Practice Quiz For Economics Honors Students
I created this quiz to practice for my economics honors final.
Pretty lame i know.
- 1.
A market:
- A.
Entails the exchange of goods, but not services.
- B.
Is an institution that brings together buyers and sellers.
- C.
Reflects upsloping demand and downsloping supply curves.
- D.
Always requires face-to-face contact between buyer and seller.
Correct Answer
B. Is an institution that brings together buyers and sellers.Explanation
This answer is correct because a market is indeed an institution that brings together buyers and sellers. In a market, buyers and sellers interact and exchange goods or services. This can happen in various forms such as physical marketplaces, online platforms, or even through intermediaries. The concept of a market is not limited to the exchange of goods only, as it can also involve the trading of services. Therefore, the statement that a market entails the exchange of goods, but not services, is incorrect.Rate this question:
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- 2.
Graphically, the market demand curve is:
- A.
Greater than the sum of the individual demand curves.
- B.
Steeper than any individual demand curve that is part of it.
- C.
The horizontal sum of individual demand curves.
- D.
The vertical sum of individual demand curves.
Correct Answer
C. The horizontal sum of individual demand curves.Explanation
The market demand curve represents the total quantity of a good or service that all consumers in the market are willing and able to purchase at different prices. It is derived by horizontally summing the individual demand curves of all consumers in the market. This is because at each price, the quantity demanded by each individual consumer is added together to determine the total quantity demanded by all consumers. Therefore, the correct answer is that the market demand curve is the horizontal sum of individual demand curves.Rate this question:
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- 3.
The demand curve shows the relationship between:
- A.
Money income and quantity demanded.
- B.
Price and production costs.
- C.
Price and quantity demanded.
- D.
Consumer tastes and the quantity demanded.
Correct Answer
C. Price and quantity demanded.Explanation
The demand curve shows the relationship between price and quantity demanded. It illustrates how the quantity of a good or service that consumers are willing and able to purchase changes as the price of the good or service changes. As the price decreases, the quantity demanded generally increases, and vice versa. This relationship is depicted by a downward-sloping demand curve. The demand curve does not represent the relationship between money income and quantity demanded, price and production costs, or consumer tastes and quantity demanded.Rate this question:
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- 4.
A decrease in demand is depicted by a:
- A.
Move from point x to point y.
- B.
Shift from D1 to D2
- C.
Shift from D2 to D1
- D.
Move from point y to point x
Correct Answer
C. Shift from D2 to D1Explanation
A decrease in demand is depicted by a shift from D2 to D1. This means that the demand for a particular product or service has decreased, causing a shift in the demand curve from D2 to D1. This shift indicates that consumers are now willing to purchase less of the product at each price level, leading to a decrease in overall demand.Rate this question:
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- 5.
A decrease in quantity demanded (as distinct from a decrease in demand) is depicted by a:
- A.
Move from point x to point y.
- B.
Shift from D1 to D2.
- C.
Shift from D2 to D1.
- D.
Move from point y to point x.
Correct Answer
D. Move from point y to point x.Explanation
A decrease in quantity demanded refers to a movement along the demand curve, caused by a change in price. When there is a decrease in quantity demanded, it means that consumers are willing to buy less of a product at a given price. This is depicted by a movement from point y to point x along the demand curve. It does not involve a shift in the entire demand curve, as that would indicate a change in demand, not quantity demanded.Rate this question:
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- 6.
A recent study found that an increase in the Federal tax on beer (and thus an increase in the price of beer) would reduce the demand for marijuana. We can conclude that:
- A.
Beer & marijuana are substitute goods.
- B.
Beer & marijuana are complimentary goods.
- C.
Beer is an inferior good.
- D.
Marijuana is an inferior good.
Correct Answer
B. Beer & marijuana are complimentary goods.Explanation
The study found that an increase in the price of beer (due to the increase in the Federal tax) would reduce the demand for marijuana. This suggests that beer and marijuana are complimentary goods, meaning that they are consumed together. When the price of beer increases, people are less likely to purchase both beer and marijuana, indicating a complementary relationship between the two goods.Rate this question:
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- 7.
