As a consequence of the problem of scarcity (Points : 4)
there is never enough of anything.
individuals have to make choices from among alternatives.
production has to be planned by government.
things which are plentiful have relatively high prices.
2. (TCO1) Money is not considered to be an economic resource because (Points : 4)
as such, it is not productive.
money is not a free gift of nature.
money is made by man.
idle money balances do not earn interest income.
3. (TCO1) A point outside the production possibilities curve is (Points : 4)
attainable, but there is not full employment.
attainable, but there is not optimal allocation.
unattainable because the economy is inefficient.
unattainable because of limited resources.
4. (TCO1) A basic characteristic of a command system is that (Points : 4)
wages paid to labor are higher.
government owns most economic resources.
free markets are never permitted in a command economy.
government planners play a limited role in deciding what goods will be produced.
5. (TCO 2) The rationale for the law of demand can best be understood on the basis of (Points : 4)
diminishing marginal utility.
capitalist markets.
the invisible hand.
the rationing function of price.
6. (TCO 2) What combination of changes in supply and demand would most likely increase the equilibrium quantity? (Points : 4)
When supply increases and demand increases
When supply decreases and demand decreases
When supply decreases and demand increases
When supply increases and demand decreases
7. (TCO 2) When the price of movie tickets in a certain town was reduced, the movie theaters' revenues did not change. This suggests that the demand for movie tickets in that town has a price-elasticity coefficient of (Points : 4)
1.0.
greater than 1.
0.5.
zero.
8. (TCO 2) The elasticity of supply for a product will be 2 if: (Points : 4)
A 1 percent decrease in the price causes a 0.2 percent decrease in quantity supplied
A 2 percent decrease in price causes a 1 percent decrease in quantity supplied
A 1 percent decrease in price causes a 2 percent decrease in quantity supplied
A 2 percent decrease in price causes a 2 percent decrease in quantity supplied
9. (TCO 2) Which is true for a purely competitive firm in short-run equilibrium? (Points : 4)
The firm is making only normal profits.
The firm's marginal cost is greater than its marginal revenue.
The firm's marginal revenue is equal to its marginal cost.
A decrease in output would lead to a rise in profits.
10. (TCO 2) Consumers who clip and redeem discount coupons (Points : 4)
exhibit the same price elasticity of demand for a given product than consumers who do not clip and redeem coupons.
exhibit more price elasticity of demand for a given product than consumers who do not clip and redeem coupons.
exhibit less price elasticity of demand for a given product than consumers who do not clip and redeem coupons.
cause total revenue to decrease for firms that issue coupons for their products.
11. (TCO 3) In the kinked demand model of oligopoly, if one firm increases its price, the most likely reaction of the other firms will be to (Points : 4)
decrease their prices.
increase their prices.
not change their prices.
reduce their quantity.
12. (TCO 3) The main difference between the short run and the long run is that (Points : 4)
firms earn zero profits in the long run.
the long run always refers to a time period of one year or longer.
in the short run, some inputs are fixed.
in the long run, all inputs are fixed.
13.
(TCO 4) Refer to the diagram. The phases of the business cycle from points A to D are, respectively:
Graph Description
(Points : 4)
Peak, recession, expansion, trough
Trough, recovery, expansion, peak
Expansion, recession, trough, peak
Peak, recession, trough, expansion
14. (TCO 4) The unemployed are those people who (Points : 4)
do not have jobs.
are not employed but are seeking work.
are not working.
are not in the workforce.
15. (TCO 4) Adding the market value of all intermediate goods and services to those of final goods and services in an economy in a given year would result in (Points : 4)
the calculation of GDP for that year.
the calculation of NDP for that year.
an amount less than GDP for that year.
an amount greater than GDP for that year.
16. (TCO 4) GDP tends to overstate economic well-being because it takes into account (Points : 4)
improvements in product quality over time.
expenditures undertaken to correct pollution.
illegal activities of individuals and businesses.
there is never enough of anything.
individuals have to make choices from among alternatives.
production has to be planned by government.
things which are plentiful have relatively high prices.
