Econ Final Part 1
(37).webp "Econ Final Part 1 - Quiz")
part 1
Questions and Answers
- 1.
Economic growth causes the production possibilities curve to
- A.
Shit inward
- B.
Shit outward
- C.
Remain constant
- D.
Become a straight line
Correct Answer
B. Shit outwardExplanation
Economic growth causes the production possibilities curve to shift outward. This is because economic growth leads to an increase in the quantity and quality of resources available for production, technological advancements, and improved efficiency. As a result, the economy is able to produce more goods and services, expanding the production possibilities and shifting the curve outward.Rate this question:
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- 2.
All societies must ration because
- A.
Demand curves slope downwards
- B.
Scarcity exists in all societies
- C.
Government requires it
- D.
Without rationing, production would be limited
Correct Answer
B. Scarcity exists in all societiesExplanation
Scarcity exists in all societies, which means that resources are limited compared to the unlimited wants and needs of individuals. This scarcity necessitates rationing, as it ensures that resources are distributed fairly and efficiently among the members of society. Without rationing, there would be an imbalance in resource allocation, leading to inefficiencies and potential conflicts. Therefore, rationing is a fundamental aspect of any society to address the inherent scarcity of resources.Rate this question:
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- 3.
An advance in technology
- A.
Causes a rightward shift in the supply curve
- B.
Causes a leftward shift in the supply curve
- C.
Has no effect on the supply curve
- D.
Causes scarcity to no longer be a problem
Correct Answer
A. Causes a rightward shift in the supply curveExplanation
An advance in technology causes a rightward shift in the supply curve because it allows producers to increase their output at a lower cost. This means that they can supply more goods or services at each price level, leading to an increase in the quantity supplied at every price. As a result, the supply curve shifts to the right, indicating a greater quantity supplied at each price point.Rate this question:
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- 4.
If the demand curve shifts leftward
- A.
Quantity demanded is less at each price
- B.
Quantity demanded is greater at each price
- C.
Quantity is unchanged
- D.
None of the above
Correct Answer
A. Quantity demanded is less at each priceExplanation
When the demand curve shifts leftward, it means that there is a decrease in demand for the product or service. This indicates that consumers are willing to buy less of the product at each price level. Therefore, the quantity demanded is less at each price.Rate this question:
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- 5.
If Jackie's demand for jewelry rises as her income falls, then jewelry is a
- A.
Special good
- B.
Normal good
- C.
Neutral good
- D.
Inferior good
Correct Answer
D. Inferior goodExplanation
If Jackie's demand for jewelry rises as her income falls, it suggests that jewelry is an inferior good. This means that as Jackie's income decreases, she is more likely to purchase more jewelry. Inferior goods are typically lower-quality or less expensive alternatives to other goods, and people tend to buy more of them when their income decreases. This behavior can be explained by the income effect, where individuals substitute cheaper goods for more expensive ones when their purchasing power decreases.Rate this question:
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- 6.
As the price of good X rises, the demand for good Y falls. The goods are
- A.
Substitutes
- B.
Normal goods
- C.
Complements
- D.
Inferior goods
Correct Answer
C. ComplementsExplanation
When the price of good X increases, the demand for good Y decreases. This indicates that the two goods are complements. Complementary goods are those that are typically consumed together, meaning that an increase in the price of one good leads to a decrease in the demand for the other. In this case, the increase in the price of good X causes consumers to reduce their demand for good Y, suggesting that the two goods are complements.Rate this question:
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- 7.
Which of the following business organizations has an advantage in raising large sums of capital?
- A.
Partnership
- B.
Proprietorship
- C.
Corporation
- D.
Nonprofit corporation
Correct Answer
C. CorporationExplanation
Corporations have an advantage in raising large sums of capital because they can issue stocks and bonds to investors. This allows them to attract a larger number of investors and raise significant amounts of money. In contrast, partnerships and proprietorships usually rely on personal savings or loans from banks, which may limit their ability to raise substantial capital. Nonprofit corporations, although they can receive donations, are generally not focused on raising large sums of capital for profit-making purposes.Rate this question:
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- 8.
