Principles Of Economics Pretest: Quiz!

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| By Gerhar Orlet
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Gerhar Orlet
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Questions: 19 | Attempts: 12,881

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Principles Of Economics Pretest: Quiz! - Quiz

This test is based on the ACEE's survey that produced the most common misconceptions concerning economics. By the end of the course, students will understand all the concepts touched on here. Read the following questions carefully and take your time. So, let's try out the quiz. All the best!


Questions and Answers
  • 1. 

    For most people, the largest protion of their personal income comes from:

    • A.

      Rent paid to them on their property

    • B.

      Interest on stocks and bonds

    • C.

      Wages and salries from their jobs

    • D.

      The federal and state governments.

    Correct Answer
    C. Wages and salries from their jobs
    Explanation
    The largest portion of most people's personal income comes from wages and salaries from their jobs. This is because the majority of individuals earn their income through employment, whether it be full-time or part-time work. Wages and salaries are the compensation received in exchange for labor or services provided by an individual, making it the primary source of income for most people.

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  • 2. 

    When a person rents an apartment, who benefits from the transaction?

    • A.

      Only the person renting the apartment

    • B.

      Only the landlord

    • C.

      Both the renter and the landlord

    • D.

      Mortgage companies

    Correct Answer
    C. Both the renter and the landlord
    Explanation
    Both the renter and the landlord benefit from the transaction when a person rents an apartment. The renter benefits by gaining a place to live without the financial commitment of purchasing a property. They also have the flexibility to move out when their lease ends. On the other hand, the landlord benefits by receiving rental income, which can be a steady source of cash flow. Additionally, renting out the apartment allows the landlord to utilize their property and potentially earn a profit.

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  • 3. 

    When deciding which of two items to purchase, you should always:

    • A.

      Choose after comparing costs and benefits of both items

    • B.

      Choose the item that costs less

    • C.

      Chosse the item with the greatest benefits

    • D.

      Choose the item that you want

    Correct Answer
    A. Choose after comparing costs and benefits of both items
    Explanation
    When deciding which of two items to purchase, it is important to consider both the costs and benefits of each item. By comparing the costs, such as the price or maintenance fees, and the benefits, such as the features or durability, one can make a more informed decision. This approach allows for a comprehensive evaluation of both items, ensuring that the chosen item is the most suitable and advantageous option.

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  • 4. 

    If the price of beef doubled and the price of poultry stayed the same, people would most likely buy:

    • A.

      Less poultry and more beef

    • B.

      More poultry and less beef

    • C.

      The same amount of pultry and beef

    • D.

      Less poultry and beef

    Correct Answer
    B. More poultry and less beef
    Explanation
    If the price of beef doubled and the price of poultry stayed the same, people would most likely buy more poultry and less beef. This is because the increase in the price of beef would make it less affordable and less attractive to consumers, leading them to choose the relatively cheaper option of poultry instead. As a result, the demand for poultry would increase while the demand for beef would decrease.

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  • 5. 

    In the United States, who determines what goods and services will be porduced?

    • A.

      Producers and the government

    • B.

      Government

    • C.

      Consumers

    • D.

      Producers, consumers, and government

    Correct Answer
    D. Producers, consumers, and government
    Explanation
    In the United States, the determination of what goods and services will be produced is a collaborative effort between producers, consumers, and the government. Producers play a significant role as they decide which products to manufacture and bring to the market based on consumer demand and profitability. Consumers also have an influence through their purchasing decisions, as their demand for certain goods and services determines what producers will produce. Additionally, the government plays a role in regulating and guiding the production of goods and services through policies, regulations, and incentives.

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  • 6. 

    Since the resources used in the production of goods and services are limited, society must:

    • A.

      Reduce the use of those resources

    • B.

      Try to get more resources

    • C.

      Focus on their most abundant resource

    • D.

      Make choices about how to use resources

    Correct Answer
    D. Make choices about how to use resources
    Explanation
    Given that the resources used in the production of goods and services are limited, society must make choices about how to use these resources. This is because there is a scarcity of resources, and it is not possible to fulfill all the wants and needs of society with the available resources. Therefore, society needs to prioritize and allocate these resources efficiently, making decisions on what to produce, how to produce, and for whom to produce. This involves considering trade-offs, opportunity costs, and making decisions that maximize the overall welfare and utility for society.

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  • 7. 

