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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.Whichofthe
followingis/areoneofthesequestions?
a.Whatgoodsandservicesaretobeproduced?
b.Howarethegoodsandservicestobeproduced?
c.Whowillgetthegoodsandservicesthatareproduced?
d.Alloftheabove

4.Ifyouwereworkingfulltimenow,youcouldearn$20,000peryear.Instead,youare
workingparttimewhilegoingtoschool.Inyourcurrentparttimejob,youearn$5,000
peryear.Atyourschool,theannualcostoftuition,books,andotherfeesis$2,000.The
opportunitycostofcompletingyoureducationis:
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).You
areallowedtotakeasecondversionofthisquiz.Ifyouscore7ormore,youcanraise
yourscoretoa7(C).Youwillneedtostudyforthesecondversion.Inmakingarational
decisionastowhetherornottoretakethetest,youshould
a.alwaysretakethequiz
b.consideronlythemarginalbenefitsfromofretakingthequiz(fourextrapoints)
c.consideronlythemarginalopportunitycostsfromtakingthequiz(thetimespent
studyingandtakingthequiz)
d.considerboththemarginalbenefitsandthemarginalopportunitycostsofretakingthequiz

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

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d.assupplyrises,thedemandrises

Economics100Quiz#1,Page2

8.Thepriceelasticityofdemandisthe:
a.percentagechangeinquantitydemandeddividedbythepercentagechangeinprice
b.percentagechangeinpricedividedbythepercentagechangeinquantitydemanded
c.dollarchangeinquantitydemandeddividedbythedollarchangeinprice
d.percentagechangeinquantitydemandeddividedbythepercentagechangeinquantitysupplied

9.CommunityCollegesdesiredtoincreaserevenues.Theydecidedtoraisefeespaidby
studentswithBachelorsdegreesto$50perunitbecausetheybelievedthiswouldresult
ingreaterrevenues.Butinreality,totalrevenuesfell.Therefore,thedemandfor
CommunityCollegecoursesbypeoplewithBachelorsdegreesmusthaveactuallybeen:
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

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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,butthisleadstobehaviors
in____________interest.
a.selfself
b.selfsocietys
c.societyssocietys
d.societysself

9.Thelawofdiminishing(marginal)returnsstatesthatasmoreofavariablefactoris
addedtoacertainamountofafixedfactor,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,amonopolycompanywillproducethatquantityatwhich
the:
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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&Ehasbeenregulatedby
thePUC?
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

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Answers:AACCDDBDDC

Economics100Quiz#4,Fall2002
1.Whichofthefollowingconceptsrepresentstheextrarevenueafirmreceivesfromthe
servicesofanadditionalunitofafactorofproduction?
a.totalrevenue
b.marginalphysicalproduct
c.marginalrevenusproduct
d.marginalrevenue

2.WorkersQuantityProduced
115
228
339
448
555
660

Thiscompanyisaprofitmaximizingfirmsellinginacompetitiveproductmarketand
hiringinacompetitivelabormarket.Itusessemiskilledlabortoproducedampersused
inofficebuildingventilationsystems.Assumethatthecurrentmarketpriceperdamper
is$50andthattheprevailingweeklysalarypersemiskilledworkeris$550.This
companyshouldemploy______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?
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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,the
concentrationratiois:
a.50%
b.2%
c.100%
d.8%

2.WhenDaimlerBenz,makeroftheMercedes,boughtChrysler,themergerwas
a.horizontal
b.vertical
c.conglomerate

Questions3through10involvethefunctionsofthegovernmentinaworldoflaissez
faire.Thefunctionsarethefollowing:
A.CreateandEnforcethe"Rules"
B.PromoteorMaintainCompetition
C.ProvideInformation
D.ProvidePublicGoods
E.ReduceNegativeExternalities(ExternalCosts)throughregulationsorthroughtaxes
F.SubsidizePositiveExternalities(ExternalBenefits)
G.ProvideMeritGoods
H.RedistributeIncomeontheBasisofNeed

Foreachofthefollowing,choosetheletterthatbestdescribesthefunctionof
government.

3.Thegovernmentprovidesantitrustlaws.

4.Thegovernmentsubsidizesthebuildingofnewstadiumsandarenas.
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5.Thegovernmentprovidesformilitarydefense.

6.Thegovernmenthasaprogramofsocialsecuritytoprovideapensionfortheelderly.

7.Thegovernmentrequiresthatallgasolinestationsposttheirpricesinsignslarge
enough
tobeseenbyareasonablepersonfromthestreet.

8.Thegovernmentrequirespeopletohaveasmogcontroldeviceintheircars.

9.Thegovernmentmakesthebeachfreeforeveryone

10.Thegovernmentmakeslawsthatdeterminecertainbehaviorsthatacorporation
mustengageinandotherbehaviorsthatacorporationcannotengagein.

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$40,000intaxes.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,Americansproduced10unitsofA
atapriceof$10and20unitsofBatapriceof$20.In2002,Americansproduced20
unitsofAatapriceof$20and30unitsofBatapriceof$30.TheNominalGDPfor2002
is:
a.$100
b.$400
c.$500
d.$900
e.$1300

6.Usingthenumbersinquestion5,theRealGDPfor2002is:
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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.The
restoftheweek,shespentlookingforajob.Marthawouldbeclassifiedas
a.employed
b.unemployed
c.notinthelaborforce

10.JohnlosthisaccountingjobwhenMontgomeryWardscloseditsstoresinSanDiego.
HelookedforasimilarjobfortenmonthsbeforefindinganaccountingjobatSears.
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

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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%,therealinterestrate
is:
a.2%
b.3%
c.5%
d.7%
e.2%

4.ForwhichofthefollowingreasonsmightinflationcauseRealGDPtogrowslowerthan
itotherwisewould?
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,consumerswillpay$2,000intaxes,save$1,000,andspend$7,000onconsumer
goods.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
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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
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b.a6monthCD
c.ahome
d.water

7.Themonetarybaseiscomposedof:
a.goldandsilver
b.currencyonly
c.currencyandreserves
d.currencyandcheckabledeposits

8.Ifthemonetarybaseisincreasedby$1,000andthereserverequirementis10%
(1/10),byhowmuchwillthemoneysupplybeincreased?
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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