quiz or go to a movie, one is confronted by the idea(s) of:
A. scarcity and opportunity costs.
b. money and real capital.
c. complementary economic goals.
d. full production.
Economics Page: 4
Learning Objective: 1-1
Macroeconomics Page: 4
McConnell - Chapter 001 #22
Microeconomics Page: 4
Status: New
Topic: 1
Type: Application of Concept
4. The term "ceteris paribus" means:
a. that if event A precedes event B, A has caused B.
b. that economics deals with facts, not values.
C. other things equal.
d. prosperity inevitably follows recession.
Economics Page: 6
Learning Objective: 1-2
Macroeconomics Page: 6
McConnell - Chapter 001 #39
Microeconomics Page: 6
Topic: 2
Type: Definition
5. Macroeconomics approaches the study of economics from the viewpoint of:
A. the entire economy.
b. governmental units.
c. the operation of specific product and resource markets.
d. individual firms.
Economics Page: 6
Learning Objective: 1-3
Macroeconomics Page: 6
McConnell - Chapter 001 #44
Microeconomics Page: 6
Topic: 3
Type: Definition
6. Microeconomics is concerned with:
a. the aggregate or total levels of income, employment, and output.
B. a detailed examination of specific economic units that make up the economic system.
c. positive economics, but not normative economics.
d. the establishing of an overall view of the operation of the economic system.
Economics Page: 6
Learning Objective: 1-3
Macroeconomics Page: 6
McConnell - Chapter 001 #49
Microeconomics Page: 6
Topic: 3
Type: Definition
7. The four factors of production are:
a. land, labor, capital, and money
B. land, labor, capital, and entrepreneurial ability
c. labor, capital, technology, and entrepreneurial ability
d. labor, capital, entrepreneurial ability, and money
Economics Page: 10-11
Learning Objective: 1-4
Macroeconomics Page: 10-11
McConnell - Chapter 001 #88
Microeconomics Page: 10-11
Status: New
Topic: 6
Type: Definition
8. The production possibilities curve illustrates the basic principle that:
a. the production of more of any one good will in time require smaller and smaller sacrifices of other goods.
b. an economy will automatically obtain full employment of its resources.
C. if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced.
d. an economy's capacity to produce increases in proportion to its population size.
Economics Page: 11
Learning Objective: 1-5
Macroeconomics Page: 11
McConnell - Chapter 001 #97
Microeconomics Page: 11
Status: New
Topic: 7
Type: Application of Concept
9. If the production possibilities curve is a straight line:
a. the two products will sell at the same market prices.
B. economic resources are perfectly substitutable between the production of the two products.
c. the two products are equally important to consumers.
d. equal quantities of the two products will be produced at each possible point on the curve.
Economics Page: 12-13
Learning Objective: 1-5
Macroeconomics Page: 12-13
McConnell - Chapter 001 #100
Microeconomics Page: 12-13
Status: New
Topic: 7
Type: Application of Concept
10. A production possibilities curve shows:
a. that resources are unlimited.
b. that people prefer one of the goods more than the other.
C. the maximum amounts of two goods that can be produced assuming the full use of available resources.
d. combinations of capital and labor necessary to produce specific levels of output.
Economics Page: 11
Learning Objective: 1-5
Macroeconomics Page: 11
McConnell - Chapter 001 #102
Microeconomics Page: 11
Status: New
Topic: 7
Type: Application of Concept
11. A nation's production possibilities curve is bowed out from the origin because:
A. resources are not equally efficient in producing every good.
b. the originator of the idea drew it this way and modern economists follow this convention.
c. resources are scarce.
d. wants are virtually unlimited.
Economics Page: 12-13
Learning Objective: 1-5
Macroeconomics Page: 12-13
McConnell - Chapter 001 #103
Microeconomics Page: 12-13
Status: New
Topic: 7
Type: Application of Concept
Answer the next question(s) on the basis of the data given in the following production possibilities table:
McConnell - Chapter 001
12. Refer to the above table. A total output of 3 units of capital goods and 4 units of consumer goods:
a. is irrelevant because the economy is capable of producing a larger total output.
b. will result in the maximum rate of growth available to this economy.