An agreement to pay periodic interest and a principal sum later is called
- A.
A bond
- B.
A stock
- C.
A future
- D.
A derivative
Correct Answer
A. A bondExplanation
A bond is an agreement between a borrower and a lender where the borrower agrees to pay periodic interest payments and repay the principal amount at a later date. This makes it the correct answer as it accurately describes the nature of a bond. Stocks represent ownership in a company, futures are contracts to buy or sell assets at a specified price in the future, and derivatives are financial instruments whose value is derived from an underlying asset.Rate this question:
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- 9.
Which of the following statements is true
- A.
A corporation is a legal entity separate from the owners
- B.
Corporate profits are taxed only once
- C.
Owners have unlimited liability
- D.
Corporations cannot sell bonds
Correct Answer
A. A corporation is a legal entity separate from the ownersExplanation
A corporation is a legal entity separate from the owners because it is formed under the law and has its own legal rights and obligations. This means that the corporation can enter into contracts, sue or be sued, and own property in its own name. The owners, also known as shareholders, have limited liability, meaning their personal assets are protected from the debts and liabilities of the corporation. This separation between the corporation and its owners allows for continuity of the business even if the owners change or pass away.Rate this question:
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- 10.
The law of marginal utility says
- A.
Total utility normall falls
- B.
Marginal utility falls as more units are consumed
- C.
Marginal utility usually stays constant
- D.
None of the above
Correct Answer
B. Marginal utility falls as more units are consumedExplanation
The law of marginal utility states that as more units of a good or service are consumed, the additional satisfaction or utility gained from each additional unit decreases. This means that the marginal utility falls as more units are consumed. As individuals consume more of a good or service, the initial satisfaction they derive from each unit diminishes, leading to a decrease in marginal utility. Therefore, the correct answer is "marginal utility falls as more units are consumed."Rate this question:
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- 11.
Which of the following is true
- A.
It is possible for total utility to rise as marginal utility falls
- B.
Marginal utility is the same as total utility
- C.
Marginal utility usually remains constant
- D.
The marginal utility of water is usually high
Correct Answer
A. It is possible for total utility to rise as marginal utility fallsExplanation
It is possible for total utility to rise as marginal utility falls because total utility is the sum of all units of utility derived from consuming a good or service, while marginal utility refers to the additional utility gained from consuming an additional unit of the good or service. Initially, as more units are consumed, marginal utility tends to decrease due to the law of diminishing marginal utility. However, total utility can still increase if the decrease in marginal utility is offset by the increase in the quantity consumed. This means that although each additional unit provides less satisfaction, the overall satisfaction can still increase with more units consumed.Rate this question:
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- 12.
Because there are so few diamonds in the world, the consumption of diamonds
- A.
Takes priority over the consumption of water
- B.
Takes place at high marginal utility
- C.
Takes place at low marginal utility
- D.
Is more important than the consumption of water
Correct Answer
B. Takes place at high marginal utilityExplanation
The correct answer is "takes place at high marginal utility". This means that the consumption of diamonds is valued more and provides greater satisfaction or benefit compared to the consumption of water. It suggests that diamonds are considered more valuable and desired, leading to a higher level of utility or satisfaction when consumed.Rate this question:
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- 13.
A fall in the price of a good leads to
- A.
A rise in real income
- B.
A fall in real income
- C.
A negative substitution effect for the good
- D.
A negative income effect for the good
Correct Answer
A. A rise in real incomeExplanation
A fall in the price of a good leads to a rise in real income because when the price of a good decreases, consumers can purchase more of that good with their given income. This increase in purchasing power allows consumers to afford a greater quantity of the good, resulting in a rise in their real income.Rate this question:
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- 14.
The price elasticity of demand is highest for
- A.
Bread
- B.
Rice
- C.
Soft drinks
- D.
