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Saturday,April05,2008

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BasicEconomicsMCQswithAnswers

Economics100Quiz1,Fall2000
1.Thefundamentaleconomicproblemfacedbyallsocietiesis:
a.unemployment
b.inequality
c.poverty
d.scarcity
2."Capitalism"refersto:
a.theuseofmarkets
b.governmentownershipofcapitalgoods
c.privateownershipofcapitalgoods
d.privateownershipofhomes&cars
3.Therearethreefundamentalquestionseverysocietymustanswer.Whichofthefollowingis/areoneof
thesequestions?
a.Whatgoodsandservicesaretobeproduced?
b.Howarethegoodsandservicestobeproduced?
c.Whowillgetthegoodsandservicesthatareproduced?
d.Alloftheabove
4.Ifyouwereworkingfulltimenow,youcouldearn$20,000peryear.Instead,youareworkingparttime
whilegoingtoschool.Inyourcurrentparttimejob,youearn$5,000peryear.Atyourschool,theannualcost
oftuition,books,andotherfeesis$2,000.Theopportunitycostofcompletingyoureducationis:
a.$2,000
b.$5,000
c.$17,000
d.$20,000
e.$22,000
5.Thebowedshapeoftheproductionpossibilitiescurveillustrates:
a.thelawofincreasingmarginalcost
b.thatproductionisinefficient
c.thatproductionisunattainable
d.thedemandisrelativelyinelastic
6.Youhavetakenthisquizandreceivedagradeof3outofapossible10points(F).Youareallowedtotakea
secondversionofthisquiz.Ifyouscore7ormore,youcanraiseyourscoretoa7(C).Youwillneedtostudy
forthesecondversion.Inmakingarationaldecisionastowhetherornottoretakethetest,youshould
a.alwaysretakethequiz
b.consideronlythemarginalbenefitsfromofretakingthequiz(fourextrapoints)
c.consideronlythemarginalopportunitycostsfromtakingthequiz(thetimespent
studyingandtakingthequiz)
d.considerboththemarginalbenefitsandthemarginalopportunitycostsofretakingthequiz

7.Thelawofdemandstatesthat:
a.asthequantitydemandedrises,thepricerises
b.asthepricerises,thequantitydemandedrises
c.asthepricerises,thequantitydemandedfalls

d.assupplyrises,thedemandrises

Economics100Quiz#1,Page2
8.Thepriceelasticityofdemandisthe:
a.percentagechangeinquantitydemandeddividedbythepercentagechangeinprice
b.percentagechangeinpricedividedbythepercentagechangeinquantitydemanded
c.dollarchangeinquantitydemandeddividedbythedollarchangeinprice
d.percentagechangeinquantitydemandeddividedbythepercentagechangeinquantitysupplied
9.CommunityCollegesdesiredtoincreaserevenues.Theydecidedtoraisefeespaidbystudentswith
Bachelorsdegreesto$50perunitbecausetheybelievedthiswouldresultingreaterrevenues.Butinreality,
totalrevenuesfell.Therefore,thedemandforCommunityCollegecoursesbypeoplewithBachelorsdegrees
musthaveactuallybeen:
a.relativelyinelastic
b.unitelastic
c.relativelyelastic
d.perfectlyelastic
10.Thedemandforaproductwouldbemoreinelastic:
a.thegreateristhetimeunderconsideration
b.thegreateristhenumberofsubstitutesavailabletobuyers
c.thelessexpensiveistheproductinrelationtoincomes
d.alloftheabove
Answers:DCDCADCACC