C. would involve an inefficient use of the economy's scarce resources.
d. is unobtainable in this economy.
Economics Page: 14-15
Learning Objective: 1-5
Macroeconomics Page: 14-15
McConnell - Chapter 001 #106
Microeconomics Page: 14-15
Status: New
Topic: 7
Type: Table
13. Assume an economy is operating at some point on its production possibilities curve, which shows civilian and military goods. If
the output of military goods is increased, the output of civilian goods:
a. will remain unchanged.
b. may be either increased or decreased.
C. must be decreased.
d. must also be increased.
Economics Page: 11
Learning Objective: 1-5
Macroeconomics Page: 11
McConnell - Chapter 001 #112
Microeconomics Page: 11
Status: New
Topic: 7
Type: Complex Analysis
McConnell - Chapter 001
14. Refer to the above tables. Opportunity costs are:
a. constant in both Duckistan and Herbania.
b. larger in Duckistan than in Herbania.
C. increasing in both Duckistan and Herbania.
d. increasing in Duckistan and constant in Herbania.
Economics Page: 12
Learning Objective: 1-5
Macroeconomics Page: 12
McConnell - Chapter 001 #126
Microeconomics Page: 12
Status: New
Topic: 7
Type: Table
15. The production possibilities curve shows:
A. the various combinations of two goods that can be produced when society employs all of its scarce resources.
b. the minimum outputs of two goods that will sustain a society.
c. the various combinations of two goods that can be produced when some resources are unemployed.
d. the ideal, but unattainable, combinations of two goods that would maximize consumer satisfactions.
Economics Page: 11
Learning Objective: 1-5
Macroeconomics Page: 11
McConnell - Chapter 001 #138
Microeconomics Page: 11
Status: New
Topic: 7
Type: Definition
16. In drawing a production possibilities curve we hold constant:
a. the money supply.
b. the consumer price index.
C. both technology and resource supplies.
d. resource supplies only.
Economics Page: 11
Learning Objective: 1-5
Macroeconomics Page: 11
McConnell - Chapter 001 #141
Microeconomics Page: 11
Status: New
Topic: 7
Type: Definition
McConnell - Chapter 001
17. Refer to the above diagram. If society is currently producing the combination of bicycles and computers shown by point D, the
production of 2 more units of bicycles:
a. cannot be achieved because resources are fully employed.
B. will cost 1 unit of computers.
c. will cost 2 units of computers.
d. will cause some resources to become unemployed.
Economics Page: 12
Learning Objective: 1-5
Macroeconomics Page: 12
McConnell - Chapter 001 #157
Microeconomics Page: 12
Status: New
Topic: 7
Type: Graphical
18. 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.
Economics Page: 29
Learning Objective: 2-1
Macroeconomics Page: 29
McConnell - Chapter 002 #2
Microeconomics Page: 29
Topic: 1
Type: Definition
19. Which of the following is a distinguishing feature of a market system?
a. public ownership of all capital.
b. central planning.
C. wide-spread private ownership of capital.
d. a circular flow of goods, resources, and money.
Economics Page: 29
Learning Objective: 2-1
Macroeconomics Page: 29
McConnell - Chapter 002 #3
Microeconomics Page: 29
Topic: 1
Type: Definition
20. Which of the following is not a characteristic of the market system?
a. private property.
b. freedom of enterprise.
C. government ownership of the major industries.
d. competition in product and resource markets.
Economics Page: 29
Learning Objective: 2-2
Macroeconomics Page: 29
McConnell - Chapter 002 #11
Microeconomics Page: 29
Status: New
Topic: 2
Type: Definition
21. In a market economy the distribution of output will be determined primarily by:
a. consumer needs and preferences.
B. the quantities and prices of the resources that households supply.
c. government regulations that provide a minimum income for all.
d. a social consensus as to what distribution of income is most equitable.
