District Test Review answers are at the end of the test

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1 District Test Review answers are at the end of the test Multiple Choice Identify the choice that best completes the statement or answers the question. 1. Cars and automobile insurance are examples of: a. Complimentary goods c. Economic models b. Substitute goods 2. In response to rising car traffic, demand for bicycles has increased. The new equilibrium point will show a. more bicycles sold, but at a higher c. more bicycles sold, but at a lower price price b. fewer bicycles sold, but at a higher d. fewer bicycles sold, but at a higher price price 3. If the price for a product is set above equilibrium a will occur. a. Surplus c. Price increase b. Shortage d. None of these 4. Due to a major chemical spill in a country s largest fishing grounds, 40% of the countries fish supply has been destroyed. Which of the following would correctly describe the consequences of the above statement? a. The sale of beef will decrease c. The sale of chickens will increase b. The sale of fishing supplies will remain d. The sale of fishing boats will increase the same 5. As the Phoenix Area has grown in population, land which was used in the production of oranges is now being used for houses, apartments, shopping centers and parking lots. Which of the following changes in the price and quantity of oranges will result from this action? a. price increase, quantity increase c. price decrease, quantity increase b. price increase, quantity decrease d. price decrease, quantity decrease 6. One of the major airline carriers (Southwest Airlines) had its mechanics go out on strike. Which of the following changes in the price and quantity of airline tickets will result from this action? a. price increase, quantity increase c. price decrease, quantity increase b. price increase, quantity decrease d. price decrease, quantity decrease 7. The President s tax reform plan calls for a 1200 dollar tax rebate to all families. Which of the following changes in the price and quantity of DVD players will result from this action? a. price increase, quantity increase c. price decrease, quantity increase b. price increase, quantity decrease d. price decrease, quantity decrease 8. How is the future price related to current demand? a. If the price is expected to rise the current c. If the price is expected to rise, the current demand will drop demand will rise b. If the price is expected to fall, the current d. Future price is not related to demand demand will rise 9. What does it mean when the demand for a product is inelastic? a. People will not buy any of that product c. Customers are sensitive to the price of the when the price goes up b. A price increase does not have a significant impact on buying habits 10. A government set maximum price that can be charged for goods and services is: a. rationing c. surplus of the good product d. There are very few satisfactory substitutes for the product.

2 b. an equilibrium price d. a price ceiling 11. Scarcity is an economic problem a. Only for poor families. c. Only for people who live in less developed countries. b. Even for wealthy families. d. For individuals and families, but not for governments and nations 12. Which of the following is not one of the four needs according to lecture. a. Food c. Shelter b. Money d. Education 13. The resources used to make all goods and services are the a. production possibilities. c. production trade-offs. b. factors of production. d. opportunity costs. 14. What does a production possibilities frontier show? a. scarce and less scarce resources b. global trade-offs and costs of doing business c. an economy that is producing but not at the maximum d. the maximum amount that an economy can produce 15. All countries today have this type of economic system. a. Command c. Mixed b. Market d. Traditional 16. Under this type of economic system the question of what to produce is determined through a combination of government decisions and the sale of goods and services. a. Command c. Traditional b. Market d. Mixed 17. In 2007, many computer companies went out of business because they were not making the kind of product at the right prices that consumers wanted. This was caused by free competition. Which of the following economic systems is being described? a. Market c. Traditional b. Command d. Mixed 18. Wilfred Estonia will grow corn in his field as he always has for the last forty years. His father and Grandfather also grew corn in the same field using the same methods he uses today. Which of the following economic systems is being described? a. Market c. Traditional b. Command d. Mixed 19. Which of the following is NOT characteristic of a centrally planned economy? a. The central government owns all land and capital. b. The central government makes all economic decisions. c. Each collective or factory sets its own goals. d. Each person is assigned a job. 20. Why does even a free market economy need some government intervention? a. to provide for things that the marketplace does not address b. to ensure that the government has the freedom to tax as necessary c. to make sure that the government can fulfill its needs for military personnel d. so that the government has some control over factor resources 21. What does the process of specialization do for an economy? a. It eliminates unemployment. c. It fosters competition. b. It makes it more efficient. d. It makes it easier to control. 22. What incentive motivates a manufacturer to sell a product?

