Economic decisions involve doing what with resources to produce goods and services for people to consume?

A. Allocating

B. Marginalizing

C. Renewing

D. Satisfying

Answer: A

Economics is about the production of goods and services, which requires the allocation of what?

A. Benefits

B. Consumption

C. Resources

D. Utility

Answer: C

In an economic system, decisions need to be made about productive resources and which of the following?

A. Allocation

B. Growth

C. Protection

D. Sustainability

Answer: A

Which of these government policies pursues the economic goal of equity?

A. Protecting consumers from fraud

B. Providing welfare benefits

C. Preventing monopolies

D. Ending a recession

Answer: B

Which of these government policies pursues the economic goal of growth?

A. Keeping taxes low

B. Increasing the money supply

C. Borrowing money using bonds

D. Protecting consumers from fraud

Answer: B

Which of these government policies pursues the economic goal of freedom?

A. Ending a recession

B. Avoiding a budget deficit

C. Increasing the money supply

D. Protecting consumers from fraud

Answer: D

What is the purpose of a free-market system?

A. To protect the conditions that enable specialization

B. To stimulate the growth of the gross domestic product

C. To raise the standard of living for everyone in the country

D. Allow consumers and producers to make their own decisions

Answer: D

Which of these is one of the principles of a free-market system?

A. The gross domestic product must be as large as possible.

B. The government must prevent consumers from being coerced.

C. Productive resources must be protected against overexploitation.

D. Public goods must be provided to secure a high standard of living.

Answer: B

Which of these is required to have a free-market system?

A. Laws against theft, fraud, and coercion

B. Government provision of public goods

C. Tight control over the money supply

D. Sustainable development

Answer: A

Why do economists measure the gross domestic product?

A. To see how much economic activity there is in a particular country

B. To estimate how much the government must tax to avoid a budget deficit

C. To enable the Fed to decide whether to increase or decrease the money supply

D. To determine whether consumers and producers are making free choices

Answer: A

What does the inflation rate indicate?

A. How far in debt the government is

B. How much the minimum wage has increased

C. How quickly prices are rising

D. How much interest is being charged on mortgages

Answer: C

Which of these economic indicators is most likely to be high during a recession?

A. Retail sales

B. Gross domestic product

C. Unemployment rate

D. Per capita personal income

Answer: C

How does the assembly line benefit the economy?

A. It enables low taxation.

B. It provides maximum utility.

C. It keeps distribution costs low.

D. Itincreasesproductivity.

Answer: D

How does use of cargo containers benefit the economy?

A. By decreasing pollution

B. By keeping distribution costs low

C. By preventing protective tariffs

D. By generating renewable energy

Answer: B

How has the Internet benefited the economy?

A. By making it difficult for repressive governments to censor their citizens

B. By lowering overhead costs for retailers and driving prices to all-time lows

C. By providing the government with a more efficient means of collecting taxes

D. By improving communication and allowing greater trade and specialization

Answer: D

In a free-market system, consumers let producers know what they want to buy and how much they're willing to pay through what?

A. Boycotts

B. Their credit reports

C. Collective bargaining

D. Their purchases

Answer: D

In order to know what people want to buy and how much they're willing to pay, producers pay attention to what?

A. The size of the money supply

B. Interest rates set by the Fed

C. Consumers' purchases

D. Economic indicators

Answer: C

Producers use market research in order to do what?

A. Find out what consumers want to buy

B. Drive other companies out of business

C. Make better investment decisions

D. Keep the costs of production low

Answer: A

Utility is a measure of what?

A. Value

B. Money

C. Usefulness

D. Satisfaction

Answer: D

The satisfaction that consumers get from their purchases is known as what?

A. Utility

B. Marginalism

C. Subjectivity

D. Materialism

Answer: A

Consumers use cost-benefit analysis in order to maximize what?

A. Keep prices low

B. Create a monopoly

C. Influence consumer behavior

D. Conduct market research

Answer: C

A consumer who is reluctant to take chances has a high level of what?

A. Income

B. Profitability

C. Risk aversion

D. Marginal utility

Answer: C

The non-monetary considerations that affect consumers' decisions are often based on what?

