2.Economic analysis is:

a. A framework for understanding issues with arise since societies need to make allocation decisions.

b. Widely understood by all in our society.

c. Important for problem solving in underdeveloped and socialist societies but of little use in western capitalist systems.

d. A natural science concerned with the biological growth and changed of social systems.

e. A set of mathematical rules to ensure a society's happiness and prosperity.

3.Opportunity cost:

Group of answer choices

a. Reduces the need to make choices.

b. Applies only to allocating capital.

c. Is another name for the "invisible hand."

d. Is greater for free resources than for economic resources.

e. Is the production forgone from the best alternative use of a resource.

4.Economic resources have a price above zero because

Group of answer choices

a. There are no other use for them.

b. They are relatively scarce.

c. They cannot be easily moved from place to place.

d. Otherwise they would not be able to satisfy human wants.

e. They are unlimited in supply.

5.Economics is best defined as the study of:

Group of answer choices

a. Business organizations and activities.

b. How choices are made to allocate available resources among alternatives in order to satisfy human wants.

c. The classification of resources used to produce final goods and services.

d. How technology can be used to change scarce resources into free resources.

e. The role of government policy in satisfying basic human wants.

6.This question is based on the following table.

Household IncomeAverage number of car per household

$0 --- $24,9992.1

25,000 ---49,9992.5

50,000 ---74,9992.8

75,000 ---99,9993.4

100,000 --- 149,9993.7

The relationship between household income and average number of car per household is:

Group of answer choices

a. Positive.

b. Negative.

c. Terminal.

d. Fluctuating.

e. Nonexistent.

7.This question is based on the following table which shows the output combinations of food and clothing available to an isolated city:

PossibilitiesClothing (tons)Food (tons)

A01,200

B2001,000

C400800

D600600

E800400

F1000200

G12000

From the given information, the opportunity cost of 200 tons of clothing is:

Group of answer choices

a. 50 tons of food.

b. 100 tons of food.

c. 200 tons of food.

d. 300 tons of food.

e. 400 tons of food.

8.Which of the following represents an important difference between a socialist economy and the United States?

Group of answer choices

a. The U.S. is an example of pure capitalism; a socialist system is an example of mixed capitalism.

b. In a socialist system, the government conducts extensive research activities; in the U.S., it does not.

c. In a socialist system, the government decides how much of each kind of good is to be produced; in the U.S., this is left entirely to business firms.

d. In the U.S., most forms of capital are available to private ownership; in a socialist system, they are generally not.

e. The socialist system relies more heavily on markets to answer the basic economic questions.

9.Over time the American economy has had:

Group of answer choices

a. Full employment without serious inflation.

b. Steadily increasing unemployment.

c. Fluctuations in unemployment and growth.

d. Persistent deflation.

e. Continuous growth in output per person.

10.A corporation is a

Group of answer choices

a. Business with at least $500,000 in assets.

b. Firm owned by a single person.

c. Business organization with a charter from the federal government.

d. Form of business organization in with 20 or more people agree to conduct a business.

e. Fictitious legal person separate and distinct from its owners.

11.An advantage of proprietorship is that the owner is faced with

Group of answer choices

a. Easy-to-obtain financing.

b. Unlimited liability.

c. Limited liability.

d. Complete control.

e. Lower tax rates that those applicable to a partnership.

12.The additional satisfaction received from consuming an additional unit of a commodity is called the

Group of answer choices

a. Marginal product.

b. Marginal propensity to consume.

c. Marginal propensity to save.

d. Elasticity of demand.

e. Marginal utility.

13.The law of diminishing marginal returns means that, as you increase the number of units of a variable input, after some point:

Group of answer choices

a. Total output will fall.

b. Costs of production will fall.

c. Marginal output will fall.

d. Demand will fall.

e. Supply will fall.

14.The law of diminishing marginal returns cannot predict the effect of an additional unit of input when

Group of answer choices

a. All other inputs are fixed.

b. Technology is changing.

c. Output rises.

d. Marginal product is falling.

e. It is possible to vary the proportion in which the various inputs are used.

