Test Bank (ECO 205) PDF

Test Bank (ECO 205) MCQ 1- Economics is best defined as the study of: A-inflation, interest rates, and the stock market. B-supply and demand. C- how people make choices in the face of scarcity and the implications of those choices for society as a whole. D -the financial concerns of businesses and...

Test Bank (ECO 205) MCQ 1- Economics is best defined as the study of: A-inflation, interest rates, and the stock market. B-supply and demand. C- how people make choices in the face of scarcity and the implications of those choices for society as a whole. D -the financial concerns of businesses and individuals. Ans: C 2- Economics is best defined as the study of A- the financial concerns of businesses and individuals. B- the role of government in limiting the choices people make. C- choice in the face of limited resources. D- whether we will have enough resources in the future. Ans:C 3- Economists recognize that because people have limited resources a- government intervention is necessary. b- they have to make trade-offs. c- they will never be happy. d- our future is bleak. Ans:B 4- The Scarcity Principle states that a-people don't have enough money to buy what they want. b- society will eventually run out of resources. c- with limited resources, having more of one thing means having less of another. d- some countries have fewer resources than others. Ans:C 5- An increase in the price of a product will reduce the amount of it purchased because: (a) (b) (c) (d) consumers substitute consumers will relatively high-priced for the higher price substitute other relatively low-priced supply curves means that real products for the one products are upsloping incomes have whose price has risen risen Ans:D 6- A market: (a) (b) (c) (d) always requires face-to- reflects upsloping face demand and entails the is an institution that contact downsloping supply exchange of goods, brings together between curves but not services buyers and sellers buyer and seller Ans:C 7- When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes the: (a) cost (b) (c) (d) income substitution effect inflationary effect effect effect Ans:C 8- Shows the relationship between income and spending (a) the price of the (b) (c) (d) product itself consumer the prices of related consumer tastes income goods Ans:A 9- The income and substitution effects account for: (a) the upward (b) (c) (d) the downward sloping supply shifts in the sloping demand movements along a curve demand curve curve given supply curve Ans:B 10- In a standard supply-and-demand diagram, what happens when demand decreases? (a) Price and (b) (c) (d) quantity supplied rise Price rises and Price declines and Ans:B Price and quantity quantity quantity demanded rises supplied decline demanded declines  11- According to the law of demand: (a) the intersection of (b) (c) (d) there is an demand and supply there is a direct inverse establishes the consumers' tastes can relationship between relationship market equilibrium influence the quantity price and the between price point demanded quantity demanded and the quantity demanded Ans:D 12- If farmers work harder and longer to maintain their incomes and living standards as their earnings per hour fall, that would involve: (a) an exception to (b) (c) (d) the downward an exception to a confirmation of slope of the the upward a confirmation of the the downward slope demand curve for slope of the upward slope of the of the supply curve labor supply curve for supply curve for labor for labor labor Ans:B 13-What is the best definition of an economic good? (a) Goods that are (b) (c) (d) very expensive Goods that a country Goods that are produces and then Goods that are vital to an in scarce or trades to another individual's welfare limited supply county Ans:B 14- A demand curve: (a) shows the (b) (c) (d) indicates the relationship quantity between price and shows the relationship demanded at each graphs as an quantity supplied between income and price in a series of upsloping line spending prices Ans:B 15- Marginal utility is defined as: A - An increase in total utility due to the increase in prices B - The amount of addition to total utility when the units used of a good are increased by one unit C - Consumer demand increases when the price decreases D - The quantity supplied increases when the price increases Ans:B 16- If a person takes an action if, and only if, the extra benefits from taking that action are at least as great as the extra costs, then that person is a- not following the Cost-Benefit Principle. b- following the Scarcity Principle. c- following the Cost-Benefit Principle. d- not rational. Ans:C 17- Choosing to study for an exam until the extra benefit (e.g., improved score) equals the extra cost (e.g., the value of forgone activities) is a- not an economic choice. b- an application of the Cost-Benefit Principle. c- an application of the Scarcity Principle. d- not rational because it ignores the importance of total benefits and total costs. Ans:B 18- A rational person: a- makes choices based on total benefits and total costs. b- makes choices based on added benefits and added costs. c- undertakes activities until the net benefits become less than zero. d- considers the financial benefits and financial costs of making a choice. Ans:B 19-The law of demand states that: a- price and quantity demanded are