Which of the following will not cause the demand for the product K to change?
- A.
A change in the price of close-substitute product J
- B.
An increase in consumer income
- C.
A change in the price of K
- D.
A change in consumer tastes
Correct Answer
C. A change in the price of KExplanation
A change in the price of product K will not cause the demand for the product to change because a change in price only affects the quantity demanded, not the overall demand. Demand is determined by factors such as consumer income, prices of substitute products, and consumer tastes. Therefore, a change in the price of K will not directly impact the demand for the product.Rate this question:
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- 8.
Which of the following would not shift the demand curve for beef?
- A.
A widely publicized study that indicates beef increases one's cholesterol
- B.
A reduction in the price of cattle feed
- C.
An effective advertising campaign by pork producers
- D.
A change in the incomes of beef consumers
Correct Answer
B. A reduction in the price of cattle feedExplanation
A reduction in the price of cattle feed would not shift the demand curve for beef because it is a factor that affects the supply of beef, not the demand. The demand curve for beef is determined by factors such as consumer preferences, income, and the prices of substitute goods. A reduction in the price of cattle feed would lower the cost of production for beef, leading to an increase in the supply of beef, but it would not directly affect the demand for beef.Rate this question:
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- 9.
In 2003 the price of oil increased, which in turn caused the demand of natural gas to rise. This can best be explained by saying that oil and natural gas are:
- A.
Complementary goods and the higher price for oil increased the demand for natural gas.
- B.
Substitute goods and the higher price for oil increased the demand for natural gas.
- C.
Complementary goods and the higher price for oil increased the demand for natural gas.
- D.
Substitute goods and the higher price for oil decreased the supply of natural gas.
Correct Answer
B. Substitute goods and the higher price for oil increased the demand for natural gas.Explanation
The increase in the price of oil suggests that consumers may have found it more expensive to use oil as an energy source. As a result, they may have turned to natural gas as a substitute, leading to an increase in the demand for natural gas. Therefore, oil and natural gas are considered substitute goods in this scenario.Rate this question:
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- 10.
An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction is based on the assumption that:
- A.
There are many goods that are substitutes for bicycles.
- B.
There are many goods that are complimentary to bicycles.
- C.
There are few goods that are substitutes for bicycles.
- D.
Bicycles are normal goods.
Correct Answer
D. Bicycles are normal goods.Explanation
The economist's prediction that a rise in consumer incomes will increase the demand for bicycles is based on the assumption that bicycles are normal goods. Normal goods are those whose demand increases as consumer incomes rise, as people have more disposable income to spend on these goods. This assumption implies that bicycles are not inferior goods, which are goods whose demand decreases as consumer incomes rise. Therefore, the economist believes that bicycles are a normal good and that an increase in consumer incomes will lead to an increase in demand for bicycles.Rate this question:
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- 11.
A rightward shift in the demand curve for product C might be caused by:
- A.
An increase in income if C is an inferior good.
- B.
A decrease in income if C is a normal good.
- C.
A decrease in the price of a product that is a close substitute for C.
- D.
A decrease in the price of a product that is complimentary to C.
Correct Answer
D. A decrease in the price of a product that is complimentary to C.Explanation
A decrease in the price of a product that is complementary to C would cause a rightward shift in the demand curve for product C. Complementary goods are products that are typically consumed together, so when the price of a complementary good decreases, it becomes more affordable and encourages consumers to purchase more of both products. This increased demand for the complementary good would lead to an increased demand for product C as well, resulting in a rightward shift in its demand curve.Rate this question:
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- 12.
If the two goods are complements:
- A.
They are consumed independently.
- B.
An increase in the price of one will increase the demand for the other.
- C.
A decrease in the price of one will increase the demand for the other.
- D.
They are necessarily inferior goods.