Economics Page: 35
Learning Objective: 2-3
Macroeconomics Page: 35
McConnell - Chapter 002 #44
Microeconomics Page: 35
Status: New
Topic: 3
Type: Application of Concept
22. Consumer sovereignty refers to the:
a. fact that resource prices are higher than product prices in capitalistic economies.
b. idea that the pursuit of self-interest is in the public interest.
C. idea that the decisions of producers and resource suppliers with respect to the kinds and amounts of goods produced must be
appropriate to consumer demands.
d. fact that a Federal agency exists to protect consumers from harmful and defective products.
Economics Page: 34
Learning Objective: 2-3
Macroeconomics Page: 34
McConnell - Chapter 002 #58
Microeconomics Page: 34
Status: New
Topic: 3
Type: Definition
23. Two major virtues of the market system are that it:
A. allocates resources efficiently and allows economic freedom.
b. results in an equitable personal distribution of income and always maintains full employment.
c. results in price level stability and a fair personal distribution of income.
d. eliminates discrimination and minimizes environmental pollution.
Economics Page: 37
Learning Objective: 2-3
Macroeconomics Page: 37
McConnell - Chapter 002 #64
Microeconomics Page: 37
Status: New
Topic: 4
Type: Application of Concept
24. Innovation lagged in the centrally planned economies because:
a. there was too much domestic business competition.
b. there was too much competition from foreign firms.
C. enterprises resisted innovation in fear that their production targets would be raised.
d. exports had to equal imports for the plan to work.
Economics Page: 38
Learning Objective: 2-1
Macroeconomics Page: 38
McConnell - Chapter 002 #72
Microeconomics Page: 38
Status: New
Topic: 5
Type: Application of Concept
25. The failure of Soviet central planning was reflected in:
a. a declining growth rate.
b. poor quality goods.
c. the failure to provide promised consumer goods.
D. all of these.
Economics Page: 38
Learning Objective: 2-1
Macroeconomics Page: 38
McConnell - Chapter 002 #75
Microeconomics Page: 38
Status: New
Topic: 5
Type: Application of Concept
26. The simple circular flow model shows that:
a. households are on the buying side of both product and resource markets.
b. businesses are on the selling side of both product and resource markets.
C. households are on the selling side of the resource market and on the buying side of the product market.
d. businesses are on the buying side of the product market and on the selling side of the resource market.
Economics Page: 39
Learning Objective: 2-5
Macroeconomics Page: 39
McConnell - Chapter 002 #77
Microeconomics Page: 39
Topic: 6
Type: Definition
27. 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.
Economics Page: 39
Learning Objective: 2-5
Macroeconomics Page: 39
McConnell - Chapter 002 #79
Microeconomics Page: 39
Topic: 6
Type: Definition
28. In terms of the circular flow diagram, households make expenditures in the _____ market and receive income through the _____
market.
a. product; financial
b. resource; product
C. product; resource
d. capital; product
Economics Page: 39
Learning Objective: 2-5
Macroeconomics Page: 39
McConnell - Chapter 002 #86
Microeconomics Page: 39
Topic: 6
Type: Definition
29. In the circular flow model:
A. households sell resources to firms.
b. households receive income through the product market.
c. households spend income in the resource market.
d. businesses neither buy nor sell resources.
Economics Page: 39
Learning Objective: 2-5
Macroeconomics Page: 39
McConnell - Chapter 002 #89
Microeconomics Page: 39
Topic: 6
Type: Definition
30. The demand curve shows the relationship between:
a. money income and quantity demanded.
b. price and production costs.
C. price and quantity demanded.
d. consumer tastes and the quantity demanded.
Economics Page: 45
Learning Objective: 3-1
Macroeconomics Page: 45
McConnell - Chapter 003 #5
Microeconomics Page: 45
Topic: 1
Type: Definition
31. The relationship between quantity supplied and price is _____ and the relationship between quantity demanded and price is
_____.
A. direct, inverse
b. inverse, direct
c. inverse, inverse
d. direct, direct
Economics Page: 46, 50
Learning Objective: 3-1
Learning Objective: 3-2
Macroeconomics Page: 46, 50
McConnell - Chapter 003 #7
Microeconomics Page: 46, 50
Topic: 1
Type: Application of Concept
32. When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes:
a. the cost effect.
b. the inflationary effect.
