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					Module 4 : Module 4 - Midterm
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1. Governments establish the laws that regulate the interaction between businesses and households and
also serve as actors in the economy themselves. (Points : 2)

           True

           False
 0                    882943869           TrueFalse        1

2. Monopoly power is the ability of individuals or firms currently in business to prevent other individuals or
firms from entering the same kind of business. (Points : 2)

           True

           False
 0                    882943870           TrueFalse        2

3. Market economies are based upon: (Points : 2)

           individual planning and individual good will towards others.

           government planning and individual good will towards others.

           government planning and private property.

           individual self-interest and private property.
 0                    882943873           MultipleChoice   2

4. Consider the table below, where each production choice represents a point on a production possibility
curve. The table shows that the opportunity cost of producing an additional 10 units of rye is:



     (Points : 2)

           2 eggs.

           4 eggs.

           10 eggs.

           decreasing.
 0                    882943876           MultipleChoice   5

5. A resource is said to have a comparative advantage if: (Points : 2)

           it is more effective in the production of one good than another.
          it is equally effective to the production of all goods.

          its effectiveness in the production of a good increases as more of that good is produced.

          its effectiveness in the production of a good does not change as more of that good is produced.
 0                 882943879         MultipleChoice    7

6. The principle of increasing marginal opportunity costs states that initial opportunity costs are
__________ and they __________ the more you concentrate on the activity (Points : 2)

          high; decrease

          low; increase

          high; increase

          low; decrease
 0                 882943883         MultipleChoice    8

7. Refer to the graph below. Given the resources and technology available to this economy, it can produce
at points:




(Points : 2)

          A, B, and C.

          A, B, and D.

          A, C, and D.

          B, C, and D.
 0                 882943887         MultipleChoice    9

8. If an economy produces on its production possibility curve, it is: (Points : 2)

          using its resources efficiently.

          using its resources unsustainably.

          using its resources equitably.

          using its resources inefficiently.
 0                 882943891         MultipleChoice    10

9. An improvement in technology will: (Points : 2)

          imply that the law of increasing costs no longer applies.

          shift the production possibilities curve inward.

          shift the production possibilities curve outward.

          have no effect on the production possibilities curve.
 0                 882943895         MultipleChoice    11

10. Economic reasoning is based on the premise that: (Points : 2)
         all decisions or actions are costless.

         only non-economic decisions or actions have a cost associated with them.

         only economic decisions or actions have a cost associated with them.

         all decisions and actions have a cost associated with them.
 0                882943899         MultipleChoice    17

11. Marginal analysis suggests that you will choose to do something if: (Points : 2)

         the total benefit is less than the total cost.

         the marginal cost exceeds the marginal benefit.

         the total benefit exceeds the total cost.

         the marginal benefit exceeds the marginal cost.
 0                882943901         MultipleChoice    18

12. The marginal benefit of owning another hardback book this month to Shelby is $20. If the $22 price of
hardback books reflects their marginal cost to Shelby and she is rational, then: (Points : 2)

         Shelby will sell the hardback books she has to others who are willing to pay less.

         Shelby can gain by buying more .

         Shelby will buy more hardback books this month.

         Shelby will not buy any more hardback books this month.
 0                882943904         MultipleChoice    19

13. The law of demand states that: (Points : 2)

         sellers supply less of a good when its price increases.

         consumers buy less of a good when its price increases only if their income increases at the same
time.

         consumers buy less of a good when its price increases even if other demand determinants change
at the same time.

         consumers buy less of a good when its price increases, provided all shift factors of demand are
fixed.
 0                882943908         MultipleChoice    20

14. According to the law of demand, a decrease in the price of baseball trading cards causes: (Points : 2)

         an increase in the quantity of trading cards demanded.

         a decrease in the quantity of trading cards demanded.

         an increase in the scarcity of baseball trading cards.

         a greater abundance of baseball trading cards.
 0                882943910         MultipleChoice    21

15. The use of the phrase "other things equal" in supply and demand analysis indicates that: (Points : 2)

         an equilibrium price has been reached.
         an equilibrium quantity has been reached.

         factors other than the one under consideration are kept constant.

         we are considering all the changes which might take place in actual markets.
 0                882943912         MultipleChoice   23

16. The law of supply states that (Points : 2)

         quantity supplied increases as price increases, other things constant.

         quantity supplied decreases as price increases, other things constant.

         more of a good will be supplied the higher its price, other things changing proportionately.

         less of a good will be supplied the higher its price, other things changing proportionately.
 0                882943913         MultipleChoice   29