2. (TCO1) Money is not considered to be an economic resource because (Points : 4)
as such, it is not productive.
money is not a free gift of nature.
money is made by man.
idle money balances do not earn interest income.
3. (TCO1) A point outside the production possibilities curve is (Points : 4)
attainable, but there is not full employment.
attainable, but there is not optimal allocation.
unattainable because the economy is inefficient.
unattainable because of limited resources.
4. (TCO1) A basic characteristic of a command system is that (Points : 4)
wages paid to labor are higher.
government owns most economic resources.
free markets are never permitted in a command economy.
government planners play a limited role in deciding what goods will be produced.
5. (TCO 2) The rationale for the law of demand can best be understood on the basis of (Points : 4)
diminishing marginal utility.
capitalist markets.
the invisible hand.
the rationing function of price.
6. (TCO 2) What combination of changes in supply and demand would most likely increase the equilibrium quantity? (Points : 4)
When supply increases and demand increases
When supply decreases and demand decreases
When supply decreases and demand increases
When supply increases and demand decreases
7. (TCO 2) When the price of movie tickets in a certain town was reduced, the movie theaters' revenues did not change. This suggests that the demand for movie tickets in that town has a price-elasticity coefficient of (Points : 4)
1.0.
greater than 1.
0.5.
zero.
8. (TCO 2) The elasticity of supply for a product will be 2 if: (Points : 4)
A 1 percent decrease in the price causes a 0.2 percent decrease in quantity supplied
A 2 percent decrease in price causes a 1 percent decrease in quantity supplied
A 1 percent decrease in price causes a 2 percent decrease in quantity supplied
A 2 percent decrease in price causes a 2 percent decrease in quantity supplied
9. (TCO 2) Which is true for a purely competitive firm in short-run equilibrium? (Points : 4)
The firm is making only normal profits.
The firm's marginal cost is greater than its marginal revenue.
The firm's marginal revenue is equal to its marginal cost.
A decrease in output would lead to a rise in profits.
10. (TCO 2) Consumers who clip and redeem discount coupons (Points : 4)
exhibit the same price elasticity of demand for a given product than consumers who do not clip and redeem coupons.
exhibit more price elasticity of demand for a given product than consumers who do not clip and redeem coupons.
exhibit less price elasticity of demand for a given product than consumers who do not clip and redeem coupons.
cause total revenue to decrease for firms that issue coupons for their products.
11. (TCO 3) In the kinked demand model of oligopoly, if one firm increases its price, the most likely reaction of the other firms will be to (Points : 4)
decrease their prices.
increase their prices.
not change their prices.
reduce their quantity.
12. (TCO 3) The main difference between the short run and the long run is that (Points : 4)
firms earn zero profits in the long run.
the long run always refers to a time period of one year or longer.
in the short run, some inputs are fixed.
in the long run, all inputs are fixed.
13.
(TCO 4) Refer to the diagram. The phases of the business cycle from points A to D are, respectively:
Graph Description
(Points : 4)
Peak, recession, expansion, trough
Trough, recovery, expansion, peak
Expansion, recession, trough, peak
Peak, recession, trough, expansion
14. (TCO 4) The unemployed are those people who (Points : 4)
do not have jobs.
are not employed but are seeking work.
are not working.
are not in the workforce.
15. (TCO 4) Adding the market value of all intermediate goods and services to those of final goods and services in an economy in a given year would result in (Points : 4)
the calculation of GDP for that year.
the calculation of NDP for that year.
an amount less than GDP for that year.
an amount greater than GDP for that year.
16. (TCO 4) GDP tends to overstate economic well-being because it takes into account (Points : 4)
improvements in product quality over time.
expenditures undertaken to correct pollution.
illegal activities of individuals and businesses.
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