C. the income effect.
d. the substitution effect.
Economics Page: 46
Learning Objective: 3-1
Macroeconomics Page: 46
McConnell - Chapter 003 #8
Microeconomics Page: 46
Topic: 1
Type: Definition
33. In presenting the idea of a demand curve economists presume that the most important variable in determining the quantity
demanded is:
A. the price of the product itself.
b. consumer income.
c. the prices of related goods.
d. consumer tastes.
Economics Page: 47
Learning Objective: 3-1
Macroeconomics Page: 47
McConnell - Chapter 003 #10
Microeconomics Page: 47
Topic: 1
Type: Definition
34. When the price of a product rises, consumers shift their purchases to other products whose prices are now relatively lower. This
statement describes:
a. an inferior good.
b. the rationing function of prices.
C. the substitution effect.
d. the income effect.
Economics Page: 46
Learning Objective: 3-1
Macroeconomics Page: 46
McConnell - Chapter 003 #13
Microeconomics Page: 46
Topic: 1
Type: Definition
35. In the past few years, the demand for donuts has greatly increased. This increase in demand might best be explained by:
a. an increase in the cost of making donuts.
b. an increase in the price of coffee.
c. consumers expecting donut prices to fall.
D. a change in buyer tastes.
Economics Page: 48
Learning Objective: 3-1
Macroeconomics Page: 48
McConnell - Chapter 003 #20
Microeconomics Page: 48
Topic: 2
Type: Application of Concept
36. Which of the following will not cause the demand for product K to change?
a. a change in the price of close-substitute product J
b. an increase in consumer incomes
C. a change in the price of K
d. a change in consumer tastes
Economics Page: 48-49
Learning Objective: 3-1
Macroeconomics Page: 48-49
McConnell - Chapter 003 #21
Microeconomics Page: 48-49
Topic: 2
Type: Application of Concept
37. Which of the following would not shift the demand curve for beef?
a. a widely publicized study that indicates beef increases one's cholesterol
B. a reduction in the price of cattle feed
c. an effective advertising campaign by pork producers
d. a change in the incomes of beef consumers
Economics Page: 49
Learning Objective: 3-1
Macroeconomics Page: 49
McConnell - Chapter 003 #22
Microeconomics Page: 49
Topic: 2
Type: Application of Concept
38. An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for
bicycles. This prediction is based on the assumption that:
a. there are many goods that are substitutes for bicycles.
b. there are many goods that are complementary to bicycles.
c. there are few goods that are substitutes for bicycles.
D. bicycles are normal goods.
Economics Page: 48
Learning Objective: 3-1
Macroeconomics Page: 48
McConnell - Chapter 003 #24
Microeconomics Page: 48
Topic: 2
Type: Application of Concept
39. DVD players and DVDs are:
A. complementary goods.
b. substitute goods.
c. independent goods.
d. inferior goods.
Economics Page: 49
Learning Objective: 3-1
Macroeconomics Page: 49
McConnell - Chapter 003 #27
Microeconomics Page: 49
Topic: 2
Type: Application of Concept
40. If the price of product L increases, the demand curve for close-substitute product J will:
a. shift downward toward the horizontal axis.
b. shift to the left.
C. shift to the right.
d. remain unchanged.
Economics Page: 49
Learning Objective: 3-1
Macroeconomics Page: 49
McConnell - Chapter 003 #29
Microeconomics Page: 49
Topic: 2
Type: Application of Concept
41. If X is a normal good, a rise in money income will shift the:
a. supply curve for X to the left.
b. supply curve for X to the right.
c. demand curve for X to the left.
D. demand curve for X to the right.
Economics Page: 48
Learning Objective: 3-1
Macroeconomics Page: 48
McConnell - Chapter 003 #36
Microeconomics Page: 48
Topic: 2
Type: Application of Concept
42. The demand curve for a product might shift as the result of a change in:
a. consumer tastes.
b. consumer incomes.
c. the prices of related goods.
