Economics Test with Multiple Choice Questions

Econ 201Name_____________________________ 1st test Sp 2012 Keith Watson 1. Economics is primarily the study of a. economists' roles in the market for stocks and bonds. `b. the problem of unlimited wants and limited resources. c. methods to eliminate scarcity. d. government programs that make the economy grow. 2. Societies in which consumers, producers, and resource suppliers determine economic outcomes are known as a. traditional economies. b. command economies. `c. market economies. d. mixed capitalistic economies. 3. The â€Å"what,† â€Å"how,† and â€Å"for whom† questions are determined by government in a. capitalistic economies. . market economies. `c. planned economies. d. traditional economies. 4. A production possibilities curve does not show `a. all the possible combinations of resources that may be used to produce a good. b. the productive capacities of a nation when resources and technology are limited. c. the opportunity costs of one good in terms of another. d. that in order to increase the production of one good some amount of another good must be foregone. 5. A production possibilities curve will shift in toward the origin if a. resources become unemployed. b. resources are shifted from consumption goods to capital goods. . national defense spending increases while spending on entertainment decreases. `d. the population and labor force decrease. 6. The economics problem is essentially one of deciding how to make the best use of a. limited resources to satisfy limited wants. b. unlimited resources to satisfy limited wants. `c. limited resources to satisfy virtually unlimited wants. d. virtually unlimited resources to satisfy virtually unlimited wants. 7. Which of the following is not a basic question that an economic system is supposed to determine? a. what and how many goods and services are produced b. hat quantities of each resource are used to produce each good `c. how to create a markets of buyers and sellers d. who rece ives the output after it is produced 8. Which of the following is not a resource? a. human capital b. physical capital c. labor ` d. money 9. Which of the following is the best definition of the demand for good â€Å"X†? Demand shows a. how much of X would be bought at the equilibrium price. b. how people's purchases of X rise and fall as their incomes rise and fall. `c. the amounts of X that would be bought at each and any price, assuming other factors (income, tastes, etc. ) remain constant. . how the amount of money people spend to purchase X changes as the price they must pay for it changes. 10. Which of the following is the best description of the law of demand? a. When supply increases, demand increases. `b. Price and quantity demanded are inversely related. c. When income increases, the demand for normal goods increases. d. When the price of A increases, the demand for B increases. 11. If the price of A falls, then ` a. the demand for complementary product B shifts to the right. b. the demand for inferior good B shifts to the right. c. the demand for substitute good B shifts to the right. . the demand for A shifts to the right. 12. An increase in the demand for A is caused by a. a decrease in the price of A. b. a decrease in the price of a substitute for A. c. an increase in the price of a complement for A. ` d. a decrease in income if A is an inferior good. 13. If hamburgers and French fries are complementary goods, a decrease in the price of French fries would `a. cause the demand curve for hamburgers to shift to the right. b. cause consumers to decrease the quantity of French fries demanded. c. cause the demand curve for hamburgers to shift to the left. d. ause consumers to decrease the quantity of hamburgers demanded. 14. Which of the following does not indicate an increase in the demand for good X? a. Consumers were purchasing 10 units of X at $3 per unit and now they are purchasing 12 units at $4. b. Consumers were purchasing 10 units of X at $3 per unit and now they are purchasing 10 units at $4 per unit. `c. Consumers were purchasing 10 units of X at $3 per unit and now they are purchasing 12 units at $2 per unit. d. The demand curve has shifted upward. 15. As Ms. Little's income decreased, she increased her purchases of peanut butter.We may conclude that for Ms. Little a. peanut butter is a normal good. b. her situation is an exception to the law of demand. c. peanut butter is not very scarce. `d. peanut butter is an inferior good. 16. If commodities x and y are close substitutes, a reduction in the price of x will `a. decrease the demand for y. c. increase the demand for x. b. increase the demand for y. d. decrease the demand for x. 17. Which of the following could not cause a shift in the demand curve for peas? a. An increase in consumers' incomes. b. An increase in the price of a complement. c. A large decrease in the price of a substitute. d. A decrease in the price of peas. e. A decrease in the price of green beans. 