SAMPLE TEST 1
Note: This is a sample test designed for your benefit. The actual test may or may not be different in the number of problems dealing with a specific issue, the level of difficulty, etc.
1. By the statement "people have unlimited wants" the author of the text means
a. people always want more goods and services than they have or can purchase with their incomes.
b. people always have a desire to have more money.
c. people always strive to be the best they can be.
d. people always give 110%.
e. the text actually refers to needs not wants.
2. The heart of the economic problem is to
a. provide for full employment.
b. eliminate scarcity.
c. increase our standard of living.
d. allocate limited resources among unlimited uses.
e. increase leisure.
3. Which of the following statements correctly describes at least one of the factors of production?
a. Natural resources, such as minerals, timber, and water, as well as land itself
b. The physical and intellectual services of technological advances
c. Buildings and warehouses, but not factories
d. Inventories
e. Automobiles
4. According to the text, which of the following is not true?
a. People do not have everything they want.
b. People do not have the time to do everything they want.
c. People do not have the money to purchase everything they want.
d. When people choose one good they must give up other things.
e. People do not have to make choices if they don't want to.
5. People who choose to do voluntary work
a. are not acting with rational self-interest.
b. find it more satisfying than the alternatives.
c. are not concerned with their own satisfaction.
d. never look at the alternative options.
e. are beyond the scope of economics.
6. Which economic concept is the closest parallel to the saying, "there's no free lunch"?
a. Specialization
b. Unlimited wants
c. Under utilization of resources
d. Opportunity costs
e. Over utilization of resources
7. Ralph has $1 million to spend on a campaign for public office. If he spends it in Arizona he estimates that he will get 10,000 more votes. If he spends it in Texas he is estimated to receive 15,000 more votes. The opportunity cost of spending it in Kansas are
a. 15,000 Texas votes.
b. 35,000 votes.
c. none, Kansas always votes for Ralph.
d. none, Arizona and Texas always vote for Ralph.
e. 15,000 Texas vote or 10,000 Arizona votes which ever is more valued by Ralph.
8. What do economists mean when they refer to the forgone opportunities or forgone benefits of the next best alternative?
a. The idea that you can watch T.V. while studying for your economics exam at the same time.
b. Quantifiable accounting costs.
c. Opportunity costs.
d. The highest-valued alternative that must be forgone when a choice is made.
e. Both opportunity costs and the highest-valued alternative that must be forgone when a choice is made.
9. A production possibilities curve shows that
a. a society can produce more if it will just try a little harder.
b. a society is restricted from ever producing more because of labor shortages.
c. a society is restricted from ever producing more because of capital shortages.
d. shows that more of one type of good can be produced only by reducing the quantity of other types of goods that are produced.
e. labor and capital are the two most important factors of production.
10. In the figure above, which of the following is true?
a. If the country is at point A and using all of its resources, point C is unattainable.
b. If the country is at point A and using all of its resources, Point C is unattainable.
c. If the country is at point B and using all of it's resources, then there will be an under utilization of resources at point C.
d. If the country is at point C, point B is unattainable.
e. If the country is at point B it will not move.
11. A bowed-out PPC implies that producing more and more of one good will bring about
a. increasingly larger declines in the production of the other good.
b. increasingly smaller declines in the productions of the other good.
c. a proportionate decrease in the production of the other good.
d. economic growth.
e. technological improvement.
12. People (and all resources)
a. tend to specialize in those activities in which their opportunity costs are minimized.
b. tend to specialize in those activities in which their opportunity costs are maximized.
c. never consider opportunity costs.
d. consider only direct costs.
e. do not behave in their own self-interest.
13. If a basketball is priced at $12.00 and a sleeve of 3 golf balls is priced at $6.00, the relative price of one golf ball in terms of a basketball is
a. 1/2 of a basketball.
b. 2 basketballs.
c. 1/6 of a basketball.
d. 1/4 of a basketball.
e. 1/3 of a basketball.
14. According to the law of demand, if the price of movie rentals decreased, ceteris paribus,
a. the demand for movie rentals would increase.
b. the quantity demanded of movie rentals would decrease.
c. the quantity demanded of movie rentals would increase.
d. the demand for movie rentals would decrease.
e. the quantity demanded of movie rentals would not change.
15. The law of demand illustrates that
a. as price decreases, demand increases.
b. price changes are always in the same direction as demand changes.
c. as price increases, quantity demanded increases.
d. as price decreases, quantity supplied increases.
e. as price decreases, quantity demanded increases.
