Basic Economy Quiz

25 Questions

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Economy Quizzes & Trivia

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Questions and Answers
  • 1. 
    A market economy answers the question "what" goods will be produced by focusing on
    • A. 

      Dollar votes.

    • B. 

      Consumer sovereignty.

    • C. 

      Least-cost method of production.

    • D. 

      Who can afford these goods.

    • E. 

      Both a. and b. above

  • 2. 
    A market economy answers the question "how" will goods be produced by focusing
    • A. 

      Dollar votes.

    • B. 

      Consumer sovereignty.

    • C. 

      Least-cost method of production.

    • D. 

      Who can afford these goods.

    • E. 

      Both a. and b. above

  • 3. 
    In a market economy, the goods produced go to those who(m):
    • A. 

      Have sufficient income and are willing to pay the price asked for those goods.

    • B. 

      The government views as best suited for consumption.

    • C. 

      Business firms choose to favor.

    • D. 

      Desire the goods the least.

    • E. 

      Need them the most.

  • 4. 
    The economic system of which of the following countries can be treated as an example of a command economy?
    • A. 

      United States

    • B. 

      Canada

    • C. 

      United Kingdom

    • D. 

      Cuba

  • 5. 
    In a market economy, resources are allocated:
    • A. 

      By central planners using a price system.

    • B. 

      By decentralized planners at the local level.

    • C. 

      By individual decision makers responding to market prices.

    • D. 

      By government bureaucracies because of the absence of a price system.

  • 6. 
    The use of large amounts of labor relative to capital in an economy indicates:
    • A. 

      Labor-intensive production.

    • B. 

      Capital-intensive production.

    • C. 

      That wage rates will be relatively high.

    • D. 

      That hand-made goods are of better quality than machine-made goods.

  • 7. 
    Countries with high labor costs tend to:
    • A. 

      Rely on only one method for the production of goods.

    • B. 

      Use more labor rather than capital in the production process.

    • C. 

      Use more capital rather than labor in the production process.

    • D. 

      Be relatively poor countries.

  • 8. 
    The circular flow of economic activity is a model of the:
    • A. 

      Flow of goods, services, and payments between households and firms.

    • B. 

      Influence of government on business behavior.

    • C. 

      Role of unions and government in the economy.

    • D. 

      Interaction among taxes, prices, and profits.

    • E. 

      Economy's banking system.

  • 9. 
    Which of the following is not a resource exchanged in the factor markets?
    • A. 

      Land

    • B. 

      Capital

    • C. 

      Labor

    • D. 

      Entrepreneurship

    • E. 

      All of the above are traded in the factor market.

  • 10. 
    An economy is producing two goods, ice cream and cookies, and is currently operating efficiently. This economy can produce more cookies if:
    • A. 

      It increases the price of ice cream.

    • B. 

      It increases the price of cookies.

    • C. 

      More of the economy's resources become idle.

    • D. 

      It produces less ice cream.

    • E. 

      It opts to produce more sugar.

  • 11. 
    The production possibilities curve illustrates:
    • A. 

      The minimum quantity of two resources necessary to produce a given level of output.

    • B. 

      That when resources are currently being used inefficiently, it is possible to increase production of one good only by sacrificing some of another good.

    • C. 

      That when resources are currently being used efficiently, it is possible to increase production of one good only by sacrificing some of another good.

    • D. 

      The minimum quantities of output that can be produced using available resources.

    • E. 

      The maximum amount of output that can be produced when resources are used inefficiently.

  • 12. 
    A candidate for president made the following campaign promise: "My administration will increase national defense without requiring sacrifices elsewhere in the economy." The promise can be kept if:
    • A. 

      The economy moves along the production possibilities in the direction of a greater quantity of defense.

    • B. 

      The economy moves from a point inside the production possibilities curve toward a point on the production possibilities curve.

    • C. 

      The production possibilities frontier shifts outward due to an improvement in technology.

    • D. 

      Any of the above occur.

    • E. 

      Either b. or c. occur, but not as a result of a.

  • 13. 
    An economist defines efficiency as:
    • A. 

      The maximization of output from available resources.

