Minimum wage causes what type of disequilibrium situation to exist? 1. Price floor, shortage of labor 2. Price ceiling, shortage of labor 3. Price ceiling, surplus of labor 4. Price floor, surplus of labor
Which is likely to cause an increase in demand? 1. 2. 3. 4. An increase in the price of resources An expectation of lower future prices A new ad campaign featuring prominent celebrity A decrease in income
If the price of an item increases, demand for its substitutes 1. 2. 3. 4. Is unaffected Increases Decreases There is no way to tell
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Which would cause the supply of wheat to shift to the right? 1. 2. 3. 4. An increase in household incomes A decrease in producer subsidies Wheat producing companies leaving the market A new, faster wheat harvesting machine
Government agencies inspect restaurants on a regular basis to insure the restaurants are obeying health and food safety regulations. What economic effect does this have on the restaurants? 1. 2. 3. 4. The price of food is typically lower because the regulations force restaurants to use cheaper ingredients. Restaurants cannot serve food if they do not meet all of the regulations. They charge higher prices to cover the costs of the time and resources used in meeting the regulations. More food is produced because the regulations make the restaurant more productive.
How is supply different than quantity supplied? 1. 2. 3. 4. Supply is the amount of a good that producers are willing to produce and quantity supplied is the actual number sold. Supply is the amount of a good that producers are willing to produce at various prices and quantity supplied is the amount producers are willing to produce at a specified price. Supply is the amount of a good that producers are willing to buy at various prices and quantity supplied is the amount producers are willing to buy at a specified price. Supply is the amount of good that producers are willing to produce at a specific price and quantity supplied is the amount of a good producers are willing to supply at all possible prices.
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In which market structure do firms have the greatest control over their own prices? 1. Oligopoly 2. Pure competition 3. Monopolistic competition 4. Monopoly
The Law of Supply states that 1. 2. 3. 4. As prices decrease, quantity supplied decreases As prices increase, quantity demanded decreases. As prices increase, supply increases As prices decrease, demand decreases
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If supply and demand both increase by the same amount in a market, which statement will DEFINITELY be true? 1. Quantity supplied will decrease 2. Equilibrium price will increase 3. Equilibrium quantity will increase 4. Quantity demanded will decrease
In which type of business organization does the owner have the MOST liability? 1. Sole proprietorship 2. Partnership 3. Corporation 4. Monopoly
Comparing changes in quantity demanded to changes in prices is related which economic concept? 1. 2. 3. 4. Equity Opportunity costs Elasticity Consumer sovereignty
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In purely competitive markets there are many producers selling nearly identical goods to consumers who are well informed about the goods they are buying. Because of this, long term profits are 1. Nearly impossible to maintain. 2. Very unpredictable, but typically large. 3. Always the same amount. 4. Easy to achieve.
Which is true concerning profits for firms that operate in purely competitive markets? 1. 2. 3. 4. Most firms make short term profits through advertising All firms make long term profits Long term profits are nearly impossible Short term profits are very likely
Which type of tax structure taxes people with higher incomes at higher percentages? 1. 2. 3. 4. Progressive Proportional Regressive Flat
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Assume Coke and Pepsi operate as an oligopoly. Which statement BEST represents this? 1. 2. 3. 4. Coke and Pepsi own many different “brands” Coke and Pepsi sell to over 75% of the market Coke and Pepsi are major corporations with stockholders Coke and Pepsi taste different, but are marketed the same way
If supply AND demand decreases at the same time, which statement will DEFINITELY be true? 1. 2. 3. 4. The equilibrium quantity of the good will be lower The equilibrium price of the good will be higher The equilibrium price of the good will be lower The equilibrium quantity of the good will be higher
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Which is NOT a condition for a monopoly to exist? 1. High demand for a good 2. No close substitutes 3. Difficult market entry 4. A single seller
Sherry runs a business with her sister. They are trying to decide whether to incorporate or not. If they decide to incorporate, what’s one major disadvantage they will face? 1. The likelihood of conflict 2. There is a greater possibility for loss of control of the company 3. It will be more difficult to raise capital for the business 4. They will increase their liability
The Federal Income Tax in the United States forces people making higher incomes to pay a higher percentage in taxes. This is an example of a 1. 2. 3. 4. Regressive tax Proportional tax Optional tax Progressive tax
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Alex and Dylan both wash cars and change oil. Currently, each man washes and changes oil by himself, but the process takes a long time. They would MOST LIKELY improve their efficiency if 1. 2. 3. 4. Alex washes cars while Dylan changes oil. Alex washes Dylan’s car while Dylan washes Alex’s car. Alex and Dylan wash a car and change the oil together. Alex and Dylan reduce the number of cars they wash.
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What occurs to equilibrium price and quantity in a market if demand increases, but supply remains the same? 1. Price is unknown, quantity increases 2. Price decreases, quantity increases 3. Price increases, quantity increases 4. Price increases, quantity decreases
Which statement is MOST LIKELY true if the Fed increases the reserve requirement and the discount rate? 1. They are trying to limit inflationary pressures. 2. The economy is in a trough. 3. There has been a recent increase in taxes. 4. Loans are difficult to get because little money is circulating.