17. The existence of a market surplus implies that price is: (Points : 2)

         above equilibrium and must fall to restore equilibrium.

         above equilibrium and must rise to restore equilibrium.

         below equilibrium and must fall to restore equilibrium.

         below equilibrium and must rise to restore equilibrium.
 0                882943914         MultipleChoice   30

18. When the wage rate paid to labor is below equilibrium: (Points : 2)

         the supply of labor increases.

         the demand for labor decreases.

         the number of workers seeking jobs exceeds the number of jobs available.

         the number of jobs available exceeds the number of workers seeking jobs.
 0                882943915         MultipleChoice   31

19. If price changes and everything else is held constant, then: (Points : 2)

         both supply and demand will shift.

         the demand curve will shift.

         there will be a movement along a given supply curve, not a shift.

         the supply curve will shift.
 0                882943916         MultipleChoice   32

20. Socialism is in theory characterized by: (Points : 2)

         private property.

         self-interest.

         distribution according to need.

         free markets.
 0                  882943917           MultipleChoice   34

21. Entrepreneurship is an ability that is most closely related to: (Points : 2)

          household spending.

          business formation.

          consumer sovereignty.

          e-commerce.
 0                  882943918           MultipleChoice   38

22. In a partnership: (Points : 2)

          there are two or more owners, with each owner liable for the actions of the other owners.

          there is only one owner but two or more employees.

          the business is legally treated as a person and owned by stockholders who are not liable for the
actions of the corporate "person."

          each owner is liable only to the extent of his or her own investment.
 0                  882943919           MultipleChoice   40

23. What form of business is the most common in the United States? (Points : 2)

          Non-profit businesses.

          Corporations.

          Sole proprietorships.

          Partnerships.
 0                  882943920           MultipleChoice   41

24. An entrepreneur might choose to form a partnership rather than a sole proprietorship because a
partnership: (Points : 2)

          provides greater accountability.

          provides limited liability.

          is easier to establish.

          allows the owners to share the risks of business.
 0                  882943921           MultipleChoice   42

25. When tax revenues exceed government expenditures, the government budget is: (Points : 2)

          in deficit.

          balanced.

          in surplus.

          not in equilibrium.
 0                  882943922           MultipleChoice   49

26. A budget deficit that would not exist if the economy were at potential income is called: (Points : 2)

          a passive deficit.
          a real deficit.

          a structural deficit.

          a nominal deficit.
 0                  882943923        MultipleChoice    51

27. One reason government debt is different from individual debt is:: (Points : 2)

          the government can print money to alleviate its debt, but individuals can't.

          the government owes much of its debt to others, while individuals carry credit and that is debt to
them

          the government can refinance its debt, but individuals can only do it when interest rates fall

          Individual debt is very similar to government debt, because the government is one entity just
larger
 0                  882943924        MultipleChoice    56

28. The Social Security system is: (Points : 2)

          sound and faces no significant problems in the next fifty years.

          threatened by the large budget surpluses projected for the next decade.

          threatened by the impending collapse of the Social Security Trust Fund, which is predicted to fail
within the next decade.

          threatened by the retirement of the baby boomers over the next thirty to fifty years.
 0                  882943925        MultipleChoice    57

29. A tax that is levied on a specific good is called: (Points : 2)

          a progressive tax.

          an excise tax.

          an income tax.

          an employment tax.
 0                  882943926        MultipleChoice    67

30. The invisible hand refers to: (Points : 2)

          the role of government in a market economy.

          the price mechanism that guides economic actions.

          political forces.

          social forces.
 0                  882943927        MultipleChoice    74

31. If production is efficient, then: (Points : 2)

          it is not possible to produce a given quantity of output at a lower cost.

          quantity demanded equals quantity supplied.
          firms are earning profits.

          income is fairly distributed.
 0                 882943928           MultipleChoice   77

32. The Independent reported in 2004 that "Online music stores such as Apple's iTunes were seen as a
revolution in music sales, with customers turning their backs on CDs to shop online" Based on this report,
you can conclude that the introduction of online music stores has shifted: (Points : 2)

          the supply curve of CDs to the right.

          the supply curve of CDs to the left.

          the demand curve of CDs to the right.

          the demand curve of CDs to the left.
 0                 882943929           MultipleChoice   83

33. Refer to the graph below. Floods in the U.S. Midwest in the early 1990s reduced the U.S. corn crop.
Which graph depicts the effect of the floods on the U.S. corn market?