Economics100Quiz#3Friday,September22,2000
1.Inthecaseofagriculture,
a.thedemandhasshiftedtotherightmorethanthesupplyhasshiftedtotheright
b.thedemandhasshiftedtotherightlessthanthesupplyhasshiftedtotheright
c.thedemandhasshiftedtotheleftmorethanthesupplyhasshiftedtotheleft
d.thedemandhasshiftedtotheleftlessthanthesupplyhasshiftedtotheleft
2.Theagriculturalpricesupportprogramisanexampleof
a.apriceceiling
b.apricefloor
c.equilibriumpricing
3.Ifthereisapricefloor,therewillbe
a.shortages
b.surpluses
c.equilibrium
4.Ifthereisapriceceiling,therewillbe
a.shortages
b.surpluses
c.equilibrium
5.Ifthereisapriceceiling,whichofthefollowingisNOTlikelytooccur?
a.rationingbyfirstcome,firstserved
b.blackmarkets
c.graymarkets
d.sellersprovidinggoodsforfreethatwereformerlynotfree
6.Thegoalofapuremarketeconomyistobestmeetthedesiresof
a.consumers
b.companies
c.workers
d.thegovernment
7.Inapuremarketeconomy,whichofthefollowingisafunctionoftheprice?
I.provideinformationtosellersandbuyers,II.provideincentivestosellersandbuyers
a.Ionly
b.IIonly
c.bothIandII
d.neitherInorII
8.Inamarketsystem,sellersactin____________interest,butthisleadstobehaviorsin____________
interest.
a.selfself
b.selfsocietys
c.societyssocietys
d.societysself
9.Thelawofdiminishing(marginal)returnsstatesthatasmoreofavariablefactorisaddedtoacertain
amountofafixedfactor,beyondsomepoint:
a.Totalphysicalproductbeginstofall
b.Themarginalphysicalproductrises
c.Themarginalphysicalproductfalls

d.Theaveragephysicalproductfalls
10.Whyisthelawofdiminishingmarginalreturnstrue?
a.specializationanddivisionoflabor
b.spreadingtheaveragefixedcost
c.limitedcapital
d.allfactorsbeingvariableinthelongrun
Answers:BBBADACBCC

Economics100MWQuiz#3
1.Whichofthefollowingisacharacteristicofpuremonopoly?
a.oneselleroftheproduct
b.lowbarrierstoentry
c.closesubstituteproducts
d.perfectinformation
2.Inpuremonopoly,whatistherelationbetweenthepriceandthemarginalrevenue?
a.thepriceisgreaterthanthemarginalrevenue
b.thepriceislessthanthemarginalrevenue
c.thereisnorelation
d.theyareequal
3.Inordertomaximizeprofits,amonopolycompanywillproducethatquantityatwhichthe:
a.marginalrevenueequalsaveragetotalcost
b.priceequalsmarginalrevenue
c.marginalrevenueequalsmarginalcost
d.totalrevenueequalstotalcost
4.QuantityPriceTotalCost
1$100$60
295130
390210
485300
580400
Thismonopolistshouldproduce:
a.1
b.2
c.3
d.4
e.5
5.Comparedtothecaseofperfectcompetition,amonopolistismorelikelyto:
a.chargeahigherprice
b.producealowerquantityoftheproduct
c.makeagreateramountofeconomicprofit
d.alloftheabove
6.Whichofthefollowingisnecessaryforanaturalmonopoly?
a.economiesofscale
b.ahighproportionofthetotalcostisthecostofcapitalgoods
c.themarketisverysmall
d.alloftheabove
7.WhichofthefollowingistrueaboutthewaybywhichSDG&EhasbeenregulatedbythePUC?
a.SDG&Ehasbeenallowedtoearnveryhigheconomicprofits
b.TheprofitsofSDG&Earecalculatedasapercentofthevalueofthecapitalgoods
c.Whenthedemandforelectricitywouldfall,thepriceofelectricitywouldalsofall
d.Alloftheabove
8.Whichofthefollowingbestdefinespricediscrimination?
a.chargingdifferentpricesonthebasisofrace
b.chargingdifferentpricesforgoodswithdifferentcostsofproduction
c.chargingdifferentpricesbasedoncostofservicedifferences
d.sellingacertainproductofgivenqualityandcostperunitatdifferentpricestodifferentbuyers
9.Inordertopracticepricediscrimination,whichofthefollowingisneeded?
a.somedegreeofmonopolypower
b.anabilitytoseparatethemarket
c.anabilitytopreventreselling
d.alloftheabove
10.Inpricediscrimination,whichsectionofthemarketischargedthehigherprice?
a.thesectionwiththerichestpeople
b.thesectionwiththeoldestpeople
c.thesectionwiththemostinelasticdemand
d.thesectionwiththemostelasticdemand
Answers:AACCDDBDDC