15.Average variable cost equals

Group of answer choices

a. Total cost divided by output.

b. Total cost minus total variable cost.

c. Total variable cost divided by output.

d. Average total cost plus average variable cost.

e. Total fixed cost minus total variable cost.

16.In a market economy, consumer purchases depend on their

Group of answer choices

a. Costs and what they can charge.

b. Production decisions.

c. Expenses, supply, and levels of activity.

d. Income, tastes, and market prices.

e. Past outlook and state of technology.

17.The question (# 17) below is based on the following information for an auto repair shop specializing in muffler installations.

______________________________________________

Quantity of LaborNumber of

Used per daymufflers installed

_______________________________________________

00

12

25

39

410

_______________________________________________

The marginal product of the second worker is

Group of answer choices

a. 1.

b. 2.

c. 3.

d. 4.

e. 5.

18.Price elasticity of demand is defined as the

Group of answer choices

a. Maximum amount consumers will pay for increased quantity.

b. Percentage change in quantity demanded induced by a 1 percent change in price. (Or, the percentage change in quantity demanded divided by the percentage change in price).

c. Percentage amount by which price can change without affecting the quantity demanded. Percentage increase in price induced by a decrease in demand.

d. Percentage increase in price induced by a decrease in demand.

e. Absolute change in quantity demanded divided by the absolute change in price.

19.Use the following information to answer question 21.

___________________________________________________________

PriceQuantity Demanded

($/bushel of wheat)(Millions of bushels)

___________________________________________________________

3.002.7

3.302.6

3.602.5

___________________________________________________________

What is the price elasticity of demand for wheat when the price of a bushel is between $3.00 and $3.30?

Group of answer choices

a. 0.33

b. 0.42

c. 0.48

d. 0.55

e. 0.37

20.A leftward shift in the demand curve for a commodity may

Group of answer choices

a. Decrease the equilibrium price of the commodity.

b. Mean consumers are willing to buy more of the good at each price than previously.

c. Mean that supply decreased.

d. Mean that the price of a complement has fallen.

e. Follow from a rise in the price of the product.

21.Which of the following conditions would indicate that a perfectly competitive firm should expand its output to increase its profit?

Group of answer choices

a. Marginal cost equals average cost.

b. Total cost exceeds marginal cost.

c. Price exceeds marginal cost.

d. Total revenue exceeds total cost.

e. Total revenue equals price.

22.The question below (22) is based on the following demand schedule for a monopolist:

______________________________________________________________

P ($)Q (units)TR ($)MR ($)

(1)(2)(3) = (1)(2)(4)

______________________________________________________________

1601

1502

1403

1304

1205

______________________________________________________________

Where: P is Price; Q is Quantity; TR is Total Revenue; MR is Marginal Revenue.

The marginal revenue associated with the sale of the third unit is:

Group of answer choices

a. $390.

b. $130

c. $140.

d. $120.

e. $110.

23.A perfect competitive firm seeking to maximize total profits will

Group of answer choices

a. Set price equal to marginal cost.

b. Maximize profit per unit.

c. Minimize cost per unit.

d. Charge the highest possible price.

e. Set marginal cost equal to marginal revenue.

24.The question below (24) is based on the following demand schedule for a monopolist:

______________________________________________________________

P ($)Q (units)TR ($)MR ($)

(1)(2)(3) = (1)(2)(4)

______________________________________________________________

1601

1502

1403

1304

1205

______________________________________________________________

Where: P is Price; Q is Quantity; TR is Total Revenue; MR is Marginal Revenue.

The marginal revenue associated with the sale of the fourth unit is:

Group of answer choices

a. $390.

b. $130.

c. $140.

d. $120.

e. $100.

25.If price elasticity of demand is 1.5, the demand for the commodity is

Group of answer choices

a. Of unitary elasticity.

b. Price elastic.

c. Price postelastic.

d. Price inelastic.

e. Price preelastic.

26.A monopolist seeking to maximize total profits will

Group of answer choices

a. Minimize cost per unit.

b. Set marginal revenue equal to marginal cost.

c. Maximize profit per unit.

d. Set price equal to average total cost.

e. Charge the highest possible price.

