ECON Test 1

The high salaries paid to sports superstars in the United States are determined by

government regulations

league regulations

joint decisions by the club owners

consumer demand

Question 17

According to economic liberalism, the regulating force of the economy is

self-interest

laissez-faire

competition

the government

Question 18

An economy in which a central authority makes most of the economic decisions is known as a

market economy

laissez-faire economy

command economy

traditional economy

Question 19

Every society faces some basic economic choices such as

what to produce

which resources to use

who gets to have what share of the output

all of the above

Question 20

In a market economy, the use of resources is determined primarily by

needs of people

consumer demand

decisions of management

government regulation

Question 21

Privatization results in

a return to economic liberalism

a reduction in government economic functions

guaranteed improvement in consumer service

diminishing returns

Question 22

In a market economy, resources are allocated by the government.

True

False

Question 23

The profit motive is one characteristic of a command economy.

True

False

Question 24

Which one of the following is a characteristic of capitalism but not of communism?

private property

wage payments

technological development

use of capital equipment

Question 25

There are no government-regulated markets in the U.S. economy.

True

False

Question 26

Price ceilings usually create surpluses since supply is increased.

True

False

Question 27

The point where quantity demanded and quantity supplied are equal is known as the

ceiling price

minimum price

equilibrium price

administered price

Question 28

Which of the following types of goods tend toward elastic demand?

luxuries

durable goods

goods with multiple uses

all of the above

Question 29

An increase in demand causes price to rise and quantity sold to fall.

True

False

Question 30

If 12 units of a good are sold when the price is $1 per unit, and 8 units are sold at a price of $1.50 per unit, then demand is

elastic

inelastic

of indeterminate elasticity

unit elastic

Question 31

If supply increases more than demand, equilibrium price will fall.

True

False

Question 32

If a good has perfectly inelastic demand,

an infinite amount could be sold without a change in price

the same amount would be purchased regardless of price

any price change is matched by an equal percentage change in quantity demanded

total revenue remains unchanged if the price rises or falls

Question 33

In the long run, the supply of goods is based on

the availability of the resources and the costs of production

the availability of the resources and the level of consumers’ incomes

the costs of production and consumer preferences

government regulations

Question 34

A surplus quantity will occur when

quantity demanded is greater than quantity supplied

price is above equilibrium

demand is elastic

price is below equilibrium

Question 35

Graphically, perfectly elastic demand is represented by a straight horizontal line.

True

False

Question 36

If the market price of gasoline were $4 a gallon and a ceiling price of $1.50 is imposed,

the price of gasoline would rise

the price of gasoline would fall

the price of gasoline would remain unchanged

the price of gasoline would increase

Question 37

If a good has negative income elasticity, then it is an inferior good.

True

False

Question 38

A shift in the supply curve for gasoline in the United States would result if

people decided to travel more by automobile

the OPEC nations decided to stop sales of crude oil to the United States

the price of gasoline increased

the price of gasoline decreased

Question 39

Stocks and bonds are counted as part of total wealth.

True

False

Question 40

A free good lacks the element of

usefulness

scarcity

transferability

tangibility

Question 41
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Putting a business venture together is the function of the

capitalist

manager

labor leader

entrepreneur

Question 42

Which of the following areas of study is included in the field of macroeconomics?

electricians’ wage rates

monopolistic pricing

price of automobiles

general price level

Question 43

The rules and principles of economics that serve as a guide for action are known as

economic policy

economic theory

macroeconomics

microeconomics

Question 44

The difference between a capital good and a consumer good depends on

the purpose for which it is used

how it was produced

what it is

how quickly it is used up

Question 45

The relationship between the price of a book and the number of volumes purchased would be an example of microeconomics.

True

False

Question 46

Economic theory and economic policy are synonymous.

True

False

Question 47

Total wealth is a _______concept; total income is a _______ concept.

stock; flow

stock; stock

flow; stock

flow; flow

Question 48

Wealth is a flow concept, whereas income is a stock concept.

True

False

Question 49

Payment for the use of capital is made in the form of investment.

True

False

Question 50

Economies must make choices because resources are limited while wants are unlimited.

True

False