18. Which of the following is the best definition of the supply of good â€Å"X†? Supply shows a. how much of X would be offered at the equilibrium price. b. how people's productions of X rise and fall as their total costs of production rise and fall. c. how the amount of money people spend to purchase X changes as the price they must pay for it changes. `d. the amounts of X that would be offered at each and any price, assuming other factors (costs, prices of alternative products, etc. ) remain constant. 19.The law of supply suggests that `a. price and quantity supplied are directly related. b. price and quantity supplied are inversely related. c. if price rises supply falls. d. if demand increases then supply increases. 20. Which of the following does not indicate a decrease in the supply of X? `a. Producers were offering 500 units of X at a price of $5. 00 per unit and now they are offering 400 units at a price of $3. 00. b. Producers were offering 500 units at a pri ce of $5. 00 and now they are offering 400 units at a price of $6. 00. c. Producers were offering 500 units at a price of $5. 0 and now they are offering 500 units at a price of $6. 00. d. Producers were offering 500 units at a price of $5. 00 and now they are offering 400 units at a price of $5. 00. 21. Which of the following will increase the supply of X? a. an increase in the price of an input in the production of X b. unfavorable weather for producing X `c. an improvement in the technology used to produce X d. an increase in the price of X e. an increase in the demand for X 22. If producers must obtain a higher price than previously in order to produce same level of output, one can say that there has occurred: a. n increase in supply. `b. a decrease in supply. c. an increase in demand. d. a decrease in demand. 23. An increase in the supply of commodity X can be expected to be caused by: a. increases in the prices of other commodities. `b. decreases in the prices of inputs used t o produce this commodity. c. increases in the prices of inputs used to produce this commodity. d. a loss in technical knowledge. e. none of the above. 24. Price is at equilibrium if a. there is no shortage. b. there is no surplus. c. supply equals demand. `d. quantity supplied is equal to quantity demanded. 25. When price is below equilibrium, a. the quantity demanded is greater than the quantity supplied. b. the quantity supplied is greater than the quantity demanded. c. a surplus results. d. the demand is greater than the supply. 26. When price is above equilibrium, a. there is a tendency for buyers to bid the price down. `b. sellers bid the price down. c. the quantity bought is less than the quantity sold. d. the amount that consumers are willing and able to purchase is greater than the amount that producers are willing and able to sell. 27. If the demand for a product increases, then a. less will be purchased if it is an inferior good. b. rice must fall in order to sell the extr a amount desired by consumers. c. the supply increases as well. `d. both equilibrium price and quantity rise. 28. If the demand and the supply of a product both decrease, then a. both price and quantity must fall. b. price will rise but quantity remains constant. `c. quantity falls, but the change in price cannot be predicted. d. price and quantity rise. 29. When supply decreases, a. the amount sold increases, but the amount purchased remains constant. b. a surplus results when prices are flexible. `c. price rises and quantity falls. d. demand increases and price rises. 0. If you notice that the equilibrium quantity of X has remained constant over a period of time, but the equilibrium price has increased, then what do you know has happened in the market for X? `a. the demand has increased and the supply has decreased. b. the demand has decreased and the supply has increased c. both the demand and supply have increased d. both the demand and supply have decreased 31. In which of the following instances is the effect upon equilibrium price indeterminate? a. demand increases and supply does not change b. supply decreases and demand increases c. demand decreases and supply increases d. demand increases and supply increases 32. If the equilibrium price of good X falls and its equilibrium quantity rises, then we know that a. an increase in demand has occurred. b. a decrease in demand has occurred. ` c. an increase in supply has occurred. d. a decrease in supply has occurred. 33. Which of the following could make the equilibrium price and quantity of good X rise? a. a decrease in income if X is a normal good ` b. a decrease in the price of a complement for X c. a decrease in the cost of producing X d. an improvement in technology that lowers the cost of producing