Pepsi-Cola
Correct Answer
D. Pepsi-ColaExplanation
The price elasticity of demand measures the responsiveness of the quantity demanded to a change in price. A higher price elasticity of demand indicates that a small change in price leads to a larger change in quantity demanded. In this case, Pepsi-Cola is the correct answer because it is a specific brand of soft drink. Soft drinks, in general, have a relatively high price elasticity of demand as they are non-essential items with many substitutes available. Pepsi-Cola, being a specific brand, may have an even higher price elasticity of demand compared to other soft drinks, as consumers may easily switch to other brands or alternatives.Rate this question:
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- 15.
Price elasticity of demand measures responsiveness of quantity to
- A.
Interest rate changes
- B.
Changes in income
- C.
Price changes
- D.
Supply changes
Correct Answer
C. Price changesExplanation
Price elasticity of demand measures the responsiveness or sensitivity of the quantity demanded of a product to changes in its price. It helps determine how much the quantity demanded will change in response to a change in price. A high price elasticity of demand indicates that a small change in price will result in a significant change in quantity demanded, indicating a more elastic demand. Conversely, a low price elasticity of demand suggests that changes in price will have minimal impact on the quantity demanded, indicating a more inelastic demand.Rate this question:
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- 16.
If quantity demanded is completely unresponsive to changes in price, demand is
- A.
Inelastic
- B.
Unit elastic
- C.
Elastic
- D.
Perfectly inelastic
Correct Answer
D. Perfectly inelasticExplanation
If the quantity demanded is completely unresponsive to changes in price, it means that no matter how much the price changes, the demand remains the same. This indicates a perfectly inelastic demand, where the quantity demanded does not change at all in response to price fluctuations. In other words, the demand is completely rigid and unaffected by price changes.Rate this question:
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- 17.
Because of a price ceiling, the quantity demanded for gasoline exceeds the quantity supplied. If the gas station owner decides to let customers line up to buy, this would be an example of
- A.
A surplus
- B.
Cutthroat competition
- C.
A black market
- D.
A nonprice rationing method
Correct Answer
D. A nonprice rationing methodExplanation
If the gas station owner decides to let customers line up to buy, this would be an example of a nonprice rationing method. This means that instead of increasing the price to meet the excess demand caused by the price ceiling, the gas station owner is using a different method to allocate the limited supply of gasoline. By allowing customers to line up, the gas station owner is rationing the available gasoline based on a first-come, first-served basis, rather than using price as the determining factor.Rate this question:
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- 18.
An effect of a price floor is
- A.
A surplus
- B.
A shortage
- C.
More satisfied customers
- D.
Higher quality of goods
Correct Answer
A. A surplusExplanation
A price floor is a government-imposed minimum price that is set above the equilibrium price in a market. This means that the price cannot fall below this minimum level. The effect of a price floor is that it creates a surplus, as the quantity supplied exceeds the quantity demanded at the higher price. This surplus occurs because suppliers are willing to supply more goods at the higher price, but consumers are not willing to purchase as much at the higher price. Therefore, there is an excess supply in the market, resulting in a surplus.Rate this question:
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- 19.
A legal minimum wage is an example of
- A.
A price ceiling
- B.
A price floor
- C.
Criminal politics at work
- D.
A price cushion
Correct Answer
B. A price floorExplanation
A legal minimum wage is an example of a price floor. A price floor is a government-imposed minimum price that cannot be legally undercut. In the case of a minimum wage, it sets a floor on the wage rate that employers are required to pay their workers. This ensures that workers receive a certain level of income and are protected from exploitation. By setting a minimum wage, the government aims to improve the standard of living for workers and reduce income inequality.Rate this question:
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- 20.
At a price floor above equilibrium price
- A.
A shortage will result
- B.
Fewer goods will be exchanged in the market
- C.
More goods will be exchanged in the market
- D.
None of the above
Correct Answer
B. Fewer goods will be exchanged in the marketExplanation
At a price floor above the equilibrium price, fewer goods will be exchanged in the market. This is because the price floor sets a minimum price that is higher than the equilibrium price, causing suppliers to increase their prices. As a result, the quantity demanded decreases while the quantity supplied increases. This creates a surplus, leading to a decrease in the quantity of goods exchanged in the market.Rate this question:
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