A. Advertising

B. Values and beliefs

C. Government planning

D. Decreasing marginal utility

Answer: B

Match each type of market structure with an example of an industry that fits that type of competition.

A. Pure competition

B. Monopoly

C. Monopolistic competition

D. Oligopoly

Fast food

Cable television

Online auctioning

Airlines

C. Fast food

B. Cable television

A. Online auctioning

D. Airlines

Match each type of market structure with its corresponding example.

A. Pure competition

B. Monopoly

C. Monopolistic competition

D. Oligopoly

Digital cameras

Online auctioning

Video rental

Sewer service

D. Digital cameras

A. Online auctioning

C. Video rental

B. Sewer service

Match each type of market structure with its corresponding example.

A. Pure competition

B. Near monopoly

C. Monopolistic competition

D. Oligopoly

Fast food

Computer operating systems

Online auctioning

Automobiles

C. Fast food

B. Computer operating systems

A. Online auctioning

D. Automobiles

Match each type of business with one of its features.

A. Sole proprietorship

B. Partnership

C. Public corporation

D. Nonprofit corporation

Board of directors

Limited liability

Unlimited liability

A goal to benefit its members

C. Board of directors

B. Limited liability

A. Unlimited liability

D. A goal to benefit its members

Match each type of business with one of its features.

A. Sole proprietorship

B. General partnership

C. Public corporation

D. Government corporation

Unlimited liability

Public regulation

Stockholder control

Collective decision making

A. Unlimited liability

D. Public regulation

C. Stockholder control

B. Collective decision making

Match each type of business with one of its features.

A. Sole proprietorship

B. Partnership

C. Corporation

D. Government corporation

Profits paid out as dividends

Sharing of profits

No profits made

All profits retained

C. Profits paid out as dividends

B. Sharing of profits

D. No profits made

A. All profits retained

According to the law of supply and demand, when supply increases what else happens?

A. Demand will decrease.

D. Productivity will decrease.

C. Quantity supplied will decrease.

D. Prices will decrease.

Answer: D

Which of these is most likely to lead to a decrease in the price of a good?

A. Demand decreases and supply remains the same.

B. Demand increases and supply decreases.

C. Demand increases as fast as supply increases.

D. Demand decreases and supply decreases the same amount.

Answer: A

What happens when demand for a good increases but its supply decreases?

A. The level of profit increases.

B. The price for the good increases.

C. Government rationing takes place.

D. Competition among producers decreases.

Answer: B

Match each of the terms below with an example that fits the term.

A. Fungibility

B. Elasticity

C. Non-excludability

D. Substitution

The provision of a public good

The demand for jewelry

The switch from white bread to wheat bread

The production of potatoes

C. The provision of a public good

B. The demand for jewelry

D. The switch from white bread to wheat bread

A. The production of potatoes

Match each of the terms below with an example that fits the term.

A. Fungibility

B. Inelasticity

C. Non-excludability

D. Substitution

The production of gasoline

The switch from coffee to tea

The provision of national defense

The demand for cigarettes

A. The production of gasoline

D. The switch from coffee to tea

C. The provision of national defense

B. The demand for cigarettes

Match each of the terms below with an example that fits the term.

A. Fungibility

B. Inelasticity

C. Non-excludability

D. Substitution

Production of rice

Demand for food and shelter

Environmental protection

Switching from butter to margarine

A. Production of rice

B. Demand for food and shelter

C. Environmental protection

D. Switching from butter to margarine

Which of these is most likely to lead to an increase in wages?

A. Outsourcing and offshoring

B. The use of an assembly line

C. The formation of a labor union

D. A government with a budget surplus

Answer: C

What is likely to happen if the size of the labor pool suddenly increases?

A. Prices will go up.

B. Profits will decrease.

C. The minimum wage will rise.

D. Wages will go down.

Answer: D

A high level of what is most likely to lead to a higher wage?

A. Education

B. Immigration

C. Market concentration

D. Government regulation

Answer: A

Put the phases of the business cycle in the correct order in which they follow a depression.

Boom

Recession

Depression

Recovery

1. Recovery

2. Boom

3. Recession

4. Depression

Put the phases of the business cycle in the correct order in which they follow a recession.

