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Test 1097
ECONOMICS APPLICATIONS IN BUSINESS
1
1. Which of the following is a way that local zoning laws affect businesses:
A. Restrict placement of billboards
C. Limit creation of monopolies
B. Prohibit price discrimination
D. Require labels on products
2. Which of the following is a type of law that governs the amount of money that businesses pay to various
levels of government:
A. Substantive
C. Trade
B. Contract
D. Tax
3. The form of business ownership in which two or more owners are liable for all debts or losses of the
business is a
A. limited partnership.
C. sole proprietorship.
B. general partnership.
D. corporation.
4. Which of the following types of business organizations reduces or limits the risk of its stockholders:
A. Partnership
C. Franchise
B. Sole proprietorship
D. Corporation
5. After only her seventh month in business, Martha realized that her new business venture was paying off,
and she would be taking home a $1,000 profit for the month. Finally, she could reap the financial rewards
of being the boss. This is an advantage of what type of business ownership?
A. Sole proprietorship
C. Corporation
B. Partnership
D. Merger
6. Italian designer suits sold in exclusive men's apparel shops would be classified as __________ goods.
A. intangible
C. convenience
B. shopping
D. specialty
7. You sell robots to companies that use them to cut stained glass to produce lamps. What classification of
industrial goods are robots?
A. Installations
C. Supplies
B. Appliances
D. Materials
8. If a good or service is scarce, consumers will usually be
A. able to get as much of it as they want.
C. willing to pay money to get it.
B. uninterested in owning it.
D. unwilling to buy it.
9. Which of the following does not limit capital goods:
A. Supply of money to pay for production
B. Supply of natural resources
C. Supply of available labor
D. Supply of consumers to purchase them
10. A farmer recently purchased 1,400 acres of farm land and six new pieces of farm machinery. What
categories of resources did the farmer acquire?
A. Natural and capital
C. Capital and labor
B. Natural and land
D. Labor and human
11. A transportation service makes sure that its trucks are well maintained and driven with care. This is an
example of a way to
A. retrain human resources.
C. renew natural resources.
B. conserve the firm's capital goods.
D. increase the number of capital goods.
12. A gap between unlimited wants and limited resources creates
A. economics.
C. wants.
B. scarcity.
D. resources.
Copyright © 2014 by MBA Research and Curriculum Center®, Columbus, Ohio
Test 1097
ECONOMICS APPLICATIONS IN BUSINESS
2
13. Which of the following is an example of an economic want:
A. Education
C. Health
B. Friendship
D. Longevity
14. Products that are available when they are needed have __________ utility.
A. form
C. place
B. time
D. possession
15. Ronnie's Retail Mart recently began a layaway program for large-ticket items. By introducing this layaway program, Ronnie's hopes to increase __________ utility.
A. time
C. possession
B. place
D. form
16. As prices decrease, consumer demand usually
A. stays the same.
B. increases.
C. decreases.
D. stabilizes.
17. When less expensive substitutes for a product are readily available, then demand for that product is likely
to be more
A. inelastic.
C. urgent.
B. unitary.
D. elastic.
18. What is one factor that will determine how much a customer is willing to pay for a good or service?
A. Production costs
C. Rationing
B. Buying power
D. Incentive
19. When demand is greater than supply, a __________ often develops.
A. buyer's market
C. surplus
B. seller's market
D. price ceiling
20. Which of the following is a service business:
A. Book publisher
B. Lumber company
C. Law firm
D. Convenience store
21. A local business is sponsoring a program to combat drug abuse in the local schools. This is an example
of a business that is
A. assisting with a fundraiser.
C. contributing to public interests.
B. filling consumer needs.
D. teaching students marketing skills.
22. Selling goods and locating potential customers are included in which of the following categories of
business activities:
A. Strategic management
C. Financial analysis
B. Marketing
D. Operations management
23. For the long-term success of the business, Stacey's Coffee House has decided to add a self-serve
laundromat. Which of the following describes the business activity Stacey's Coffee House is likely
involved in:
A. Promoting its new service to potential customers
B. Establishing a system for retrieving information
C. Determining what will put it in reach of its goals
D. Organizing itself for meeting its objectives
24. Pricing the product appropriately is a(n) ___________ activity.
A. marketing
C. financing
B. operations-management
D. information-management
Test 1097
ECONOMICS APPLICATIONS IN BUSINESS
3
25. The government's mandating the use of unleaded gas in new cars is an example of
A. protecting specific businesses.
C. stabilizing the economy.
B. protecting the environment.
D. providing public goods.
26. How has globalization affected consumers?
A. It has made them more close-minded toward other cultures.
B. It has increased competition between them.
C. It has given them a bigger and better variety of products to choose from.
D. It has helped them to save on taxes.
27. A luxury spa has experienced decreased sales. The owner believes the reason is a rise in unemployment
in the area. What external environmental factor does this represent?
