Test #1- Scarcity, Free Enterprise, Demand
Test #1- Scarcity, Free Enterprise, Demand
_____ 1. ______is a problem because
of the tension between limited
resources and unlimited wants
a. choice
b. scarcity
c. law of diminishing marginal utility
d. economics
_____ 2. An example of capital in a computer repair store would include:
a. office space, phones, computers
b. workers to take care of the register
c. natural resources like copper used to make wires
d. the entrepreneurship of a new manager
_____ 3. The term for the value of the next
best alternative in an economic
decision is
a. cost-benefit analysis
b. free lunch
c. opportunity cost
d. trade off
_____ 4. An outward shift in a production
possibilities curve could be
caused by
a. fewer resources available
b. more resources available
c. underutilization
d. efficiency
_____ 5. Adam Smith’s “invisible hand”
works only in a
a. command economy
b. market economy
c. planned economy
d. traditional economy
_____ 6. In a command economy, the
Government
a. encourages entrepreneurs
b. controls basic industries
c. practices laissez faire
d. protects private property
_____ 7. One main idea of a market
economy is
a. consumer sovereignty
b. high taxes
c. government-controlled production
d. national health insurance
_____ 8. A person who lives downstream
from a polluting factory may
experience a
a. free ride
b. negative externality
c. positive externality
d. public transfer
_____ 9. What is necessary for demand?
a. consumers are willing to buy and the product is available
b. consumers are willing and able to buy product
c. the product is available and consumers are able to buy
d. consumers are familiar with the product
_____ 10. An actress sets off a craze for wearing camouflage clothing among her fans. What
factor is affecting demand?
a. consumer expectation
b. consumer taste
c. complements
d. substitutes
_____ 11. Following an increase in demand for cookies is an increase of demand for milk. What factor is affecting demand?
a. consumer expectation
b. consumer taste
c. complements
d. substitutes
_____ 12. What is a market demand curve?
a. a graph showing the production possibilities of a firm
b. a table showing how much of a product a market is willing and able to buy at each price
c. a table showing the production possibilities of a firm
d. a graph showing how much of a product a market is willing and able to buy at each price
_____ 13. How is total revenue calculated?
a. price x change in demand
b. price x quantity sold
c. change in price x quantity demanded
d. change in price x quantity sold
_____ 14. How is profit calculated?
a. Revenue + Cost of production
b. Cost of production x Revenue
c. Cost of production - Revenue
d. Revenue – Cost of Production4
_____ 15. A demand curve is usually
a. a horizontal line.
b. a downward slope from left to right.
c. an upward slope from left to right.
d. bow-shaped.
_____ 16. The change in the amount consumers will buy because they can buy a different product instead
a. inferior goods
b. normal goods
c. income effect
d. substitution effect
_____ 17. What explains the reason why at a buffet, your 10th plate doesn’t bring you the same satisfaction as the 1st plate?
a. the law of diminishing marginal utility
b. the formula to calculate total revenue
c. the substitution effect
d. the income effect
_____ 18. A factory closes, laying off hundreds of workers, and consumer spending in the
town falls. What factor is affecting demand?
a. consumer expectation
b. consumer taste
c. income
d. substitutes
_____ 19. If quantity demanded does not change significantly when price changes the demand is
a. elastic
b. inelastic
c. perfectly elastic
d. unit elastic
_____ 20. What do various points on a demand curve represent?
a. change in demand
b. change in marginal utility
c. change in elasticity
d. change in quantity demanded
_____ 21. What does a shift of a demand curve represent?
a. change in demand
b. change in marginal utility
c. change in elasticity
d. change in quantity demanded
Use graph below for Q’s 22-24
_____ 22. On curve D1, when the price is $60, what is the quantity demanded?
a. 200 b. 300 c. 400 d. 500
_____ 23. On curve D2, at what price is the quantity demanded 300?
a. $60 b. $90 c. $120 d. $150
_____ 24. . What conclusion can you draw from this demand curve?
a. Jeans advertising misled consumers.
b. Advertising increased demand for jeans.
c. Advertising decreased demand for jeans.
d. Advertising did not affect demand for jeans.
Use data below to answer Q’s 25-27
Hot Dogs at Oracle Arena Revenue Table
Price of Hot Dog / Qty Demanded / Total Revenue$5 / 500 / $2,500
$4.50 / 550 / $2,475
$4 / 600 / $2,400
$3.50 / 650 / $2,275
$3 / 715 / $2,145
_____ 25. At $5 per hot dog, what is the total revenue of the hot dog stand at Oracle Arena?
a. $500 b. $2,500 c. $2,000 d. $355
_____ 26. The demand for hot dogs at Oracle Arena according to the total revenue test is
a. elastic b. inelastic
c. perfectly elastic d. unit elastic
_____ 27. What conclusion can you draw from the revenue table?
a. If hot dog vendors at sporting events wanted to increase their revenue and maximize profits, they should lower their prices.
b. The price of a hot dog makes up a significant portion of people’s income which is the reason for such an elastic demand
c. In controlled spaces like sporting events, there is a lack of available substitutes and a large volume of people will buy hot dogs at any price
d. Golden State fans are incapable of thinking economically unlike Clipper fans who excel in the field of economics and smuggle in their own snacks