    A large increase in the cost of producing jeans is most likely to result in:

    • A.

      Lower jean prices and more jeans bought

    • B.

      Higher jean prices and fewer jeans bought

    • C.

      No change

    • D.

      Lower jean prices and fewer jeans bought

    Correct Answer
    B. Higher jean prices and fewer jeans bought
    Explanation
    A large increase in the cost of producing jeans would result in higher jean prices because the higher production cost would need to be passed on to the consumers. This increase in price would likely lead to fewer jeans being bought as consumers may find the higher prices less affordable or less attractive. Therefore, the correct answer is higher jean prices and fewer jeans bought.

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  • 8. 

    A person who starts a business to produce a new product is known in the marketplace as:

    • A.

      A bureaucrat

    • B.

      A manager

    • C.

      An entrepreneur

    • D.

      A Chief Executive Officer (CEO)

    Correct Answer
    C. An entrepreneur
    Explanation
    The correct answer is "An entrepreneur". This is because an entrepreneur is someone who starts a business or venture, taking on financial risks in order to produce and introduce new products or services into the marketplace. They are known for their innovative and creative thinking, as well as their ability to identify and seize opportunities for business growth and success.

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  • 9. 

    Which of the following would most likely accelerate innovation in the computer industry?

    • A.

      Taxing all new inventions in the industry

    • B.

      Investing more into research and development

    • C.

      Increased government regulation of the industry

    • D.

      Greater use of PCs by individuals

    Correct Answer
    D. Greater use of PCs by individuals
    Explanation
    Greater use of PCs by individuals would most likely accelerate innovation in the computer industry because it creates a larger market demand for new and improved technologies. When more people use PCs, there is a greater need for advancements in hardware, software, and user experience. This increased demand can drive companies to invest more in research and development, leading to innovation and new inventions in the industry. Additionally, greater use of PCs by individuals can also lead to more feedback and user-driven innovations, as individuals discover new needs and preferences while using their computers.

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  • 10. 

    If interest rates charged by banks decreased, business would be most likely to:

    • A.

      Increase investment spending

    • B.

      Decrease the number of employees

    • C.

      Increase their prices

    • D.

      See an increase in their stock prices

    Correct Answer
    A. Increase investment spending
    Explanation
    If interest rates charged by banks decrease, it becomes cheaper for businesses to borrow money. This would incentivize businesses to increase their investment spending, as they can now borrow at lower costs and potentially earn higher returns on their investments. This increase in investment spending can help stimulate economic growth and expansion.

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  • 11. 

    The stock market is an example of an institution that exists to help people achieve their goals. The existence of the stock market:

    • A.

      Helps predict stock prices

    • B.

      Helps predict corporate earnings

    • C.

      Brings together buyers and sellers of stocks

    • D.

      Generally increases the prices of stocks

    Correct Answer
    C. Brings together buyers and sellers of stocks
    Explanation
    The stock market brings together buyers and sellers of stocks, allowing them to trade securities. It provides a platform for investors to buy and sell shares of publicly traded companies, facilitating liquidity and price discovery. Through the stock market, buyers can find sellers and vice versa, enabling transactions to take place. This helps investors achieve their goals by providing them with a marketplace to participate in the buying and selling of stocks.

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  • 12. 

    Which of the following statements about money is true?

    • A.

      It holds its value during times of inflation

    • B.

      It makes saving more difficult

    • C.

      It makes buying and selling easier

    • D.

      It doesn't hold its value

    Correct Answer
    C. It makes buying and selling easier
    Explanation
    Money serves as a medium of exchange, allowing individuals to easily buy and sell goods and services. It acts as a universally accepted form of payment, facilitating transactions and making economic activities more efficient. Therefore, the statement that money makes buying and selling easier is true.

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  • 13. 

    Which of the following are most likely to be helped by inflation?

    • A.

      Banks that loaned money at a fixed interest rate

    • B.

      People living on fixed incomes

    • C.

      People who borrowed money at fixed interest rates

    • D.

      Businesses

    Correct Answer
    C. People who borrowed money at fixed interest rates
    Explanation
    People who borrowed money at fixed interest rates are most likely to be helped by inflation. When inflation occurs, the value of money decreases over time. This means that the amount of money borrowed remains the same, but its value decreases. As a result, borrowers benefit because they are repaying their loans with money that is worth less than when they initially borrowed it. This effectively reduces the real burden of their debt, making it easier for them to repay.