A. Sociocultural
C. Technological
B. Economic
D. Governmental
28. An overall concern about the well-being of the natural environment has influenced many companies to
use recycled materials in their packaging. In this example, ___________ factors have affected the
business environment.
A. technological
C. political
B. economic
D. social
29. The main way that economic factors influence the external business environment is by
A. decreasing interest rates.
C. affecting customers' ability to spend.
B. making products more expensive.
D. downgrading national credit ratings.
30. Businesses that successfully adapt to current market situations often realize that
A. diversification is the key.
C. change is an opportunity.
B. more financing is necessary.
D. cutting costs is important.
31. To maintain its current customer base and attract new markets, the KMV Company lowered the prices of
some of its products. What external factor most likely influenced this action?
A. Operating cost increases
C. Production line improvements
B. Changes in consumer spending
D. Comprehensive employee training programs
32. How are products allocated in a traditional economic system?
A. By individuals
C. By the marketplace
B. By government
D. By consumers' incomes
33. Who answers the basic economic question of how goods will be produced in a socialist command
economy?
A. Government and businesses
C. Producers
B. Government planners
D. Individuals
34. A family produces pottery bowls using a production method taught by the oldest member of the group.
The family produces 10 bowls per week and trades them for items produced by other families. This
situation would occur in a __________ economic system.
A. market
C. communist command
B. traditional
D. socialist command
35. One of the results of freedom in the marketplace is that
A. people can buy anything they can afford that can legally be sold.
B. people and businesses can own things of value.
C. government decides how to use an individual's private property.
D. businesses use resources efficiently.
Test 1097
ECONOMICS APPLICATIONS IN BUSINESS
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36. One of the factors that directly limits the economic freedom of individuals in a private enterprise system is
government
A. services.
C. taxation.
B. production.
D. indecision.
37. The greatest motivating factor in a market economy is the
A. thrill of competition.
C. satisfaction of doing a good job.
B. chance to make a profit.
D. opportunity to produce goods and services.
38. Globalization can be an advantage for businesses because it
A. can contribute to a phenomenon called "brain drain."
B. can help them to cut costs for certain resources.
C. increases competition.
D. inhibits business ideas.
39. A popular product is said to be
A. out of style.
B. late.
C. in demand.
D. available.
40. Recognizing and eliminating a risk is a way to __________ a risk.
A. transfer
C. retain
B. control
D. avoid
41. Sandra has been caught taking items from her employer's business without paying for them. This is an
example of __________ business risk.
A. capital
C. human
B. natural
D. economic
42. Lightning and earthquakes are examples of _______ risks.
A. economic
C. natural
B. human
D. speculative
43. Which of the following situations would involve direct competition:
A. A manufacturer installs a conveyor belt to speed up production.
B. A new bank opens in a community already served by three banks.
C. A department store conducts a "Back-to-School" sale during July and August.
D. All of the workers employed by a large automobile manufacturer go out on strike.
44. A market in which businesses sell products that are basically identical is an example of
A. perfect competition.
C. monopolistic competition.
B. free enterprise.
D. limited socialism.
45. Who provides public goods and services that we all need and use?
A. Local contractors
C. Government
B. Businesses
D. Natural resources
46. In business terms, what is profit?
A. A holiday bonus
B. A good investment
C. A monetary reward
D. A risky venture
47. Which of the following is a characteristic of taxes:
A. Applied only to tangibles
B. Restricted to businesses
C. Encouraged by consumers
D. Levied by governments
Test 1097
ECONOMICS APPLICATIONS IN BUSINESS
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48. Which of the following is an example of a business paying property taxes:
A. Manny's Gas Station collects a gasoline tax from its customers at the point of purchase.
B. Cortland Hotel withholds a certain percentage of its employees' earnings, which it forwards to the
federal tax agency.
