Economics And Business Quiz

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Economics And Business Quiz - Quiz

In business today, one has to have adequate knowledge of economics and how it affects businesses and their activities. There are some factors within the economy to watch out for if you have a business such as interest rates, wages, and inflation. The quiz below is designed to help see how much you understand the connection. Give it a try!


Questions and Answers
  • 1. 

    Which of the following would be a topic emphasized in a microeconomics class?

    • A.

      How a nation's GDP is computed

    • B.

      The reason's why the unemployment rate for the economy is rising or falling

    • C.

      How market conditions determine the price of a specific product

    • D.

      How the government can use fiscal and monetary policies to stabilize the economy

    Correct Answer
    C. How market conditions determine the price of a specific product
    Explanation
    A microeconomics class focuses on individual economic units such as households, firms, and markets. It analyzes how market conditions, such as supply and demand, determine the price of a specific product. This topic is relevant to microeconomics as it explores the interactions between buyers and sellers in a specific market, which is a fundamental concept in understanding how markets function at a smaller scale.

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  • 2. 

    For many years, Congressman Reggie Lader has called for more government regulation of business. "After all," the Congressman said recently, "business people are out to make a profit, not to create jobs or serve their customers. The government must pass more laws to require business to take the interests of consumers and workers into account." From these comments, it is clear that Congressman Lader:

    • A.

      Agrees with the ideas of Thomas Malthus

    • B.

      Does not accept the philosophy behind Adam Smith's invisible hand

    • C.

      Is unaware of the fact that most businesses in the United States are actually owned by the government

    • D.

      Does not realize that government regulation is already the main determinatinant of business decisions in capital economies

    Correct Answer
    B. Does not accept the philosophy behind Adam Smith's invisible hand
    Explanation
    The explanation for the correct answer is that Congressman Lader's statement about the need for more government regulation of business shows that he does not accept the philosophy behind Adam Smith's invisible hand. The invisible hand refers to the idea that in a free market, individuals pursuing their own self-interests will unintentionally benefit society as a whole. However, Congressman Lader believes that businesses are solely focused on making a profit and therefore need government intervention to consider the interests of consumers and workers. This contradicts the belief in the invisible hand and suggests a different perspective on the role of government in regulating business.

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  • 3. 

    When the supply curve and demand curve for a particular good are on a single graph, the point at which the two curves intersect identifies the:

    • A.

      Total profit earned by producers

    • B.

      Total amount of labor that will be employed in the market

    • C.

      Amount of time it takes to bring together the buyers and sellers of the good

    • D.

      Equilibrium price of the good

    Correct Answer
    D. Equilibrium price of the good
    Explanation
    The point at which the supply curve and demand curve intersect on a graph represents the equilibrium price of the good. This is the price at which the quantity demanded by consumers matches the quantity supplied by producers. At this price, there is no shortage or surplus of the good in the market, and both buyers and sellers are satisfied.

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  • 4. 

    In most large cities there are a large number of bakeries. These bakeries produce similar, but not identical, products. Some bakeries claim to have the best cheesecakes in town, while others brag about their cookies or specialty breads. The bakery market in a large city is an example of:

    • A.

      Monopolistic competition

    • B.

      Perfect competition

    • C.

      An oligopoly

    • D.

      A monopoly

    Correct Answer
    A. Monopolistic competition
    Explanation
    The bakery market in a large city is an example of monopolistic competition. This is because there are a large number of bakeries producing similar but not identical products. Each bakery has some degree of control over the price and quality of its products, as well as some level of product differentiation. The bakeries compete with each other based on factors such as taste, variety, and customer service, creating a competitive market structure where each bakery has some market power but faces competition from others.

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  • 5. 

    Which of the following people would tend to favor a socialist economy?

    • A.

      John wants to live in a country with low marginal tax rates

    • B.

      Robin wants to live in a country that encourages rapid economic growth

    • C.

      Liz wants to live in a country with limited government regulation

    • D.