Correct Answer
C. A decrease in the price of one will increase the demand for the other.Explanation
If two goods are complements, it means that they are consumed together or used in conjunction with each other. In this case, a decrease in the price of one good will increase the demand for the other good. This is because when the price of one complement decreases, consumers are more likely to purchase more of that good, which in turn increases the demand for the other complement. For example, if the price of hot dog buns decreases, people are more likely to buy more hot dogs, increasing the demand for hot dogs.Rate this question:
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- 13.
DVD players and DVDs are:
- A.
Complimentary goods.
- B.
Substitute goods.
- C.
Independent goods.
- D.
Inferior goods.
Correct Answer
A. Complimentary goods.Explanation
DVD players and DVDs are considered complimentary goods because they are products that are typically used together. DVD players are used to play DVDs, and DVDs are the content that is played on DVD players. The demand for DVD players and DVDs is interrelated, as the purchase of one product often leads to the purchase of the other. Therefore, they are considered complimentary goods.Rate this question:
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- 14.
If the demand curve for product B shifts to the right as the price of product A declines, then:
- A.
Both A and B are inferior goods.
- B.
A is a superior good and B is an inferior good.
- C.
A is an inferior good and B is a superior good.
- D.
A and B are complementary goods.
Correct Answer
D. A and B are complementary goods.Explanation
If the demand curve for product B shifts to the right as the price of product A declines, it implies that the two products are complementary goods. Complementary goods are those that are typically consumed together, so when the price of one decreases, the demand for the other increases. In this case, as the price of product A declines, the demand for product B increases, indicating that they are complementary goods.Rate this question:
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- 15.
If the price of product L increases, the demand curve for close-substitute product J will:
- A.
Shift downward toward the horizontal axis.
- B.
Shift to the left.
- C.
Shift to the right.
- D.
Remain unchanged.
Correct Answer
C. Shift to the right.Explanation
When the price of product L increases, it becomes relatively more expensive compared to its close substitute, product J. This leads consumers to switch their preference from product L to product J, resulting in an increase in demand for product J. Therefore, the demand curve for close-substitute product J will shift to the right.Rate this question:
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- 16.
Which of the following is most likely to be an inferior good?
- A.
Fur coats
- B.
Ocean cruises
- C.
Used clothing
- D.
Steak
Correct Answer
C. Used clothingExplanation
Used clothing is most likely to be an inferior good because as people's income increases, they tend to purchase new clothing rather than used clothing. This is because used clothing is often seen as lower quality or less desirable compared to new clothing. As people's income rises, they have the ability to afford higher quality or more fashionable clothing, making used clothing a less preferred option.Rate this question:
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- 17.
Cameras and film are:
- A.
Substitute goods.
- B.
Complementary goods.
- C.
Independent goods.
- D.
Inferior goods.
Correct Answer
B. Complementary goods.Explanation
Cameras and film are considered complementary goods because they are typically used together. Cameras require film to capture images, and film requires cameras to be developed. The demand for one good (cameras) is directly related to the demand for the other good (film), as they are used in conjunction with each other. Therefore, an increase in the demand for cameras would lead to an increase in the demand for film, and vice versa.Rate this question:
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- 18.
A decrease in the price of cameras will:
- A.
Cause the demand curve for film to become vertical.
- B.
Shift the demand curve for film to the right.
- C.
Shift the demand curve for film to the left.
- D.
Not affect the demand for film.
Correct Answer
B. Shift the demand curve for film to the right.Explanation
A decrease in the price of cameras will shift the demand curve for film to the right. This is because a lower price for cameras will make them more affordable for consumers, leading to an increase in the demand for cameras. As a result, the demand for film, which is complementary to cameras, will also increase. This shift in the demand curve for film to the right indicates that at any given price, consumers are willing to buy a larger quantity of film.Rate this question:
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- 19.
A normal good is one:
- A.
Whose amount demanded will increase if its price decreases.
- B.
Whose amount demanded will increase if its price increases.
- C.
Whose demand curve will shirt leftward as incomes rise.