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  • 14. 

    Assume that one US Dollar is the same as 10 Japanese Yen. If the Dollar becomes worth 15 Yen, which of the following occurs?

    • A.

      The price of all japanese goods increases

    • B.

      Japan will import more goods into the US

    • C.

      Americans in Japan will see that their dollar will buy more goods and services

    • D.

      America will increase its exports to Japan

    Correct Answer
    C. Americans in Japan will see that their dollar will buy more goods and services
    Explanation
    When the value of the US Dollar increases compared to the Japanese Yen, Americans in Japan will benefit from their currency being able to buy more goods and services. This is because their Dollar will have a higher purchasing power in Japan. This does not necessarily mean that the price of all Japanese goods will increase, that Japan will import more goods into the US, or that America will increase its exports to Japan.

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  • 15. 

    If your city sets a maximum amount that landlords can charge for rent, what is the most likely result?

    • A.

      Available apartments will equal the number of people who want to rent them

    • B.

      There will be fewer apartments than people who want to rent them

    • C.

      There will be more apartments than people who want to rent them.

    • D.

      No change.

    Correct Answer
    B. There will be fewer apartments than people who want to rent them
    Explanation
    When a city sets a maximum amount that landlords can charge for rent, it is likely that there will be fewer apartments available than people who want to rent them. This is because landlords may find it less profitable to rent out their properties at the capped rent, leading to a decrease in the number of available apartments. Additionally, the demand for affordable housing may increase due to the lower rent, further exacerbating the shortage of available apartments.

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  • 16. 

    Whihc of the following methods for reducing pollution would most economists support?

    • A.

      Increased regulation on polluting companies

    • B.

      Eliminating all air pollution

    • C.

      Reducing air pollution until the cost of further reductions outweighs the benefits

    • D.

      Government sponsored "green" automobiles

    Correct Answer
    C. Reducing air pollution until the cost of further reductions outweighs the benefits
    Explanation
    Economists would most likely support the method of reducing air pollution until the cost of further reductions outweighs the benefits. This approach aligns with the concept of cost-benefit analysis, which is a fundamental principle in economics. It recognizes that there is a point where the cost of reducing pollution further becomes too high compared to the benefits gained. By finding this balance, resources can be allocated efficiently, ensuring that the maximum benefit is achieved while minimizing unnecessary costs. Increased regulation on polluting companies and government-sponsored "green" automobiles may also be supported by economists, but the option of reducing air pollution until the cost-benefit threshold is reached is likely the most economically sound approach.

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  • 17. 

    If the United States stopped importing cars from Japan, who would most likely benefit?

    • A.

      Japanese automakers

    • B.

      American automakers

    • C.

      American consumers

    • D.

      Japanese consumers

    Correct Answer
    B. American automakers
    Explanation
    If the United States stopped importing cars from Japan, American automakers would most likely benefit. This is because if there is a decrease in competition from Japanese automakers, American automakers would have a larger market share and potentially higher sales. Additionally, American automakers would have the opportunity to fill the gap left by Japanese imports, leading to increased production and potentially more job opportunities in the American automotive industry.

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  • 18. 

    If real Gross Domestic Product (GDP) has increased, which of the following has also definitely increased?

    • A.

      The amount of final goods and services produced

    • B.

      The number of resources used to produce goods and services

    • C.

      Prices of final goods and services

    • D.

      Demand for final goods and services

    Correct Answer
    A. The amount of final goods and services produced
    Explanation
    If the real Gross Domestic Product (GDP) has increased, it means that the total value of goods and services produced in an economy has increased. This implies that the amount of final goods and services produced has also definitely increased. An increase in real GDP indicates economic growth and expansion, which typically involves an increase in production and output.

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  • 19. 

    When a government's expenses for a year are higher than its revenue for that year, the difference is know a/an

    • A.

      Surplus

    • B.

      Shortage

    • C.

      Budget deficit

    • D.

      National debt

    Correct Answer
    C. Budget deficit
    Explanation
    When a government's expenses for a year are higher than its revenue for that year, it results in a budget deficit. This means that the government has spent more money than it has generated in revenue, leading to a shortfall or deficit in its budget. A budget deficit indicates that the government may need to borrow money or take other measures to cover the shortfall and manage its finances effectively.

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