Economics100Quiz#4,Fall2002
1.Whichofthefollowingconceptsrepresentstheextrarevenueafirmreceivesfromtheservicesofan
additionalunitofafactorofproduction?

a.totalrevenue
b.marginalphysicalproduct
c.marginalrevenusproduct
d.marginalrevenue
2.WorkersQuantityProduced
115
228
339
448
555
660
Thiscompanyisaprofitmaximizingfirmsellinginacompetitiveproductmarketandhiringinacompetitive
labormarket.Itusessemiskilledlabortoproducedampersusedinofficebuildingventilationsystems.
Assumethatthecurrentmarketpriceperdamperis$50andthattheprevailingweeklysalarypersemi
skilledworkeris$550.Thiscompanyshouldemploy______workers.
a.2
b.3
c.4
d.5
e.6
3.Thedemandforlaboristhesameasthe
a.marginalrevenueproduct
b.marginalphysicalproduct
c.marginalcost
d.wage
4.Thedemandforlaborslopesdownandtotherightbecauseof
a.thelawofdemand
b.theironlawofwages
c.thelawofdiminishingmarginalreturns
d.economiesofscale
5.Thedemandforlaborwillbemoreelasticif:
a.therearefewsubstitutesforlabor
b.thereisashorttimeunderconsideration
c.laborisalargepercentofthetotalcostofproduction
d.thedemandfortheproductisrelativelyinelastic
e.alloftheabove
6.Skillsthatcanbetransferredtootheremployersarecalled:
a.generalskills
b.specificskills
c.nonpecuniaryskills
d.alloftheabove
7.Whichskillsaremostlikelytobepaidforbytheemployer?
a.Generalskills
b.Specificskills
c.Educationalskills
8.IfworkerAearnsmoreinwagesthanworkerB,itcouldbebecause:
a.TheproductmadebyworkerAsellsforahigherpricethanthatmadebyworkerB
b.WorkerAusesmorecapitalperworkerthanworkerB
c.WorkerAhasmorenaturalabilitythanworkerB
d.Alloftheabove
9.Skillsthatembodiedinapersonarecalled
a.Humancapital
b.Embodiedskills
c.Physicalcapital
d.Experienceskills
10.Treatinganindividualastypicalofagroupisthedefinitionof
a.purediscrimination
b.statisticaldiscrimination
c.humancapital
d.specificskills
Answers:CBACCABDAB

Economics100Quiz#5,Fall2001
1.Ifthereare50firmsinaindustry,eachselling2%ofthetotalsales,theconcentrationratiois:
a.50%
b.2%
c.100%
d.8%
2.WhenDaimlerBenz,makeroftheMercedes,boughtChrysler,themergerwas
a.horizontal
b.vertical
c.conglomerate
Questions3through10involvethefunctionsofthegovernmentinaworldoflaissezfaire.Thefunctionsare
thefollowing:

A.CreateandEnforcethe"Rules"
B.PromoteorMaintainCompetition
C.ProvideInformation
D.ProvidePublicGoods
E.ReduceNegativeExternalities(ExternalCosts)throughregulationsorthroughtaxes
F.SubsidizePositiveExternalities(ExternalBenefits)
G.ProvideMeritGoods
H.RedistributeIncomeontheBasisofNeed
Foreachofthefollowing,choosetheletterthatbestdescribesthefunctionofgovernment.
3.Thegovernmentprovidesantitrustlaws.
4.Thegovernmentsubsidizesthebuildingofnewstadiumsandarenas.
5.Thegovernmentprovidesformilitarydefense.
6.Thegovernmenthasaprogramofsocialsecuritytoprovideapensionfortheelderly.
7.Thegovernmentrequiresthatallgasolinestationsposttheirpricesinsignslargeenough
tobeseenbyareasonablepersonfromthestreet.
8.Thegovernmentrequirespeopletohaveasmogcontroldeviceintheircars.
9.Thegovernmentmakesthebeachfreeforeveryone
10.Thegovernmentmakeslawsthatdeterminecertainbehaviorsthatacorporationmustengageinandother
behaviorsthatacorporationcannotengagein.
Answers:DABFDHCEGA