- D.
The consumption of which varies directly with incomes.
Correct Answer
D. The consumption of which varies directly with incomes.Explanation
A normal good is a type of good where the amount demanded increases as incomes rise. This means that as people's incomes increase, they are able to afford more of the normal good and therefore consume more of it. The consumption of a normal good varies directly with incomes, meaning that as incomes increase, so does the consumption of the good.Rate this question:
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- 20.
Assume the demand curve for product X shifts to the right. This might be caused by:
- A.
A decline in income if X is an inferior good.
- B.
A decline in the price of Z if X and Z are substitute goods.
- C.
A change in consumer tastes that is unfavorable to X.
- D.
An increase in the price of Y if X and Y are complimentary goods.
Correct Answer
A. A decline in income if X is an inferior good.Explanation
If the demand curve for product X shifts to the right, it implies that more people are willing and able to purchase the product at each price level. This could be caused by a decline in income if X is an inferior good. Inferior goods are those for which demand decreases as consumer income increases. When income declines, consumers may switch from purchasing higher-priced goods to lower-priced goods, causing the demand for inferior goods like X to increase. Therefore, a decline in income would be a plausible explanation for the rightward shift in the demand curve for product X.Rate this question:
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- 21.
A PPC might be shifted outward by each of the following EXCEPT:
- A.
Increase in immigration
- B.
Advancements made in Information Management Systems
- C.
Decrease in unemployment
- D.
Increase in educational levels of the general population
Correct Answer
B. Advancements made in Information Management SystemsExplanation
Advancements made in Information Management Systems would not cause a shift outward in a PPC (Production Possibility Curve). A shift outward in a PPC represents an increase in the economy's productive capacity. The factors that can cause this shift include an increase in immigration, a decrease in unemployment, and an increase in educational levels of the general population. However, advancements in Information Management Systems do not directly contribute to an increase in the economy's productive capacity, so they would not cause a shift outward in a PPC.Rate this question:
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- 22.
A production possibility frontier that is represented by a straight line rather than the usual bowed shape would indicate:
- A.
Increasing opportunity cost
- B.
Decreasing opportunity cost
- C.
Constant opportunity cost
- D.
Absolute and comparative advantage
- E.
Comparative but not absolute advantage
Correct Answer
C. Constant opportunity costExplanation
If a production possibility frontier is represented by a straight line instead of the usual bowed shape, it indicates constant opportunity cost. This means that the resources used to produce one good can be easily and efficiently switched to produce another good without any increase or decrease in the opportunity cost. In other words, the trade-off between producing one good and another remains the same throughout the production process.Rate this question:
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- 23.
What is the fundamental problem of economics?
- A.
Scarcity
- B.
Capital
- C.
The factors of production
- D.
Labor
Correct Answer
A. ScarcityExplanation
The fundamental problem of economics is scarcity. Scarcity refers to the limited availability of resources in relation to unlimited wants and needs. This means that there are not enough resources to satisfy all human wants and needs. As a result, individuals, businesses, and societies must make choices about how to allocate their scarce resources in the most efficient and effective way. Scarcity is at the core of economic decision-making and the study of how individuals and societies allocate resources to fulfill their needs and wants.Rate this question:
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- 24.
Suppose you are eating a steak at a restaurant. What is the opportunity cost to you of the steak meal?
- A.
The price of the steak, drinks & tip.
- B.
The cost of dressing up and transportation to the restaurant
- C.
The lost opportunity to have chicken instead.
- D.
All the above are opportunity costs of the steak dinner
- E.
None of the above is an opportunity cost of the steak dinner
Correct Answer
C. The lost opportunity to have chicken instead.Explanation
The opportunity cost of the steak meal is the lost opportunity to have chicken instead. This means that by choosing to eat the steak, you are giving up the chance to have chicken. The other options mentioned, such as the price of the steak, drinks, tip, and the cost of dressing up and transportation, may be considered costs associated with the meal, but they do not represent the opportunity cost.Rate this question:
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