Boom

Recession

Depression

Recovery

1. Depression

2. Recovery

3. Boom

4. Recession

Put the phases of the business cycle in the correct order in which they follow a boom.

Boom

Recession

Depression

Recovery

1. Recession

2. Depression

3. Recovery

4. Boom

Why is a fractional reserve banking system necessary?

A. To enable the government to charge lower taxes

B. To provide the regulation of the global economy

C. To enable banks to loan out money to make a profit

D. To prevent the money supply from growing too quickly

Answer: C

What is the purpose of the required reserve ratio?

A. To keep central banks from having too much influence over currency exchange rates

B. To provide government planners with accurate information about economic indicators

C. To make sure banks have enough money on hand to meet customers' withdrawal requests

D. To prevent the government from getting so far into debt that the economy is weakened

Answer: C

Under a fractional reserve banking system, the amount of money loaned out can only increase if what happens?

A. Taxes are reduced.

B. The money supply increases.

C. There are more government bonds for sale.

D. Therequiredreserveratioislowered.

Answer: D

Which is not a policy tool used by the Fed?

A. Setting the discount rate

B. Buying and selling bonds

C. Making tax cuts

D. Setting the required reserve ratio

Answer: C

What is not a way that the Fed can generate an increase in the money supply?

A. Buying bonds

B. Lowering the discount rate

C. Reducing the required reserve ratio

D. Cutting taxes

Answer: D

Which of these is the Fed not able to do?

A. Prevent a budget deficit

B. Regulate private banks

C. Sell government bonds

D. Increase the money supply

Answer: A

Which of these is most likely to lead to an increase in the price of a company's stock?

A. Its dividends are reduced.

B. Its outstanding shares are sold.

C. Its profits increase.

D. Its market capitalization declines.

Answer: C

What is most likely to push the price of a company's stock higher?

A. An increase in demand for the company's stock

B. An increase in demand for the company's products

C. An increase in the exchange rate for the U.S. dollar

D. An increase in tariffs paid by the company's competitors

Answer: A

Which of these is most likely to lead to a decrease in the price of a company's stock?

A. Its annual profits decrease.

B. Its outstanding shares are sold.

C. Its suppliers decrease their prices.

D. Its competitors go out of business.

Answer: A

Why is it possible to make money in the currency exchange market?

A. Inflation always drives up the value of money.

B. Governments always buy their own currencies.

C. Exchange rates are always fluctuating.

D. Some currencies are minted with precious metals.

Answer: C

Buying a bond is similar to which of the following?

A. Paying a dividend

B. Giving a loan

C. Getting a mortgage

D. Going into credit card debt

Answer: B

What kind of goods are sold in the commodity market?

A. Normal

B. Monetary

C. Substitution

D. Unprocessed

Answer: D

When a company goes public, it begins doing what?

A. Issuing government bonds

B. Offering new products for sale

C. Paying corporate income taxes

D. Selling shares of stock

Answer: D

An initial public offering (IPO) is when a company does what?

A. Enters into a new partnership

B. Offers a new line of products

C. Begins selling stock to the public

D. Gets taken over by the government

Answer: C

The purpose of an initial public offering (IPO) is to do what?

A. Get unlimited liability

B. Break into a monopoly market

C. Comply with government regulations

D. Raise money

Answer: D

Match each type of tax with an example of its use.

A. Capital gains tax

B. Consumption tax

C. Excise tax

D. Sin tax

9% tax on all sales

10% tax on gambling winnings

$0.30 tax on a gallon gasoline

15% on profits from stock sales

B. 9% tax on all sales

D. 10% tax on gambling winnings

C. $0.30 tax on a gallon gasoline

A. 15% on profits from stock sales

Match each type of tax with an example of its use.

A. Capital gains tax

B. Consumption tax

C. Excise tax

D. Payroll tax

10% on profits from the sale of a house

15% tax to pay for Social Security

$5 tax on a cable television line

6% tax on all sales

A. 10% on profits from the sale of a house

D. 15% tax to pay for Social Security

C. $5 tax on a cable television line

B. 6% tax on all sales

Match each type of tax with an example of its use.