C. The Bellman Corporation submits a $8,792 check to the government, which is based on the
value of its office building.
D. North-South Airline allocates $4,000 of its earnings to give to a college's scholarship fund.
49. Which of the following influences interest rates for the purpose of promoting economic growth and full
employment in a country:
A. Price index
C. Monetary policy
B. Antitrust laws
D. Spending rules
50. What type of monetary policy involves increasing the amount of money in circulation?
A. Recessive
C. Progressive
B. Tight
D. Loose
51. The interest rate investors can receive on bonds is rising. How does this impact the demand for money?
A. Interest rate changes do not affect the demand for money.
B. There will be more demand for money.
C. There will be less demand for money.
D. The demand for money will fluctuate.
52. Why would the demand for money increase during the month of December?
A. Investors are cashing in other investments to obtain money.
B. Businesses are offering a variety of sales to attract customers.
C. Interest rates usually increase during December.
D. The demand for exports decreases.
53. Which of the following factors increases the demand for money:
A. Decreased international demand for a country's goods
B. Increased consumer spending
C. Increased interest rates
D. Decreased domestic investment by foreigners
54. Which of the following statements is true about the Federal Reserve System (Fed):
A. Although the Fed monitors the money supply, it does not influence economic stability.
B. The Fed implements monetary policies, which are legislated by the President.
C. As the central bank, the Fed is privately owned by commercial banks.
D. The Secretary of the Treasury serves as the Fed's chairperson.
55. How does the Federal Reserve help to control inflation?
A. It adjusts short-term interest rates.
B. It regulates financial institutions.
C. It distributes coin and paper currency to financial institutions.
D. It eliminates the reserve requirement.
56. Which of the following represents a good time for a country's government to use its fiscal policy to
increase taxes:
A. When a recession lasts too long
C. While the economy is expanding
B. When inflation is too high
D. While the economy is contracting
57. Which of the following is an important tool that governments use to keep the economy balanced and
running smoothly:
A. Inflation rates
C. Monetary systems
B. Fiscal policies
D. Property taxes
Test 1097
ECONOMICS APPLICATIONS IN BUSINESS
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58. A government often changes its fiscal policy in response to a(n)
A. price ceiling.
C. import quota.
B. business cycle.
D. economic problem.
59. Changes in fiscal and monetary policies often have an effect on the
A. function of business.
C. rate of competition.
B. level of employment.
D. type of production.
60. How is the U.S. money supply impacted when Federal Reserve Banks sell government securities?
A. Reduces the amount of money and credit available
B. Balances the need for printing new cash
C. Increases the need for discount window loans
D. Adjusts the reserve requirements
61. The amount of work that an individual can produce in a given period of time is a measure of
A. job simplification.
C. division of labor.
B. worker productivity.
D. specialization.
62. Why should productivity be measured?
A. To determine the best ways to invest company profits
B. To find new ways to meet customer needs
C. To see whether the business's objectives are being met
D. To locate new sources of inputs
63. Which of the following is one way that businesses can motivate employees to increase productivity:
A. Send top management to workshops
C. Offer inflexible working hours
B. Eliminate division of labor
D. Use participative decision making
64. Increased repetition of the same job task can result in
A. decreased levels of skill.
C. decreased interdependency.
B. increased employee boredom.
D. increased employee satisfaction.
65. Another term for division of labor is specialization by
A. profession.
B. trade.
C. task.
D. stage of production.
66. The degree of unionization in the United States varies based on a business's
A. geographical location and level of union organization.
B. type of industry and use of pressure strategies.
C. geographical location and use of pressure strategies.
D. type of industry and geographical location.
67. Which of the following labor issues is most affected by the use of technology:
A. Job security
C. Union security
B. Wages
D. Benefits
68. According to the law of diminishing returns, what usually decreases at some point with the addition of
more employees if all other factors stay the same?
A. Inequality
C. Productivity
B. Depreciation
D. Consumption
69. One reason why it is important for businesses to understand the impact of the law of diminishing returns
is to avoid
A. paying high interest rates.
C. hiring too many workers.
B. misinterpreting economic trends.
D. importing a lot of products.
Test 1097
ECONOMICS APPLICATIONS IN BUSINESS
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70. What type of business benefits from the concept of economies of scale?