D. all of these.
Economics Page: 48-49
Learning Objective: 3-1
Macroeconomics Page: 48-49
McConnell - Chapter 003 #52
Microeconomics Page: 48-49
Topic: 2
Type: Definition
43. An inferior good is:
a. one whose demand curve will shift rightward as incomes rise.
b. one whose price and quantity demanded vary directly.
c. one which has not been approved by the Federal Food and Drug Administration.
D. not accurately defined by any of the above statements.
Economics Page: 48
Learning Objective: 3-1
Macroeconomics Page: 48
McConnell - Chapter 003 #53
Microeconomics Page: 48
Topic: 2
Type: Definition
44. 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.
Economics Page: 49
Learning Objective: 3-1
Macroeconomics Page: 49
McConnell - Chapter 003 #68
Microeconomics Page: 49
Topic: 3
Type: Application of Concept
45. The law of supply indicates that:
A. producers will offer more of a product at high prices than they will at low prices.
b. the product supply curve is downsloping.
c. consumers will purchase less of a good at high prices than they will at low prices.
d. producers will offer more of a product at low prices than they will at high prices.
Economics Page: 50
Learning Objective: 3-2
Macroeconomics Page: 50
McConnell - Chapter 003 #72
Microeconomics Page: 50
Topic: 4
Type: Definition
46. A firm's supply curve is upsloping because:
a. the expansion of production necessitates the use of qualitatively inferior inputs.
b. mass production economies are associated with larger levels of output.
c. consumers envision a positive relationship between price and quality.
D. beyond some point the production costs of additional units of output will rise.
Economics Page: 50
Learning Objective: 3-2
Macroeconomics Page: 50
McConnell - Chapter 003 #77
Microeconomics Page: 50
Topic: 4
Type: Application of Concept
47. A leftward shift of a product supply curve might be caused by:
a. an improvement in the relevant technique of production.
b. a decline in the prices of needed inputs.
c. an increase in consumer incomes.
D. some firms leaving an industry.
Economics Page: 52
Learning Objective: 3-2
Macroeconomics Page: 52
McConnell - Chapter 003 #78
Microeconomics Page: 52
Topic: 5
Type: Application of Concept
48. The location of the product supply curve depends on:
A. production technology.
b. the number of buyers in the market.
c. the tastes of buyers.
d. the location of the demand curve.
Economics Page: 52
Learning Objective: 3-2
Macroeconomics Page: 52
McConnell - Chapter 003 #79
Microeconomics Page: 52
Topic: 5
Type: Definition
49. Other things equal, if the price of a key resource used to produce product X falls, the:
A. product supply curve of X will shift to the right.
b. product demand curve of X will shift to the right.
c. product supply curve of X will shift to the left.
d. product demand curve of X will shift to the right.
Economics Page: 51
Learning Objective: 3-2
Macroeconomics Page: 51
McConnell - Chapter 003 #88
Microeconomics Page: 51
Status: New
Topic: 5
Type: Application of Concept
50. A government subsidy to the producers of a product:
a. reduces product supply.
B. increases product supply.
c. reduces product demand.
d. increases product demand.
Economics Page: 52
Learning Objective: 3-2
Macroeconomics Page: 52
McConnell - Chapter 003 #91
Microeconomics Page: 52
Status: New
Topic: 5
Type: Application of Concept
McConnell - Chapter 003
51. Refer to the above table. If demand is represented by columns (3) and (2) and supply is represented by columns (3) and (5),
equilibrium price and quantity will be:
a. $10 and 60 units.
b. $9 and 50 units.
C. $8 and 60 units.
d. $7 and 50 units.
Economics Page: 53
Learning Objective: 3-3
Macroeconomics Page: 53
McConnell - Chapter 003 #93
Microeconomics Page: 53
Topic: 6
Type: Table
McConnell - Chapter 003
52. 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.