27.A cartel is

Group of answer choices

a. A formal collusive arrangement among firms.

b. Found most of the time in monopolistic competition.

c. Usually exempt from antitrust laws in the United States.

d. Easier to maintain as the number of firms involved increases.

e. Unlikely to occur in international markets.

28.The legal, technical, and financial difficulties a firm must overcome to participate in a particular market are called:

Group of answer choices

a. Implicit costs.

b. Open market operations.

c. Crowding-out conditions.

d. Barriers to entry.

e. External economies and diseconomies.

29.After some point, increased real wage rates that make people richer cause the supply curve of labor to

Group of answer choices

a. Become horizontal.

b. Shift to the right.

c. Shift to the left.

d. Fluctuate unpredictably.

e. Bend backward.

30.The question below (30) is based on the following information for a firm under conditions of perfect competition:

Number of workersMP of LProduct's Pricethe value of MP of

(1)(2)(3)(4) = (2) (3)

1416

1314

1210

119

108

If the price of the product is $5 per unit and the firm must pay $50 per worker employed, how many workers should the firm hire to maximize profits?

Group of answer choices

a. 14.

b. 13.

c. 12.

d. 11.

e. 10.

31.The existence of noncompeting groups and other occupational differences in labor markets means that

Group of answer choices

a. Homogeneous, competitive labor markets are possible in the short run.

b. The market demand curves for all labor groups are highly price inelastic.

c. Wage differentials will tend to persist over time.

d. Wages have little or no effect on the supply curves of labor.

e. The government must step up in to ensure that enough people enter unskilled occupations.

32.The equilibrium rate of interest is

Group of answer choices

a. Determined by the demand and supply of loanable funds.

b. Equivalent to the profit rate.

c. Fixed by law in the United States.

d. Equal to the value of a bond or a stock.

e. The rate that ensures that households and businesses can borrow all the need.

33.The interest rate earned on an investment in an asset is called

Group of answer choices

a. The capital output ratio.

b. The rate of return.

c. The risk quotient.

d. Capitalization.

e. Depreciation.

34.The question below is based on the following cost and revenue schedule for the Presto Piano Co.________________________________________________________________________

OutputTotal Revenue ($)Total Cost ($)

________________________________________________________________________

11,0001,000

22,0001,700

33,0002,600

44,0003,300

55,0004,300

66,0007,000________________________________________________________________________

To maximize profits, the firm should produce between:

Group of answer choices

a. 1 and 2 units per period.

b. 2 and 3 units per period.

c. 3 and 4 units per period.

d. 4 and 5 units per period.

e. 5 and 6 units per period.

35.If the permanent annual rate of return on an asset that costs $20,000 is 6 percent, then each year the owner of the asset will earn:

Group of answer choices

a. $1,000.

b. $1,200.

c. $1,400.

d. $1,600.

e. $1,800.

36.The amount of money one must pay for the use of $1 for one year is called:

Group of answer choices

a. Profits.

b. Rent.

c. Wages.

d. Loanable funds.

e. Interest.

37.The market demand curve for labor:

Group of answer choices

a. Derives employment totals from the amounts supplied.

b. May slop upward due to external diseconomies.

c. Shows, for each price, the quantity of labor demanded in the entire market.

d. Will be horizontal if the market is perfect competitive.

e. Relates the quantity of labor demanded to the product price.

1. The social security benefits are funded by taxes levied on

Group of answer choices

a. Sales.

b. Wealth.

c. Property income.

d. Wages.

e. All forms of income.

1. A tax that takes a greater proportion of one's income as that income rises is called

Group of answer choices

a. An income tax.

b. A regressive tax.

c. A progressive tax.

d. An excise tax.

e. A proportional tax.

40.The negative income tax is a:

Group of answer choices

a. System whereby families below a certain break-even level receive a government income tax payment.

b. Principle that argues that most income taxes reduce incentive to produce in a market system.

c. Proposal to allow the automatic setting of income tax rates to negate the effects of a business cycle.

d. Form of unequal taxation that disproportionately hurt low-income families.

e. Tax on unearned income primarily designed to affect high-income families.