Economics100Quiz6,Fall2002
1.Thelargestsourceoftaxrevenueforthefederalgovernmentis:
a.thepersonalincometax
b.thesocialsecuritytax
c.thepropertytax
d.thesalestax
2.Whenmyincomewas$100,000,Ipaid$10,000intaxes.Whenmyincomebecame$200,000,Ipaid$40,000
intaxes.Mymarginaltaxrateis:
a.10%
b.20%
c.30%
d.40%
3.Thetaxisquestion#2is:
a.progressive
b.regressive
c.proportional
4.Whichofthefollowingtaxesisregressive?
a.thefederalincometax
b.thestateincometax
c.thesalestax
d.theMedicaretax
5.Assumethattherearetwogoods,AandB.In1996,Americansproduced10unitsofAatapriceof$10and
20unitsofBatapriceof$20.In2002,Americansproduced20unitsofAatapriceof$20and30unitsofBat
apriceof$30.TheNominalGDPfor2002is:
a.$100
b.$400
c.$500
d.$900
e.$1300
6.Usingthenumbersinquestion5,theRealGDPfor2002is:
a.$400b.$500c.$800d.$900e.$1,300
7.Whichofthefollowingstatementsis/aretrue?
a.BusinessInvestmentSpendingoccurswhenindividualsbuystockinthestockmarket
b.ProductivityistheUnitedStatesgrewveryslowlybetween1973and1996
c.Becauseofdiscouragedworkers,theofficialunemploymentrateistoohigh
d.Fullemploymentoccurswhenthereisnofrictionalunemployment
8.Immediatelyafteratrough,wewouldexpecttohavea/an
a.peak
b.recession
c.recovery
d.anothertrough
9.Lastweek,Marthaspentonedaycleaningahouse.Forthis,shewaspaid$50.Therestoftheweek,she
spentlookingforajob.Marthawouldbeclassifiedas
a.employed
b.unemployed
c.notinthelaborforce
10.JohnlosthisaccountingjobwhenMontgomeryWardscloseditsstoresinSanDiego.Helookedfora

similarjobfortenmonthsbeforefindinganaccountingjobatSears.DuringthemonthJohnwasunemployed,
hewas
a.frictionallyunemployed
b.seasonallyunemployed
c.cyclicallyunemployed
d.structurallyunemployed
Answers:ACACECBCAD

Economics100MakeupforQuiz6
1.Defineaveragetaxrate
Definemarginaltaxrate
2.Defineprogressivetax
Defineregressivetax
Defineproportionaltax
3.Defineindexation
4.DefineNominalGrossDomesticProduct(GDP)
DefineRealGrossDomesticProduct(GDP)
5.Definebusinessinvestmentspending
6.Brieflyexplainhowtheofficialunemploymentrateiscalculated.
7.Definefrictionalunemployment
Definecyclicalunemployment
Definestructuralunemployment
Definefullemployment