16. Which of the following is not constant along an individual consumer's demand curve for Coke?
a. The price of Coke
b. The price of Pepsi
c. The consumer's income
d. The consumer's tastes
e. All of these
17. A boycott of lettuce would, if effective, cause
a. an increase in the equilibrium quantity of lettuce bought and sold.
b. an increase in the price of lettuce.
c. a decrease in the demand for lettuce.
d. a decrease in the supply of lettuce.
e. a decrease in the demand for and the supply of lettuce.
18. Which of the following would not shift the demand curve for golf balls?
a. An increase in the price of golf clubs
b. A decrease in the popularity of golf
c. An increase in the number of golfers
d. An expected increase in the price of golf balls
e. A decrease in the price of golf balls
19. Consumers complain about the cost of things. They argue that the big businesses are taking advantage of the small individuals. Which of the following statements might an economist put forth in reaction to statements such as this?
a. The price of any good is determined by supply AND demand.
b. This is merely one example of how the government fulfills its role through its benevolent attempts to keep the gouging to a minimum.
c. Since price is determined solely by the supplier of any good, consumers are by definition subject to whatever price is set by those suppliers.
d. Demand alone determines the price of a good and it is therefore impossible for consumers to be ripped off.
e. Suppliers unwilling to supply their product at reasonable prices that consumers can afford to pay should be prohibited by law from conducting business.
20. The law of supply
a. has very little to do with how prices in a market based economy are determined.
b. asserts that as the price of a good or service rises, the quantity supplied rises.
c. asserts that as the price of a good or service rises, the quantity supplied declines.
d. while valid, is almost always ignored in a market based economy.
e. asserts that as the price of a good or service rises, the demand curve shifts inward.
21. Which of the following would not affect the supply of automobiles?
a. An increase in the price of steel
b. An improvement in the technology of automobile manufacturing
c. An increase in the price of automobiles
d. A decrease in the number of automobile producers
e. An increase in the productivity of workers
22. From a point of equilibrium, which of the following would most likely result in a surplus?
a. If demand shifted to the right
b. If the government kept the price greater than the equilibrium price
c. If supply shifted to the left
d. If the government kept the price below the equilibrium price
e. If the quantity demanded was greater than the quantity supplied
23. A shortage in tickets for an NBA basketball game
a. occurs when the quantity supplied is smaller than the quantity demanded at a given price.
b. occurs when the quantity supplied is greater than the quantity demanded at a given price.
c. occurs when the price of the tickets are too high.
d. is exactly the same thing as scarcity in tickets for an NBA basketball game.
e. implies that equilibrium has been achieved.
24. In the figure above, if price were fixed at P3, which of the following is true?
a. There would be an excess quantity demanded of Q5 - Q1.
b. There would be an excess quantity supplied of Q3 - Q4.
c. There would be an equilibrium.
d. There would be a shortage.
e. Prices would tend to rise.
25. According to the figure above, as represented by the shift from D1 to D2,
a. the demand for meals has risen.
b. the quantity of resources used in the production of meals has risen.
c. consumer income may have risen.
d. consumer tastes for meals may have declined.
e. consumer tastes for resources may have fallen.
26. The market system works efficiently only if the market price
a. reflects only the direct costs created in a transaction.
b. reflects only the externalities of a transaction.
c. reflects the full costs of producing and consuming a good or service.
d. reflects the full costs of producing a good but not consuming it.
e. reflects the full costs of consuming a good but not producing it.
27. Which of the following would not be an appropriate government remedy for a negative externality problem?
a. Taxing the victim of the externality
b. Establishing a government agency to regulate the problem
c. Taxing the imposer of the externality
d. Assigning property rights
e. None of these
28. Externalities have an impact in our economy because
a. their presence always makes us better off.
b. they affect the way our scarce resources are allocated.
c. their presence always makes us worse off.
d. they contribute to the business cycle.
e. they cause the real cost of products to be less than the price.
29. Which of the following would be classified as a public good?
a. Lottery tickets
b. Automobiles
c. National defense
d. Cable television programs
e. Telephones
30. In the absence of government, an underallocation of resources generally exists for
a. public goods and services.
b. public and external benefit goods and services.
c. external benefit goods and services.
d. imported products.
e. external cost goods and services.
Answers
1. a
2. d
3. a
4. e
5. b
6. d
7. e
8. e
9. d
10. c
11. a
12. a
13. c
14. c
15. e
16. a
17. c
18. e
19. a
20. b
21. c
22. b
23. a
24. b
25. d
26. c
27. a
28. b
29. c
30. b