inversely related. b- the larger the number of buyers in a market, the lower the product price will be c-.price and quantity demanded are directly related. d- consumers will buy more of a product at high prices than at low prices. Ans: A 20- Graphically, the market demand curve is: a- steeper than any individual demand curve that is part of it. b- greater than the sum of the individual demand curves. c- the horizontal sum of individual demand curves. d- the vertical sum of individual demand curves. Ans:C 21- One reason why the quantity demanded of a good tends to fall as its price rises is that: (a) at higher (b) (c) (d) prices, people feel the increase suppliers are the increase in poorer and in price shifts willing to price shifts the cut down on the supply supply less demand curve their use of curve downward the good upward Ans:B 22- An increase in the supply of commodity X for any given price of X could be caused by (a) a reduction in (b) (c) (d) the prices of an increase in factors of the prices of an increase production an increase factors of in the prices of important to in consumer production other this commodity income important to commodities this commodity Ans:A 23- The single word that best describes the fundamental essence of economics is: (a) employment (b) prices (c) inflation (d) scarcity Ans:D 24- What is the best definition of an economic good? (a) Goods that (b) Goods that (c) Goods that a (d) are very Goods that are are in country expensive vital to an scarce or produces and individual's limited then trades to Ans:B welfare supply another county 25- Which of the following may have been considered a free good today? (a) Air (b) (c) (d) Computers Cattle. Land Ans:A 26- An increase in the price of a product will reduce the amount of it purchased because: (a) supply (b) (c) (d) consumers the higher consumers will curves are substitute price means substitute other upsloping relatively high- that real products for the priced for incomes one whose price Ans:C relatively low- have risen has risen priced products 27- 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 (b) (c) (d) the cost of an increase consumers a change making donuts in the price expecting donut in buyer of coffee prices to fall tastes Ans:D 28- If the market demand curve shifts sharply to the left as the market supply curve moves to the right, we would expect: (a) price to fall (b) (c) (d) while quantity the same may or may not price and the same price to prevail, change quantity to quantity to with no change in fall prevail quantity Ans:A 29- One reason that the quantity demanded of a good increase when its price falls is that the: (a) price (b) (c) (d) lower price lower price lower price decline shifts the shifts the increases the real shifts the demand demand incomes of buyers, supply curve to the curve to the enabling them to curve to the left right buy more left Ans:D 30- Which of the following describes “utility”? A)how consumers rank different goods and services. B) how useful is a good or service. C)how many different things a good or service can do. D) when consumers use goods or services. Ans:A T&F 1- The major purpose of studying economics is to learn how to succeed in business. Ans: False 2- Capital goods differ from other factors in that they are produced-they are outputs of the economic system. Ans: True 3- Since the amount bought must equal amount sold, at no price can there be a lack of equality between the quantities demanded and supplied of a good. Ans: False 4- An economic good is valued in part by its scarcity Ans: True 5- The market system gives more goods to those with more money votes. Ans: True 6- For whom goods are produced is a question that is largely answered by pricing the factors of production that people own. Ans: True 7- A fixed supply of apartments can be rationed out by letting market forces establish the market clearing competitive rent rate. Ans: True 8- The quantity of some good X demanded by individuals typically depends upon their incomes and preferences. Ans: True 9- An equilibrium point could conceivably lie on the supply schedule, but not the demand schedule. Ans: False 10- Given a normal upward sloping supply schedule and a downward sloping demand schedule, an increase in labor productivity should result in a lower equilibrium price for the concerned good. Ans:True 11-. For a theory to be useful, it must be confirmed in each test case. Ans: False 12-. Economics may be simply defined as the study of money matters. Ans: False 13-. The wide agreement among economists on the basic economic principles concerning prices and unemployment leads them to consensus in the policy field. Ans: False 14. Unlike the chemist, the economist can rarely perform controlled experiments. Ans: True 15. Economics includes the study of how to improve society. Ans: True 16- An economic good is valued in part by its scarcity. Ans: True 17- "Perfect competition" exists only when no single individual can influence the market price. Ans: True 18 - Market equilibrium comes at the price which quantity demanded equals quantity supplied. Ans: True 19 - Over time the fact that some people buy more hamburger at 89 cents per pound than at 69 cents per pound refutes the law of downward-sloping demand. Ans: False 20 - A surplus in supply means that demanders are not willing to pay the current market price. Ans: True