    • B. 

      The maximization of revenue from available resources.

    • C. 

      The maximization of inputs using available resources.

    • D. 

      the creation of a surplus using available resources.

  • 14. 
    Inefficiency is best illustrated by which of the following?
    • A. 

      Foregoing civilian goods in order to produce more military goods

    • B. 

      Limiting economic growth by reducing capital spending

    • C. 

      High levels of unemployment of labor and other resources that could be productively employed

    • D. 

      Producing outside the production possibilities frontier

  • 15. 
    If the economy of Taiwan is growing more rapidly than the economy of Japan, most likely:
    • A. 

      Japan's current rate of investment is higher than that of Taiwan.

    • B. 

      Japan spends more on capital goods than Taiwan.

    • C. 

      Compared to Japan, Taiwan foregoes a greater proportion of consumption goods in favor of capital investment.

    • D. 

      Taiwan's current level of investment is lower than that of Japan.

  • 16. 
    When economic growth occurs it will:
    • A. 

      Eventually eliminate scarcity.

    • B. 

      Shift the production possibilities curve to the left.

    • C. 

      Be a product of luck.

    • D. 

      Likely be determined by uncontrollable factors such as the climate.

    • E. 

      Often result from improved technology.

  • 17. 
    The bowed production possibilities curve represents:
    • A. 

      Decreasing production costs.

    • B. 

      Constant opportunity costs.

    • C. 

      Decreasing opportunity costs.

    • D. 

      Increasing opportunity costs.

  • 18. 
    Improving the level of education of the labor force will:
    • A. 

      Move the economy from a point inside the production possibilities curve to a point on the production possibilities curve.

    • B. 

      Move the economy from a point on the production possibilities curve to a point inside the production possibilities curve.

    • C. 

      Shift the production possibilities curve outward.

    • D. 

      Shift the production possibilities curve inward.

    • E. 

      Do none of the above.

  • 19. 
    Which of the following is not an example of a consumption good?
    • A. 

      Video games

    • B. 

      Television

    • C. 

      A tractor

    • D. 

      A trip to Hawaii

    • E. 

      All of the above are examples of consumption goods.

  • 20. 
    The private ownership of property and the use of the market system to direct and coordinate economic activity is most characteristic of:
    • A. 

      A command economy

    • B. 

      A mixed economy

    • C. 

      A market economy

    • D. 

      A traditional economy

  • 21. 
    When economists speak of markets, they primarily mean:
    • A. 

      Places where production of goods and services take place.

    • B. 

      Those locations where trades of stocks and bonds of corporations take place.

    • C. 

      Process of buyers and sellers voluntarily agreeing upon prices and quantities of goods and services.

    • D. 

      The trillions of dollars that change hands in the foreign exchange markets.

  • 22. 
    In a simple circular flow model,
    • A. 

      Households are suppliers of resources.

    • B. 

      Firms are suppliers of final products.

    • C. 

      Households are demanders of final products.

    • D. 

      Firms are demanders of resources.

    • E. 

      All the above are true.

  • 23. 
    Assume that the production possibilities for Badlands are the following combinations of kegs of beer and sides of beef: Which of the following are true? BeefBeer660641602543484355246  
    • A. 

      The opportunity cost of the second keg of beer is 30 sides of beef.

    • B. 

      The opportunity cost of the third keg of beer is 18 sides of beef.

    • C. 

      The opportunity cost of the fourth keg of beer is 6 sides of beef.

    • D. 

      The opportunity cost of the fifth keg of beer is 7 sides of beef.

    • E. 

      The opportunity cost of the sixth keg of beer is 4 sides of beef.

  • 24. 
    Workers in the 1800s building railroads by hand was an example of a(n) ____ intensive form of production.
    • A. 

      Capital

    • B. 

      Labor

    • C. 

      Entrepreneurial

    • D. 

      Working

  • 25. 
    In a command economy, economic resources are allocated by
    • A. 

      A central planning board.

    • B. 

      Consumer sovereignty.

    • C. 

      The choices that consumers make, taking the price they must pay into consideration.

    • D. 

      The supply chain.