Economics100Quiz#7,Fall2002
1.Assumethatthereareonlytwogoods:AandB
Inthebaseyear,QuantityPrice
A10$1
B10$4
Inthecurrentyear,QuantityPrice
A20$5
B25$20
TheConsumerPriceIndex(CPI)forthecurrentyearis:
a.50
b.100
c.200
d.500
e.600
2.Whichofthefollowinggroupsismosthurtbyunexpectedinflation?
a.workerswithcostoflivingadjustmentsintheirlaborcontracts
b.homeowners
c.peoplewithlargedebtstopayfortheirhomesandcars
d.peoplewithlargeretirementsavingsheldinsavingsaccounts
3.Ifthenominalinterestrateis5%andtheinflationrateis2%,therealinterestrateis:
a.2%
b.3%
c.5%
d.7%
e.2%
4.ForwhichofthefollowingreasonsmightinflationcauseRealGDPtogrowslowerthanitotherwisewould?
a.Inflationmakeseveryonepoorer
b.Inflationreducesthevalueofconsumerdebt
c.Inflationincreasesbusinessinvestmentspending
d.Inflationdecreasessavingsinfinancialform
5.DisposableIncomeisequalto:
a.NationalIncomec.NationalIncomeMinusTaxes
b.RealGDP
c.NationalIncomeMinusTaxes
d.NationalIncomeMinusTaxesPlusTransfers
6.AssumethatPotentialRealGDPequals$10,000.NationalIncomeistherefore$10,000.Ofthis,consumers
willpay$2,000intaxes,save$1,000,andspend$7,000onconsumergoods.BusinessInvestmentspendingis
$2000.Inordertoavoidrecessionsandinflation(tohaveequilibrium),thegovernmentshouldhavea:
a.balancedbudget
b.budgetdeficitof$1000
c.budgetsurplusof$1000
d.budgetdeficitof$2000
7.AccordingtoKeynes,whentheGreatDepressionstarted,thegovernmentshouldhave:
a.donenothing
b.decreasedthemoneysupply
c.hadalargeincreaseingovernmentspending
d.enactedhightariffs,suchastheSmootHawleyTariff

8.Ifthegovernmentlowerstaxesby$10billion,theRealGDPwillriseby
a.morethan$10billion
b.lessthan$10billion
c.exactly$10billion
9.Whichofthefollowingisanautomaticstabilizer?
a.unemploymentbenefits
b.spendingoneducation
c.defensespending
d.netinterest
10.Crowdingoutmeansthat
a.agovernmentbudgetdeficitlowersinterestratesandcausesinvestmentspendingtorise
b.anincreaseinmarginaltaxrateslowersproduction
c.agovernmentbudgetdeficitraisesinterestratesandcausesinvestmentspendingtofall
d.agovernmentbudgetdeficitraisesAmericanexportsandlowersAmericanimports
Answers:DDBDDCCAAC

Economics100Quiz8
1.WhichofthefollowingISafunctionofmoney?
a.mediumofexchange
b.storeofvalue
c.unitofaccounting
d.alloftheabove
2.WhichofthefollowingisacomponentofM1?
a.savingsdeposits
b.creditcard
c.checkabledeposits
d.gold
3.WhichofthefollowingisaNOTcomponentofM2?
a.smalltimedeposits
b.moneymarketmutualfunds
c.stocks
d.checkabledeposits
4.WhichofthefollowingistrueabouttheFederalReserveSystem(Fed)?
a.itisasystemof12centralbanks
b.itsBoardofGovernorsiselectedbyavoteofthepeople
c.itsmainpolicymakingbodyistheFDIC
d.itacceptsdepositsfromthepublicandmakesloanstobusinesses
e.alloftheabove
5.AnIOUoftheFederalReserveBankofSanFranciscotoBankofAmericaiscalled:
a.discounts
b.federalfunds
c.reserves
d.collateral
6.Whichofthefollowingisthemostliquid?
a.asavingsaccount
b.a6monthCD
c.ahome
d.water
7.Themonetarybaseiscomposedof:
a.goldandsilver
b.currencyonly
c.currencyandreserves
d.currencyandcheckabledeposits
8.Ifthemonetarybaseisincreasedby$1,000andthereserverequirementis10%(1/10),byhowmuchwill
themoneysupplybeincreased?
a.$100
b.$1,000
c.$5,000
d.$10,000
9.IftheFederalReservewishestoincreasethemoneysupply,itshould:
a.raisethereserverequirement
b.raisethediscountrate
c.buyTreasurysecuritiesintheopenmarket
d.alloftheabove
10.Anincreaseinthemoneysupplywillcauseinterestratesto
a.rise
b.fall
c.remainunchanged
Answers:DCCACACDCB

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