A major advantage corporations offer over sole-proprietorships is 1. Limited liability 2. Total control over the company 3. Ease of startup 4. The ability to set prices freely
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Use the following list to answer the question. There are only a few large sellers All the products sold are very similar, There is a high degree of interdependent pricing. This is MOST LIKELY describes which kind of market structure? 1. Monopoly 2. Monopolistic competition 3. Pure competition 4. Oligopoly
How does a corporation benefit from selling stock? 1. It gives them limited liability. 2. They can raise larger amounts of capital. 3. It eliminates the potential for conflict. 4. They get larger profits
A key advantage of a partnership is 1. 2. 3. 4. Specialization of the partners The life expectancy of the business Unlimited liability of the partners Ease of raising capital through stockholders
Which market structure is typically characterized by a large number of producers selling similar, but differentiated products? 1. Monopolistic competition 2. Pure competition 3. Oligopoly 4. Monopoly
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Long term economic growth is MOST influenced by 1. 2. 3. 4. Fed policies that reduce the money supply Increasing marginal tax rates Leftward shifts of the production possibilities curve Investments in physical and human capital
What is MOST LIKELY to happen to the economy if the Federal Reserve Bank sells treasury securities at the same time that Congress passes a law increasing taxes? 1. 2. 3. 4. There is not enough information to determine the outcome. Contraction, because both of the policies are contractionary. Stability, because the policies cancel each other. Expansion, because both of the policies are expansionary.
When the money supply is increased, which is MOST likely to happen? 1. 2. 3. 4. The price level will increase. Each dollar will be able to buy more goods. The price level will not be affected. The price level will decrease.
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The government sets a price ceiling in a market. This is MOST LIKELY to cause 1. 2. 3. 4. Equilibrium A surplus Efficiency A shortage
Which statement describes the law of demand? 1. 2. 3. 4. As prices rise, quantity demanded decreases. As prices rise, demand decreases. As prices fall, quantity demanded decreases. None of the other answers listed are correct.
Which BEST describes entrepreneurship? 1. 2. 3. 4. The physical and mental talents of workers A person who uses land, labor, and capital in their job A person willing to take a financial risk by combining resources to produce a good or service The ability of a person to work more efficiently than another person
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An assembly line can increase a factory’s productivity because it allows workers to 1. Put in overtime hours 2. Diversify their skills 3. Focus on a specific task 4. Use a wide range of knowledge
Which strictly monetary policy combination would work best to slow down an overheating, overproducing economy? 1. 2. 3. 4. Increase taxes, lower government spending Decrease the discount rate, buy treasury securities Increase taxes, increase the discount rate Increase the discount rate, sell treasury securities
Demand for gasoline is said to be fairly inelastic for most people. This is probably because 1. 2. 3. 4. It has few substitutes and is necessary for most transportation It has many substitutes and is easily attained It has few substitutes and is in large supply It is difficult to make cheaply
Serena’s business is small and was quick to start. Serena retains all of her profits, but is also responsible for all the debts and legal responsibilities of the business. Based solely on this information, Serena’s business is MOST LIKELY a 1. Sole proprietorship 2. Partnership 3. Corporation 4. Monopoly
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How are equilibrium price and quantity determined in most market in the U. S. Economy? 1. 2. 3. 4. By the law of demand By a point on a production possibilities curve Government sets the price Consumer and producer interaction
A price floor is problematic in a market because it leads to 1. Surpluses 2. Decreased productivity 3. Shortages 4. Increased taxes
What is the main difference between pure competition and monopolistic competition? 1. 2. 3. 4. Firms in pure competition are selling nearly identical, rather than differentiated goods Firms in pure competition rely more heavily on advertising Firms in pure competition have no substitutes to their goods Firms in pure competition make more profits
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Sellers enter a market looking to make as much money as possible by offering a good or service. Buyers enter a market looking to spend as little as possible for a good or service. This interaction determines the 1. Productivity of a business 2. Economic system of a country 3. Production possibilities curve 4. Market clearing price of a good
Why do governments interact in economies to redistribute income, resolve market failures, and provide public goods and services? 1. 2. 3. 4. To provide equity and stability to the economy It is the easiest way to achieve economic growth Central banks, like the Fed, do not have the ability to do these things To maximize the ups and downs of the business cycle
Which describes price elasticity of demand? 1. 2. 3. 4. The interaction of supply and demand to determine equilibrium price The amount of a good that is demanded at a particular price The measure of how much a change in price affects the quantity demanded The measure of how a change in demand changes equilibrium price
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Which statement is true regarding monopolistic competition? 1. 2. 3. 4. There is only one seller in the market. All the sellers are selling identical products. Businesses have great control over the price of their product. Advertising plays a key role in the market.
If the price of a product falls, which is true regarding demand? 1. Demand increases 2. Demand decreases 3. Quantity demanded increases 4. Quantity demanded decreases
In the market seen here, a government-mandated price of $5 would cause? 1. 2. 3. 4. price floor with a surplus of 40 widgets price ceiling with a surplus of 20 widgets price floor with a shortage of 20 widgets price ceiling with a shortage of 40 widgets
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