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
25%
1
25%
25%
2
3
25%
4
Which is likely to cause an
increase in demand?
25%
1.
2.
3.
4.
25%
25%
2
3
25%
An increase in the price
of resources
An expectation of lower
future prices
A new ad campaign
featuring prominent
celebrity
A decrease in income
1
4
If the price of an item increases,
demand for its substitutes
25%
1.
2.
3.
4.
25%
25%
2
3
25%
Is unaffected
Increases
Decreases
There is no way to
tell
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4
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Which would cause the supply
of wheat to shift to the right?
25%
1.
2.
3.
4.
25%
25%
2
3
25%
An increase in
household incomes
A decrease in producer
subsidies
Wheat producing
companies leaving the
market
A new, faster wheat
harvesting machine
1
4
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.
25%
1
25%
25%
2
3
25%
4
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.
25%
1
25%
25%
2
3
25%
4
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In which market structure do firms have the
greatest control over their own prices?
25%
25%
25%
2
3
25%
1. Oligopoly
2. Pure competition
3. Monopolistic
competition
4. Monopoly
1
4
The Law of Supply states that
25%
1.
2.
3.
4.
25%
25%
2
3
25%
As prices decrease, quantity
supplied decreases
As prices increase, quantity
demanded decreases.
As prices increase, supply
increases
As prices decrease, demand
decreases
1
4
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If supply and demand both increase by the
same amount in a market, which statement
will DEFINITELY be true?
25%
25%
25%
2
3
25%
1. Quantity supplied
will decrease
2. Equilibrium price will
increase
3. Equilibrium quantity
will increase
4. Quantity demanded
will decrease
1
4
In which type of business organization does
the owner have the MOST liability?
25%
25%
25%
2
3
25%
1. Sole
proprietorship
2. Partnership
3. Corporation
4. Monopoly
1
4
Comparing changes in quantity demanded
to changes in prices is related which
economic concept?
25%
1.
2.
3.
4.
25%
25%
2
3
25%
Equity
Opportunity costs
Elasticity
Consumer
sovereignty
1
4
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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.
25%
1
25%
25%
2
3
25%
4
Which is true concerning profits for firms that
operate in purely competitive markets?
25%
1.
2.
3.
4.
25%
25%
2
3
25%
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
1
4
Which type of tax structure taxes people
with higher incomes at higher percentages?
25%
1.
2.
3.
4.
25%
25%
2
3
25%
Progressive
Proportional
Regressive
Flat
1
4
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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
25%
1
25%
25%
2
3
25%
4
If supply AND demand decreases at the
same time, which statement will
DEFINITELY be true?
25%
1.
2.
3.
4.
25%
25%
2
3
25%
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
1
4
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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
25%
1
25%
25%
2
3
25%
4
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
25%
1
25%
25%
2
3
25%
4
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
25%
1.
2.
3.
4.
25%
25%
2
3
25%
Regressive tax
Proportional tax
Optional tax
Progressive tax
1
4
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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
25%
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.
1
25%
25%
2
3
25%
4
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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
25%
1
25%
25%
2
3
25%
4
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.
25%
1
25%
25%
2
3
25%
4
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
25%
1
25%
25%
2
3
25%
4
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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?
25%
25%
25%
2
3
25%
1. Monopoly
2. Monopolistic
competition
3. Pure competition
4. Oligopoly
1
4
How does a corporation benefit
from selling stock?
25%
1.
2.
3.
4.
25%
25%
2
3
25%
It gives them limited
liability.
They can raise larger
amounts of capital.
It eliminates the
potential for conflict.
They get larger profits
1
4
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
25%
1
25%
25%
2
3
25%
4
Which market structure is typically characterized
by a large number of producers selling similar, but
differentiated products?
25%
25%
25%
2
3
25%
1. Monopolistic
competition
2. Pure competition
3. Oligopoly
4. Monopoly
1
4
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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
25%
1
25%
25%
2
3
25%
4
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?
25%
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.
1
25%
25%
2
3
25%
4
When the money supply is increased,
which is MOST likely to happen?
25%
1.
2.
3.
4.
25%
25%
2
3
25%
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.
1
4
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The government sets a price ceiling in a
market. This is MOST LIKELY to cause
25%
1.
2.
3.
4.
25%
25%
2
3
25%
Equilibrium
A surplus
Efficiency
A shortage
1
4
Which statement describes the
law of demand?
25%
1.
2.
3.
4.
25%
25%
2
3
25%
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.
1
4
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
25%
1
25%
25%
2
3
25%
4
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An assembly line can increase a factory’s
productivity because it allows workers to
25%
25%
25%
2
3
25%
1. Put in overtime
hours
2. Diversify their skills
3. Focus on a specific
task
4. Use a wide range of
knowledge
1
4
Which strictly monetary policy combination
would work best to slow down an
overheating, overproducing economy?
25%
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
1
25%
25%
2
3
25%
4
Demand for gasoline is said to be fairly
inelastic for most people. This is probably
because
25%
1.
2.
3.
4.
25%
25%
2
3
25%
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
1
4
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
25%
25%
25%
2
3
25%
1. Sole
proprietorship
2. Partnership
3. Corporation
4. Monopoly
1
4
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How are equilibrium price and quantity
determined in most market in the U.S.
Economy?
25%
1.
2.
3.
4.
25%
25%
2
3
25%
By the law of demand
By a point on a production
possibilities curve
Government sets the price
Consumer and producer
interaction
1
4
A price floor is problematic in a
market because it leads to
25%
25%
25%
2
3
25%
1. Surpluses
2. Decreased
productivity
3. Shortages
4. Increased taxes
1
4
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
25%
1
25%
25%
2
3
25%
4
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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
25%
1
25%
25%
2
3
25%
4
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
25%
1
25%
25%
2
3
25%
4
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
25%
1
25%
25%
2
3
25%
4
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Which statement is true regarding
monopolistic competition?
25%
1.
2.
3.
4.
25%
25%
2
3
25%
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.
1
4
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
25%
1
25%
25%
2
3
25%
4
In the market seen here, a
government-mandated price of $5
would cause?
25%
1.
2.
3.
4.
25%
25%
2
3
25%
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
1
4