A. Consumption tax

B. Income tax

C. Excise tax

D. Sin tax

10% tax on gambling winnings

20% tax on wages earned

$0.30 tax on a gallon gasoline

9% tax on the sale of luxuries

D. 10% tax on gambling winnings

B. 20% tax on wages earned

C. $0.30 tax on a gallon gasoline

A. 9% tax on the sale of luxuries

The government needs to provide public goods for what reason?

A. Private companies cannot profit by providing them.

B. They are necessary for raising the standard of living.

C. The government can reduce taxes by profiting from public goods.

D. Citizens demand government regulation to protect their freedom.

Answer: A

Why are private companies unlikely to provide public goods?

A. Public goods are inferior goods that can never be sold for a very high price.

B. Private companies are prevented by the government from producing public goods.

C. The fungibility of public goods makes it easy for consumers to substitute merit goods.

D. The non-excludability of public goods makes it difficult to profit from them.

Answer: D

Which of these prevents private companies from deciding to produce public goods?

A. Government regulations

B. Protective tariffs

C. Decreasing marginal utility

D. The profit motive

Answer: D

Which of these promotes greater efficiency and lower prices by protecting competition?

A. Antitrust laws

B. Small-claims courts

C. Government contractors

D. Environmental-protection laws

Answer: A

Antitrust laws promote greater efficiency and lower prices by protecting what?

A. Workers

B. Consumers

C. Competition

D. Infant industries

Answer: C

Antitrust laws protect competition and bring about lower what?

A. Efficiency

B. Wages

C. Taxes

D. Prices

Answer: D

Match each unfair business practice with an example of its use.

A. Predatory pricing

B. Making misleading statements

C. Price fixing

Local pizza delivery companies agree to charge $20 for a large cheese pizza.

A large auto maker charges a price below production cost in order to eliminate small competitors.

A juice company falsely claims that its drinks reduce the incidence of heart attacks.

C. Local pizza delivery companies agree to charge $20 for a large cheese pizza.

A. A large auto maker charges a price below production cost in order to eliminate small competitors.

B. A juice company falsely claims that its drinks reduce the incidence of heart attacks.

Match each action with the unfair business practice it represents.

A. Bid rigging

B. Production limitation

C. Price fixing

A defense contractor gets its competitors to agree to enter low bids.

Local coffee shops agree to charge $3 for a cup of coffee.

A group of oil companies agrees to reduce the amount of oil each member produces.

A. A defense contractor gets its competitors to agree to enter low bids.

C. Local coffee shops agree to charge $3 for a cup of coffee.

B. A group of oil companies agrees to reduce the amount of oil each member produces.

Match each type of unfair business practice with its description.

A. Vendor lock-in

B. Price fixing

C. Predatory pricing

A large company charges a price below production cost in order to eliminate small competitors.

A group of companies agrees that all of them will charge the same price.

A company says that a wide range of products can be used with its product but this is not true.

C. A large company charges a price below production cost in order to eliminate small competitors.

B. A group of companies agrees that all of them will charge the same price.

A. A company says that a wide range of products can be used with its product but this is not true.

Rationing is an attempt to limit shortages that naturally result from what?

A. Boycott

B. Price ceiling

C. Trade embargo

D. Protective tariff

Answer: B

In order to limit the shortages that naturally result from a price ceiling, the government can do what to certain goods?

A. Tax

B. Produce

C. Ration

D. Subsidize

Answer: C

The government sets a price floor in order to protect what?

A. Domestic workers

B. A vulnerable industry

C. International trade

D. Low-income consumers

Answer: B

When does Country A have a comparative advantage over Country B in the production of televisions?

A. Country A can produce televisions more cheaply.

B. Country B charges higher prices for its televisions.

C. Country B experiences decreasing marginal utility in its production of televisions.

D. Country A has a lower opportunity cost for producing televisions.

Answer: D

When does County X have a comparative advantage in the production of coffee?

A. Country X allows coffee growers to pay very low wages to their workers.

B. Country X has a higher protective tariff on coffee than any other country.

C. Country X has the right climate and geography to grow a lot of coffee for export.

D. Country X doesn't give up a more efficient form of production in order to grow coffee.

Answer: D

When does Country X have an absolute advantage over Country Y in the production of corn?