A. Nonprofit charitable organization
C. Large manufacturing plant
B. Private financial planner
D. Small specialty retailer
71. Each of the following is an example of economies of scale except:
A. Efficient capital
C. Lower hourly labor costs
B. Labor specialization
D. Lower per-unit design and development costs
72. You are the manager of a small-scale manufacturing company. You are faced with the decision to buy
newer, more expensive equipment that is highly efficient, or to continue using the older, less efficient
equipment. Your company would need to increase _________ to make up the cost of the purchase of the
new equipment.
A. advertising
C. managers
B. workers
D. output
73. When consumers' purchasing power decreases, the economy will experience a period of
A. containment.
C. contraction.
B. expansion.
D. emergence.
74. Which of the following is an economic factor that often causes consumers to reduce spending:
A. Personal needs
C. Low prices
B. Interest rates
D. Family issues
75. What often happens to an economy during a mildly inflationary period?
A. Decreased profits
C. Increased growth
B. Decreased prosperity
D. Increased unemployment
76. When a nation's inflation rate is low, what do prices tend to do?
A. Fluctuate daily
C. Remain stable
B. Increase dramatically
D. Reduce currency values
77. What is one way that price stability indicates the condition of the economy?
A. Reduction in taxes and spending
C. Increase in the money supply
B. Absence of inflation or deflation
D. Decrease in consumer buying power
78. Which of the following government expenditures would not be counted in GDP:
A. Your state builds a new highway.
B. The government gives Mr. Jones $50 in food stamps.
C. Your city purchases a new police car.
D. The federal government purchases Tomahawk missiles.
79. Which category of figures used in calculating gross domestic product do the following items fall under:
Wages paid to military personnel and money spent to build and repair highways.
A. Government purchases of goods and services
B. Personal consumption expenditures
C. Net exports of goods and services
D. Gross private domestic investment
80. Unemployment hurts the economy because unemployed people are unable to contribute to the
A. annual federal deficit.
C. gross domestic product.
B. balance of payments.
D. standard of living.
81. One of the economic costs of unemployment is unequal distribution of burdens or hardships among the
unemployed. Which of the following is a group most likely to bear an unequal share of the burden:
A. Full-time students
C. Small-business owners
B. Management
D. Low-skilled workers
Test 1097
ECONOMICS APPLICATIONS IN BUSINESS
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82. Avery is a recent college graduate who is not working and is actively looking for a job. This is an example
of __________ unemployment.
A. relational
C. cyclical
B. structural
D. frictional
83. The best time for a business to purchase new equipment is when
A. the gross domestic product falls.
C. job growth declines.
B. consumer demand decreases.
D. interest rates are low.
84. Which of the following is a circumstance that is most likely to cause interest rates to increase:
A. Tight money supply
C. Economic recession
B. Low inflation
D. Consistent investment spending
85. All of the ups and downs in the activity of an economy are called
A. expansions.
C. business cycles.
B. contractions.
D. aggregate demand.
86. Which of the following describes a recession:
A. The most productive phase of the business cycle
B. A contraction in economic activity that lasts for six months
C. A depression that continues for more than a year
D. The peak of demand for goods and services
87. A business that buys goods and services from a company in another nation is performing which of the
following activities:
A. Promoting
C. Importing
B. Producing
D. Exporting
88. Determine whether the following statement is true or false: As the value of the U.S. dollar increases, U.S.
imports will decrease.
A. False, a strong U.S. dollar increases imports.
B. True, a strong U.S. dollar decreases imports.
C. True, U.S. businesses benefit when the value of the dollar increases.
D. False, the value of the U.S. dollar does not affect imports or exports.
89. One of the main benefits of trade between nations is __________ goods and services.
A. higher prices for
C. decreased sales of
B. a better variety of
D. a lower quantity of
90. Which of the following factors is most likely to cause a country's currency value to fall:
A. Standards
C. Decentralization
B. Rapid inflation
D. Fewer exports
91. The exchange rate of a nation's currency is most likely to decrease when the nation
A. limits the amount of money it prints.
C. carries a low level of debt.
B. exports more than it imports.
D. experiences political instability.
92. The value of a currency in a floating exchange-rate system is determined by
A. previous exchange-rate data.
C. international banks.
B. supply and demand.
D. the world economic commission.
93. Businesspeople from one country need to be aware of the cultural differences of businesspeople from
other parts of the world to avoid
A. meeting face-to-face.
C. asking questions.
B. being insulting or rude.
D. discussing finances.
Test 1097
ECONOMICS APPLICATIONS IN BUSINESS
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94. Because the leaders of a business set the tone for the business's beliefs and values, they are part of the
business's ___________ subculture.
