PracticeTest1:Chapters1,3,4

1.Thefourfactorsofproductionare:
A.labor,capital,entrepreneurialability,andmoney.
B.land,labor,capital,andentrepreneurialability.
C.land,labor,capital,andmoney.
D.labor,capital,technology,andentrepreneurialability.

2.Aproductionpossibilitiescurveshows:
A.combinationsofcapitalandlabornecessarytoproducespecificlevelsofoutput.
B.thatresourcesareunlimited.
C.thatpeoplepreferoneofthegoodsmorethantheother.
D.themaximumamountsoftwogoodsthatcanbeproduced,assumingthefulluseofavailableresources.

3.Thelawofincreasingopportunitycostsstatesthat:
A.ifthepricesofalltheresourcesusedtoproducegoodsincrease,thecostofproducinganyparticulargood
willincreaseatthesamerate.
B.thesumofthecostsofproducingaparticulargoodcannotriseabovethecurrentmarketpriceofthatgood.
C.ifsocietywantstoproducemoreofaparticulargood,itmustsacrificelargerandlargeramountsofanother
goodtodoso.
D.ifthesumofthecostsofproducingaparticulargoodrisesbyaspecifiedpercent,thepriceofthatgoodmust
risebyagreaterrelativeamount.

4.Theproductionpossibilitiescurvehas:
A.apositiveslopethatincreasesaswemovealongitfromlefttoright.
B.anegativeslopethatisconstantaswemovealongitfromlefttoright.
C.anegativeslopethatdecreasesaswemovealongitfromlefttoright.
D.anegativeslopethatincreasesaswemovealongitfromlefttoright.

5.Opportunitycostsexistbecause:
A.householdsandbusinessesmakerationaldecisions.
B.mostdecisionsdonotinvolvesacrificesortradeoffs.
C.thedecisiontoengageinoneactivitymeansforgoingsomeotheractivity.
D.wantsarescarcerelativetoresources.

6.Thelawofdemandstatesthat,otherthingsequal:
A.priceandquantitydemandedareinverselyrelated.
B.priceandquantitydemandedaredirectlyrelated.
C.consumerswillbuymoreofaproductathighpricesthanatlowprices.
D.thelargerthenumberofbuyersinamarket,thelowerwillbeproductprice.

7.Thesupplycurveshowstherelationshipbetween:
A.physicalinputsofresourcesandtheresultingunitsofoutput.
B.productioncostsandtheamountdemanded.
C.totalbusinessrevenuesandquantitysupplied.
D.priceandquantitysupplied.

8.Amarket:
A.entailstheexchangeofgoods,butnotservices.
B.alwaysrequiresfacetofacecontactbetweenbuyerandseller.
C.reflectsupslopingdemandanddownslopingsupplycurves.
D.isaninstitutionthatbringstogetherbuyersandsellers.

9.Theconstructionofdemandandsupplycurvesassumesthattheprimaryvariableinfluencingdecisionsto
produceandpurchasegoodsis:
A.incomes.
B.preferences.
C.price.
D.expectations.

10.WhichofthefollowingwillnotcausethedemandforproductKtochange?
A.AnincreaseinincomesofbuyersofproductK.
B.AchangeinthepriceofproductK.
C.AchangeinthepriceofclosesubstituteproductJ.
D.AchangeinconsumertastesforproductK.

11.AshifttotherightinthedemandcurveforproductAcanbemostreasonablyexplainedbysayingthat:
A.consumerpreferenceshavechangedinfavorofAsothattheynowwanttobuymoreateachpossibleprice.
B.thepriceofAhasdeclinedand,asaresult,consumerswanttopurchasemoreofit.
C.consumerincomeshavedeclined,andconsumersnowwanttobuylessofAateachpossibleprice.
D.thepriceofAhasincreasedand,asaresult,consumerswanttopurchaselessofit.

12.

Refertothediagram.Anincreaseinquantitysuppliedisdepictedbya:
A.shiftfromS2toS1.
B.movefrompointxtopointy.
C.movefrompointytopointx.
D.shiftfromS1toS2.

13.Thelawofsupplyindicatesthat,otherthingsequal:
A.theproductsupplycurveisdownsloping.
B.producerswilloffermoreofaproductatlowpricesthanathighprices.
C.producerswilloffermoreofaproductathighpricesthanatlowprices.
D.consumerswillpurchaselessofagoodathighpricesthanatlowprices.

14.Thelocationoftheproductsupplycurvedependsonthe:
A.numberofbuyersinthemarket.
B.productiontechnology.
C.tastesofbuyers.
D.locationofthedemandcurve.

15.Amarketisinequilibrium:
A.iftheamountproducerswanttosellisequaltotheamountconsumerswanttobuy.
B.providedthereisnosurplusoftheproduct.
C.atallpricesabovethatshownbytheintersectionofthesupplyanddemandcurves.
D.wheneverthedemandcurveisdownslopingandthesupplycurveisupsloping.

16.Marketfailureissaidtooccurwhenever:
A.privatemarketsdonotallocateresourcesinthemosteconomicallydesirableway.
B.someconsumerswhowantagooddonotobtainitbecausethepriceishigherthantheyarewillingtopay.
C.pricesrise.
D.governmentintervenesinthefunctioningofprivatemarkets.

17.Whichofthefollowingisanexampleofmarketfailure?
A.Publicgoods.
B.Allofthese.
C.Positiveexternalities.
D.Negativeexternalities.

18.Thetwomaincharacteristicsofapublicgoodare:
A.nonrivalryandlargenegativeexternalities.
B.nonexcludabilityandproductionatrisingmarginalcost.
C.nonrivalryandnonexcludability.
D.productionatconstantmarginalcostandrisingdemand.

19.Apositiveexternalityorspilloverbenefitoccurswhen:
A.productdifferentiationincreasesthevarietyofproductsavailabletoconsumers.
B.thebenefitsassociatedwithaproductexceedthoseaccruingtopeoplewhoconsumeit.
C.afirmdoesnotbearallofthecostsofproducingagoodorservice.
D.firmsearnpositiveeconomicprofits.

20.Anegativeexternalityorspillovercostoccurswhen:
A.firmsfailtoachieveproductiveefficiency.
B.firmsfailtoachieveallocativeefficiency.
C.thetotalcostofproducingagoodexceedsthecostsbornebytheproducer.
D.thepriceofthegoodexceedsthemarginalcostofproducingit.

Quiz1:1,3,4Key
Version#1

1.B

2.D

3.C

4.D

5.C

6.A

7.D

8.D

9.C

10.B

11.A

12.C

13.C

14.B

15.A

16.A

17.B

18.C

19.B

20.C