3 a. making profits on sales c. pleasing the consumer b. putting others out of business d. popularity of the product 23. Which of the following is characteristic of a traditional economy? a. Communities tend to be fast-growing. b. They are usually based on light industrial production. c. They have a high standard of living. d. Children tend to have the same jobs as their parents did. 24. In what kind of an economy does the government make all the decisions? a. socialist c. centrally planned b. laissez faire d. free enterprise 25. What is the difference between seasonal unemployment and structural unemployment? a. Seasonal unemployment occurs because of schedules, whereas structural occurs because people lack skills. b. Seasonal unemployment is rare in a modern society, whereas structural is not. c. Seasonal unemployment occurs only in the summer, whereas structural can occur all year round. d. Seasonal unemployment is generally among low-paid workers, whereas structural is among the highly paid. 26. When the economy is working properly, what is the unemployment rate? a. 0 to 3 percent c. 8 to 10 percent b. 4 to 6 percent d. 10 to 12 percent 27. Which of the following is most likely to be worried about high inflation? a. a factory worker c. a doctor with a suburban practice b. a shopkeeper d. a retired couple on a fixed income 28. Of the following, which is the best example of structural unemployment? a. A computer programmer who quits his c. An auto worker who loses her job job to move to a warmer climate. during a recession b. A construction worker who loses his d. A steel worker who is replaced by a job in the winter robot 29. Erin loses her job at a shoe factory when the economy falls into a recession. What best describes Erin? a. frictionally unemployed c. seasonally unemployed b. cyclically unemployed d. structurally unemployed 30. What is an example of inflation caused by cost-push? a. Airlines hire more security to search c. The Federal Reserve buys bonds passengers bags b. The new, smaller PS2 is the hot toy for the holidays 31. An example of cost-push inflation would be: d. The discount rate is decreased by.25%. a. Prices increase over time c. The price of oil causes an increase in all prices b. Prices increase because a product is popular d. Prices increase because of the need for a complimentary good

4 32. Suppose a drop in consumer confidence results in an economic contraction, such as the recession of What should be done to move the economy out of the recession? a. Government spending should be c. The money supply should be increased decreased b. Taxes should be increased d. Interest rates should be increased 33. Which of these statements is an important part of supply side economics?: a. The federal government should protect economic growth by balancing budget every year b. The government should promote economic growth by reduce taxes c. The best way to get out of a recession is to increase government spending d. The government should allow the free market to regulate itself 34. The consumer price index rose 11% last quarter. Which of the following actions by the government, in theory, would correct the above situation? a. increase discount rate c. increase in government spending b. decrease in reserve rate d. no government action 35. Due to worries about future profits; businesses have released a great number of people. Which of the following actions by the government, in theory, would correct the above situation? a. decrease in government spending c. increase the reserve rate b. decrease the discount rate d. no government action 36. Business executives, worried about global economic conditions, cut back on business spending and investments. This resulted in layoffs in the capital goods industry, reducing consumer spending by the laid off workers. Which of the following actions by the government, in theory, would correct the above situation? a. Decrease taxes c. Decrease in government spending b. Increase discount rate d. No change in government policy 37. Many poeple decide to leave cold weather states and move to warmer weahter states and look for new and better jobs. Which of the following actions by the government, in theory, would correct the above situation? a. Decrease taxes c. Decrease in government spending b. Increase government bond sales d. No change in government policy 38. The reserve rate is: a. the interest rate the government charges c. the amount of deposits a bank must keep banks to borrow money. b. the allowable rate of inflation before it is considered a problem 39. The discount rate is: a. the interest rate the government charges banks to borrow money. and not use for loans or investments d. a tool used by the government when implementing fiscal policy c. the amount of deposits a bank must keep and not use for loans or investments b. the allowable rate of inflation before it is d. a tool used by the government when considered a problem implementing fiscal policy 40. An example of an expansionary monetary policy would be: a. lowering the reserve requirement c. lowering the tax rate b. Decreasing government spending d. increasing government spending 41. The government becomes concerned due to a dramatic rise in unemployment and a decrease in the GDP for the third quarter. Which of the following government actions would be the most appropriate for this situation? a. Raise income taxes c. Raise the reserve rate