A. power
C. independent
B. natural
D. achievement
95. To encourage people to buy domestic goods, a country wants foreign goods to be more costly. It
imposes a tax on imported products to increase their selling prices. This tax is known as a(n)
A. bribe.
C. quota.
B. tariff.
D. idiom.
96. Which of the following is true regarding the labor issues of multi-national corporations (MNCs):
A. Women and men are usually paid equally.
B. Their suppliers often violate workers' rights.
C. Workers use collective bargaining to resolve disputes with management.
D. Men and women are usually trained together.
97. What approach to hiring managers for an international business would you recommend if a business
wanted to “act local”?
A. Ethnocentric
C. Global staffing
B. Polycentric
D. Parent-country nationals
98. What is a benefit to a business of having written records of financial transactions?
A. Information is accurate, accessible, and meaningful.
B. Accounting is simplified and less detailed.
C. Expenses are reduced, and income is increased.
D. Investments are increased, and profit is reinvested.
99. What is one of the characteristics of an effective budget?
A. It is formal.
C. It is flexible.
B. It is competitive.
D. It is complex.
100. A quality of all specialized budgets is that they are
A. interrelated.
B. created independently.
C. driven by projected inventory.
D. unrelated.
Test 1097
ECONOMICS APPLICATIONS IN BUSINESS—KEY
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1. A
BL001MC004
31. B
EC107MC012
61. B
EC013MC016
91. D
EC100MC023
2. D
BL001MC029
32. A
EC007MC029
62. C
EC013MC024
92. B
EC100MC025
3. B
BL003MC022
33. A
EC007MC045
63. D
EC013MC080
93. B
EC045MC019
4. D
BL003MC041
34. B
EC007MC059
64. B
EC014MC006
94. A
EC045MC043
5. A
BL003MC056
35. A
EC009MC050
65. C
EC014MC070
95. B
EC045MC057
6. D
EC002MC081
36. C
EC009MC067
66. D
EC015MC076
96. B
EC101MC006
7. A
EC002MC105
37. B
EC009MC105
67. A
EC015MC082
97. B
EC101MC009
8. C
EC002MC117
38. B
EC104MC025
68. C
EC023MC019
98. A
FI106MC004
9. D
EC003MC038
39. C
EC010MC119
69. C
EC023MC063
99. C
FI106MC030
10. A
EC003MC047
40. D
EC011MC040
70. C
EC023MC064
100. A
FI106MC058
11. B
EC003MC073
41. C
EC011MC071
71. C
EC077MC002
12. B
EC001MC039
42. C
EC011MC115
72. D
EC077MC018
13. A
EC001MC084
43. B
EC012MC060
73. C
EC081MC001
14. B
EC004MC051
44. A
EC012MC128
74. B
EC081MC005
15. C
EC004MC102
45. C
EC008MC055
75. C
EC083MC015
16. B
EC005MC010
46. C
EC010MC105
76. C
EC083MC028
17. D
EC005MC090
47. D
EC072MC007
77. B
EC083MC031
18. B
EC006MC057
48. C
EC072MC019
78. B
EC017MC008
19. B
EC006MC128
49. C
EC073MC008
79. A
EC017MC104
20. C
EC070MC037
50. D
EC073MC011
80. C
EC082MC010
21. C
EC070MC046
51. C
EC096MC003
81. D
EC082MC029
22. B
EC071MC050
52. A
EC096MC004
82. D
EC082MC038
23. C
EC071MC099
53. B
EC096MC010
83. D
EC084MC001
24. A
EC071MC113
54. C
EC097MC002
84. A
EC084MC025
25. B
EC008MC061
55. A
EC097MC003
85. C
EC018MC066
26. C
EC104MC027
56. B
EC074MC002
86. B
EC018MC068
27. B
EC105MC018
57. B
EC074MC005
87. C
EC016MC002
28. D
EC105MC021
58. D
EC074MC007
88. A
EC016MC042
29. C
EC105MC032
59. B
EC098MC011
89. B
EC016MC076
30. C
EC107MC001
60. A
EC098MC015
90. B
EC100MC001