Economics Page: 54
Learning Objective: 3-3
Macroeconomics Page: 54
McConnell - Chapter 003 #104
Microeconomics Page: 54
Topic: 6
Type: Graphical
53. A market is in equilibrium:
a. provided there is no surplus of the product.
b. at all prices above that shown by the intersection of the supply and demand curves.
C. if the amount producers want to sell is equal to the amount consumers want to buy.
d. whenever the demand curve is downsloping and the supply curve is upsloping.
Economics Page: 53
Learning Objective: 3-3
Macroeconomics Page: 53
McConnell - Chapter 003 #106
Microeconomics Page: 53
Topic: 6
Type: Definition
54. If the demand and supply curves for product X are stable, a government-mandated increase in the price of X will:
a. increase the supply of X and decrease the demand for X.
b. increase the demand for X and decrease the supply of X.
C. increase the quantity supplied and decrease the quantity demanded of X.
d. decrease the quantity supplied of X and increase the quantity demanded of X.
Economics Page: 54
Learning Objective: 3-5
Macroeconomics Page: 54
McConnell - Chapter 003 #107
Microeconomics Page: 54
Topic: 6
Type: Complex Analysis
McConnell - Chapter 003
55. Refer to the above diagram. A price of $60 in this market will result in:
a. equilibrium.
b. a shortage of 50 units.
c. a surplus of 50 units.
D. a surplus of 100 units.
Economics Page: 54
Learning Objective: 3-3
Macroeconomics Page: 54
McConnell - Chapter 003 #109
Microeconomics Page: 54
Topic: 6
Type: Graphical
56. If there is a shortage of product X:
a. fewer resources will be allocated to the production of this good.
B. the price of the product will rise.
c. the price of the product will decline.
d. the supply curve will shift to the left and the demand curve to the right, eliminating the shortage.
Economics Page: 54
Learning Objective: 3-3
Macroeconomics Page: 54
McConnell - Chapter 003 #116
Microeconomics Page: 54
Topic: 6
Type: Application of Concept
Answer the next question(s) on the basis of the following production possibilities tables for two countries, Latalia and Trombonia:
McConnell - Chapter 035
57. Refer to the above tables. In Latalia the domestic real cost of 1 ton of pork:
a. is 3 tons of beans.
b. diminishes with the level of pork production.
C. is 5 tons of beans.
d. is 1/5 of a ton of beans.
Economics Page: 678-679
Learning Objective: 35-1
Macroeconomics Page: 342-343
McConnell - Chapter 035 #23
Microeconomics Page: 444-445
Topic: 2
Type: Table
58. Refer to the above tables. If these two nations specialize on the basis of comparative advantage:
a. Trombonia will produce beans and Latalia will produce pork.
b. Trombonia will produce both beans and pork.
c. Latalia will produce both beans and pork and Trombonia will produce neither.
D. Latalia will produce beans and Trombonia will produce pork.
Economics Page: 678-679
Learning Objective: 35-1
Macroeconomics Page: 342-343
McConnell - Chapter 035 #24
Microeconomics Page: 444-445
Topic: 2
Type: Table
59. Refer to the above tables. Assume that before specialization and trade, Latalia produced combination C and Trombonia produced
combination B. If these two nations now specialize completely based on comparative advantage, the total gains from specialization
and trade will be:
A. 4 tons of beans.
b. 1 ton of pork and 2 tons of beans.
c. 4 tons of pork.
d. 2 tons of pork and 4 tons of beans.
Economics Page: 678-679
Learning Objective: 35-1
Macroeconomics Page: 342-343
McConnell - Chapter 035 #25
Microeconomics Page: 444-445
Topic: 2
Type: Table
McConnell - Chapter 035
60. Refer to the above diagrams. The solid lines are production possibilities curves; the dashed lines are trading possibilities curves.
The opportunity cost of producing a:
a. pizza is 2 beers in both countries.
b. beer is 1/2 a pizza in both countries.
c. pizza in East Lothian is 1 beer.