5 b. Decrease government spending d. Decrease the discount rate 42. After the election of John McCain the people of America feel that a new age has begun and begin to buy at record levels. These purchases move the U.S. out of the current recession but unfortunately cause an increase in the CPI. Which of the following governmental action would be appropriate in this situation? a. decrease taxes c. decrease the reserve rate b. decrease government spending d. decrease the discount rate 43. In the last 6 months sales of most consumer goods have decreased, causing store owners to layoff workers. Which of the following actions, in theory, would help correct this problem? a. decrease the reserve rate c. increase the sale of government securities b. increase the discount rate d. no government action needed 44. Canada had long been a producer of cheap wheat, but the U.S. had a high tariff on it to protect American farmers. Recently a trade agreement was concluded which lowered the tariff. Which of the following would result from the change in the tariff for natural resources? a. The quantity of wheat will increase c. The standard of living will decrease b. The quantity of wheat will decrease d. The price of wheat will increase 45. Japan has increases its tariff on American made cars by 50% in retaliation, the U.S. increases its tariff on Japanese steel by 50%. Which of the following would result from change in tariff on cars and steel? a. Consumer standard of living in Japan c. Consumer standard of living in both would increase countries would increase b. Consumer standard of living in the d. Consumer standard of living in both U.S. would remain the same nations would decrease 46. Americans purchase 73% of their tires from Canadian manufacturers. Goodyear pressures Congress to enact a law, which increases the tire tariff by 34.3%. Which of the following would result from change in tariff on tires? a. The Canadian standard of living would remain unchanged c. The American standard of living would decrease b. The Canadian standard of living would d. The American standard of living increase would increase 47. Japan now produces over half of the wrist watches available for sale in the United States. Suppose the United States government places a quota on foreign watches. Which of the following would result from change in quota on wristwatches? a. The price of watches will increase c. The price of watches will be eliminated b. The price of watches will be d. price of watches will decrease unchanged 48. After the death of Fidel Castro Cuba and the United States begin normalizing relations. This normalization begins with the ending of the 40 year embargo between the two nations. Which of the following would result from change in the embargo. a. Interdependence between the two nations will increase b. The price of products traded between the two countries will increase c. The quantity of products traded between the two countries will decrease d. The standard of living in the U.S. will decrease

6 49. Americans currently purchase very few medical supplies from other nations. The tariffs on foreign produced medical supplies are 28% of their value, making them non-competitive. Congress passes a law removing the tariff on these foreign produced medical supplies. Which of the following would result from change in tariff on foreign produced medical supplies? a. The price of medical supplies would c. The price of medical supplies would stay the same decrease b. The price of medical supplies would d. The price of medical supplies would triple increase 50. The largest builder of pools in Arizona announced a price reduction in December. Within two weeks, the three other pool builders in Arizona announced similar price deceases. Which of the following market structures uses this method in determining prices? a. monopoly c. monopolistic competition b. oligopoly d. perfect competition 51. Recently, the only meat market in the town of Blue Hill raised all of its prices by 10%. Very few people in the town stopped buying meat. Which of the following market structures uses this method in determining prices? a. monopoly c. monopolistic competition b. oligopoly d. perfect competition 52. One goal of government is the US has been to a. Promote monopolies c. promote mergers b. discourage competition in the economy d. encourage competition in the economy 53. Which of the following is NOT a form of nonprice competition? a. location c. advertising b. physical characteristics d. discounts 54. Which of the following is NOT a condition for perfect competition? a. Many buyers and sellers participate in the market. b. Sellers offer a wide variety of products. c. Buyers and sellers are well informed about products. d. Sellers are able to enter and exit the market freely. 55. How much control over price do companies in a perfectly competitive market have? a. none c. some b. very little d. total control

7 District Test Review Answer Section MULTIPLE CHOICE 1. ANS: A PTS: 1 2. ANS: A PTS: 1 3. ANS: A PTS: 1 4. ANS: C PTS: 1 5. ANS: B PTS: 1 6. ANS: B PTS: 1 7. ANS: A PTS: 1 8. ANS: C PTS: 1 9. ANS: B PTS: ANS: D PTS: ANS: B PTS: ANS: B PTS: ANS: B PTS: ANS: D PTS: ANS: C PTS: ANS: D PTS: ANS: A PTS: ANS: C PTS: ANS: C PTS: ANS: A PTS: ANS: B PTS: ANS: A PTS: ANS: D PTS: ANS: C PTS: ANS: A PTS: ANS: B PTS: ANS: D PTS: ANS: D PTS: ANS: B PTS: ANS: A PTS: ANS: C PTS: ANS: C PTS: ANS: B PTS: ANS: A PTS: ANS: B PTS: ANS: A PTS: ANS: D PTS: ANS: C PTS: ANS: A PTS: ANS: A PTS: ANS: D PTS: 1

8 42. ANS: B PTS: ANS: A PTS: ANS: A PTS: ANS: D PTS: ANS: C PTS: ANS: A PTS: ANS: A PTS: ANS: C PTS: ANS: B PTS: ANS: A PTS: ANS: D PTS: ANS: D PTS: ANS: B PTS: ANS: A PTS: 1