A. Country X can grow corn more cheaply than Country Y

B. Country Y has high opportunity costs for growing corn.

C. The population of Country X consumes less corn than is grown.

D. The global demand for corn is higher than the supply from Country Y.

Answer: A

Which of these results from the mobility of production that characterizes the current global economy?

A. Outsourcing

B. Protectionism

C. Immigration

D. Terrorism

Answer: A

Companies use offshoring in order to do what?

A. Lobby the government

B. Increase market share

C. Reduce labor costs

D. Protect infant industrie

Answer: C

Low wages in the underdeveloped world give U.S. companies an incentive to do what?

A. Lobby

B. Boycott

C. Colonize

D. Outsource

Answer: D

Why is renting an apartment usually cheaper than buying a house?

A. Apartments are usually smaller than houses.

B. Leases have lower interest rates than mortgages.

C. Renting involves hidden costs like the security deposit.

D. Buying a house is an investment that pays off in the long run.

Answer: D

Why is buying a house a better investment than renting an apartment?

A. Mortgage payments increase the homeowner's equity.

B. Housing prices increase faster than rents.

C. Leases have higher interest than mortgages.

D. Houses are generally larger than apartments.

Answer: A

Which of these is a disadvantage of buying a house instead of renting?

A. Homeowners have to get liability insurance.

B. Homeowners must pay for all repairs themselves.

C. Homeowners are in a higher income tax bracket.

D. Homeowners are not allowed to move out when they want.

Answer: B

Match each type of insurance with an example of what it would pay for.

A. Auto insurance

B. Renter's insurance

C. Life insurance

D. Health insurance

Funeral expenses

A trip to the emergency room

Repair on a car involved in an accident

Replacement of a computer stolen from an apartment

C. Funeral expenses

D. A trip to the emergency room

A. Repair on a car involved in an accident

B. Replacement of a computer stolen from an apartment

Match each type of insurance with an example of when the insurance company would make a payment.

A. Liability coverage

B. Disability insurance

C. Renter's insurance

D. Health insurance

You cause an accident that damages someone else's car.

You go to the emergency room after a car accident.

Your stereo and computer are stolen from your apartment.

You have to take a month off from work because of a broken leg.

A. You cause an accident that damages someone else's car.

D. You go to the emergency room after a car accident.

C. Your stereo and computer are stolen from your apartment.

B. You have to take a month off from work because of a broken leg.

Match each type of insurance with an example of when the insurance company would make a payment.

A. Collision coverage

B. Disability insurance

C. Homeowner's insurance

D. Health insurance

You cause an accident that damages your vehicle.

You go to the emergency room after a car accident.

You have a fire in your house that damages your furniture.

You lose your job because of a sports injury.

A. You cause an accident that damages your vehicle.

D. You go to the emergency room after a car accident.

C. You have a fire in your house that damages your furniture.

B. You lose your job because of a sports injury.

What is the purpose of a budget?

A. To pay as few taxes as possible

B. To avoid the costs of compliance

C. To keep expenses below income

D. To promote personal values and beliefs

Answer: C

What is the goal of using a personal budget?

A. To reduce your tax burden

B. To eliminate your fixed expenses

C. To maximize the return on your investments

D. To save for your future financial goals

Answer: D

What does a budget help you do?

A. Get companies to change their behavior

B. Keep your expenses below your income

C. Avoid being manipulated by salespeople

D. Maximize the return on your investments

Answer: B

Why are student loans usually guaranteed by the government?

A. Banks charge low interest rates for student loans.

B. Banks are required to maintain a certain reserve ratio.

C. Banks don't have any collateral for student loans.

D. Banks would give students credit cards they can't

Answer: C

Which of these is a form of self-help financial aid?

A. Liability coverage

B. Scholarships

C. Tuition fees

D. Student loans

Answer: D

What is one of the features of most student loans?

A. Students don't have to begin repaying until they're done with school.

B. Collateral is provided through the purchase of a leased automobile.

C. Loan insurance is required in case the student suffers an injury or illness.

D. Interest rates are high to cover the risk of students defaulting on their loans.

Answer: A