D. beer in West Lothian is 1/2 a pizza.
Economics Page: 679-680
Learning Objective: 35-1
Macroeconomics Page: 343-344
McConnell - Chapter 035 #30
Microeconomics Page: 445-446
Topic: 2
Type: Graphical
Econ Practice Test Unit I Summary
Category
# of Questions
Economics Page: 10-11
1
Economics Page: 11
5
Economics Page: 12
2
Economics Page: 12-13
2
Economics Page: 14-15
1
Economics Page: 29
3
Economics Page: 34
1
Economics Page: 35
1
Economics Page: 37
1
Economics Page: 38
2
Economics Page: 39
4
Economics Page: 4
3
Economics Page: 45
1
Economics Page: 46
2
Economics Page: 46, 50
1
Economics Page: 47
1
Economics Page: 48
4
Economics Page: 48-49
2
Economics Page: 49
4
Economics Page: 50
2
Economics Page: 51
1
Economics Page: 52
3
Economics Page: 53
2
Economics Page: 54
4
Economics Page: 6
3
Economics Page: 678-679
3
Economics Page: 679-680
1
Learning Objective: 1-1
3
Learning Objective: 1-2
1
Learning Objective: 1-3
2
Learning Objective: 1-4
1
Learning Objective: 1-5
10
Learning Objective: 2-1
4
Learning Objective: 2-2
1
Learning Objective: 2-3
3
Learning Objective: 2-5
4
Learning Objective: 3-1
15
Learning Objective: 3-2
7
Learning Objective: 3-3
5
Learning Objective: 3-5
1
Learning Objective: 35-1
4
Macroeconomics Page: 10-11
1
Macroeconomics Page: 11
5
Macroeconomics Page: 12
2
Macroeconomics Page: 12-13
2
Macroeconomics Page: 14-15
1
Macroeconomics Page: 29
3
Macroeconomics Page: 34
1
Macroeconomics Page: 342-343
3
Macroeconomics Page: 343-344
1
Macroeconomics Page: 35
1
Macroeconomics Page: 37
1
Macroeconomics Page: 38
2
Macroeconomics Page: 39
4
Macroeconomics Page: 4
3
Macroeconomics Page: 45
1
Macroeconomics Page: 46
2
Macroeconomics Page: 46, 50
1
Macroeconomics Page: 47
1
Macroeconomics Page: 48
4
Macroeconomics Page: 48-49
2
Macroeconomics Page: 49
4
Macroeconomics Page: 50
2
Macroeconomics Page: 51
1
Macroeconomics Page: 52
3
Macroeconomics Page: 53
2
Macroeconomics Page: 54
4
Macroeconomics Page: 6
3
McConnell - Chapter 001
20
McConnell - Chapter 002
12
McConnell - Chapter 003
30
McConnell - Chapter 035
6
Microeconomics Page: 10-11
1
Microeconomics Page: 11
5
Microeconomics Page: 12
2
Microeconomics Page: 12-13
2
Microeconomics Page: 14-15
1
Microeconomics Page: 29
3
Microeconomics Page: 34
1
Microeconomics Page: 35
1
Microeconomics Page: 37
1
Microeconomics Page: 38
2
Microeconomics Page: 39
4
Microeconomics Page: 4
3
Microeconomics Page: 444-445
3
Microeconomics Page: 445-446
1
Microeconomics Page: 45
1
Microeconomics Page: 46
2
Microeconomics Page: 46, 50
1
Microeconomics Page: 47
1
Microeconomics Page: 48
4
Microeconomics Page: 48-49
2
Microeconomics Page: 49
4
Microeconomics Page: 50
2
Microeconomics Page: 51
1
Microeconomics Page: 52
3
Microeconomics Page: 53
2
Microeconomics Page: 54
4
Microeconomics Page: 6
3
Status: New
21
Topic: 1
10
Topic: 2
15
Topic: 3
5
Topic: 4
3
Topic: 5
6
Topic: 6
11
Topic: 7
10
Type: Application of Concept
24
Type: Complex Analysis
2
Type: Definition
24
Type: Graphical
4
Type: Table
6