      Fred prefers to live in a country that promotes social equality

    Correct Answer
    D. Fred prefers to live in a country that promotes social equality
    Explanation
    Fred's preference for living in a country that promotes social equality suggests that he would tend to favor a socialist economy. Socialism aims to reduce income and wealth inequalities by advocating for the redistribution of resources and promoting social welfare programs. Fred's desire for social equality aligns with the principles of socialism, which prioritize the well-being of the entire society over individual wealth accumulation.

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  • 6. 

    A command system is characterized by:

    • A.

      Reliance on the forces of supply and demand to determine what is produced

    • B.

      Reliance on the government to determine what is produced and who gets the output

    • C.

      An extremely rapid rate of economic growth

    • D.

      Freedom of choice and freedom of competition

    Correct Answer
    B. Reliance on the government to determine what is produced and who gets the output
    Explanation
    A command system is characterized by reliance on the government to determine what is produced and who gets the output. In a command system, the government has control over the allocation of resources and makes decisions on production and distribution. This means that the government decides what goods and services are produced and how they are distributed among the population. This is in contrast to a market system, where supply and demand determine production and distribution. In a command system, individual choice and competition are limited as the government dictates economic decisions.

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  • 7. 

    The total value of final goods and services produced within a nation's borders in a given year is known as the nation's:

    • A.

      Aggregate production quota

    • B.

      Aggregate domestic output

    • C.

      Index of aggregate economic output

    • D.

      Gross domestic product

    Correct Answer
    D. Gross domestic product
    Explanation
    Gross domestic product (GDP) is the correct answer because it represents the total value of all final goods and services produced within a nation's borders in a given year. It is a measure of the economic output of a country and is used to gauge the overall health and growth of the economy. The other options, such as aggregate production quota, aggregate domestic output, and index of aggregate economic output, do not accurately describe the concept of GDP.

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  • 8. 

    John complained to his buddy, Frank, that the prices of all the goods he and his family buy have increased a lot over the past year. Frank disagreed, saying that the prices of some goods have gone up a bit, but other prices have declined. Frank feels that the average price of consumer goods hasn't changed very much. In order to resolve their disagreement, John and Frank should look at recent figures for the:

    • A.

      GDP

    • B.

      CPI

    • C.

      PPI

    • D.

      MEW

    Correct Answer
    B. CPI
    Explanation
    John and Frank are discussing the prices of consumer goods. To resolve their disagreement, they should look at recent figures for the Consumer Price Index (CPI). The CPI measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. By examining the CPI, John and Frank can determine whether the overall prices of the goods they buy have increased or remained relatively stable.

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  • 9. 

    The Federal Reserve System operates:

    • A.

      As a semi-private organization not under the direct control of the government

    • B.

      Under the direct control of the executive branch of the government

    • C.

      Under the direction of the Banking Oversight Committee of Congress

    • D.

      As a special agency of the U.S. Treasury

    Correct Answer
    A. As a semi-private organization not under the direct control of the government
    Explanation
    The Federal Reserve System operates as a semi-private organization not under the direct control of the government. This means that while it is not entirely independent from government influence, it also has some degree of autonomy. The Federal Reserve System is composed of both public and private elements, with its decision-making body, the Federal Open Market Committee, consisting of both government officials and representatives from private banks. This structure allows for a balance between government oversight and independence in carrying out its responsibilities, such as controlling monetary policy and regulating the banking system.

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  • 10. 

    Senator Bud Jette is alarmed at the state of the economy. Unemployment is high and GDP is low. Senator Jette has called for Congress to take decisive action to increase its expenditures and cut takes in order to stimulate the economy. The actions called for by Senator Jette are examples of the government's use of:

    • A.

      Monetary policy

    • B.

      Fiscal policy

    • C.

      Incomes policy

    • D.

      Social investment policy

    Correct Answer
    B. Fiscal policy
    Explanation
    The actions called for by Senator Jette, such as increasing government expenditures and cutting taxes, are examples of fiscal policy. Fiscal policy refers to the government's use of taxation and spending to influence the overall economy. In this case, Senator Jette is advocating for the government to use its spending power and tax policies to stimulate the economy by increasing demand and encouraging economic growth.

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  • Current Version
  • Dec 18, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Oct 18, 2009
    Quiz Created by
    Nksandoval
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