(Points : 2)

          I

          II

          III

          IV
 0                 882943930           MultipleChoice   84

34. Refer to the graphs below. A recent report indicates that the device known as the right heart catheter
used to diagnose heart conditions poses more risks than previously thought. The effect of the report on the
market for right heart catheters is best shown by which of the graphs?




(Points : 2)

          I

          II

          III

          IV
 0                 882943931           MultipleChoice   85

35. Refer to the graph below. Assume the graph reflects demand in the egg market. Which arrow best
captures the impact of increased consumer concern about cholesterol on the egg market?
(Points : 2)

          A

          B

          C

          D
 0                 882943932        MultipleChoice   90

36. Assume the graph below reflects demand in the automobile market. Which arrow best captures the
impact of increased consumer income on the automobile market?




(Points : 2)

          A

          B

          C

          D
 0                 882943933        MultipleChoice   91

37. Relative to other countries, the U.S. debt to GDP ratio is: (Points : 2)

          one of the largest.

          one of the smallest

          somewhere in the middle given ratios go as high as 170% and fall as low as 27% (as of 2000).

          Exactly the same as other developed countries, such as Japan and Italy.
 0                 882943934        MultipleChoice   95

38. Pencils and erasers are complements. An increase in the price of one (pencils) will result in: (Points :
2)

          A decrease in the demand for the other (erasers)

          An increase in the demand for the other (erasers)

          A decrease in the quantity demanded of the other (erasers)

          An increase in the quantity demanded of the other (erasers)
 0                 882943935        MultipleChoice   106

39. In late 2003, news reports hit the airways stating that scientists had found evidence of BSE, or "Mad
Cow Disease", in U.S. cattle. At the same time, many cattle ranchers had to leave the market because their
contaminated cattle had to be put to death. What happens to the demand and supply for red meat? (Points
: 2)
         Demand decreases and supply increases

         Demand increases and supply increases

         Demand decreases and supply decreases

         Demand increases and supply decreases
 0                882943936        MultipleChoice   108

40. In late 2003, news reports hit the airways stating that scientists had found evidence of BSE, or "Mad
Cow Disease", in U.S. cattle. At the same time, many cattle ranchers had to leave the market because their
contaminated cattle had to be put to death. What happens to in the market for red meat? (Points : 2)

         Equilibrium price is indeterminate but equilibrium quantity decreases

         Equilibrium price is indeterminate but equilibrium quantity increases

         Equilibrium price decreases but equilibrium quantity is indeterminate

         Equilibrium price increases but equilibrium quantity is indeterminate
 0                882943937        MultipleChoice   109

41. An increase in the quantity of resources (Points : 2)

         shifts the PPC inward.

         shifts the PPC outward.

         moves the economy to a point higher up on a given PPC.

         moves the economy to a point further down a given PPC.
 0                882943938        MultipleChoice   116

42. Two countries that specialize their production along the lines of comparative advantage and then trade
with one another will be able to: (Points : 2)

         both produce and consume more.

         produce more and consume less.

         produce less and consume more.

         both produce and consume less.
 0                882943939        MultipleChoice   127

43. If Max's demand for hot dogs falls as his income rises, then hot dogs are (Points : 2)

         a bad good.

         an inferior good.

         a preferential good.

         a normal good.
 0                882943940        MultipleChoice   128

44. If people begin to favor science fiction novels to a greater degree than previously, the demand curve
for science fiction novels (Points : 2)

         shifts rightward.
         shifts leftward.

         stays constant.

         can shift either rightward or leftward.
 0                 882943941         MultipleChoice   131

45. As the price of good X rises, the demand for good Y falls. Therefore, goods X and Y are (Points : 2)

         substitutes.

         normal goods.

         complements.

         inferior goods.
 0                 882943942         MultipleChoice   132

46. A rightward shift in the demand curve for tennis balls could be caused by (Points : 2)

         a fall in the price of tennis balls.

         a fall in the price of tennis rackets.

         a rise in the price of tennis lessons.

         a fall in income, assuming tennis balls are a normal good.
 0                 882943943         MultipleChoice   136

47. Consider a point on a market demand curve. The point represents (Points : 2)

         a single price and the quantity demanded by an individual buyer.

         a single price and the sum of the quantities demanded by all buyers.

         various prices and various quantities demanded.

         various prices and various quantities demanded and supplied added together.
 0                 882943944         MultipleChoice   138

48. At a price for which quantity demanded exceeds quantity supplied, a __________ is experienced,
which pushes the price __________ toward its equilibrium value. (Points : 2)

         surplus; downward

         surplus; upward

         shortage; downward

         shortage; upward
 0                 882943945         MultipleChoice   141

49. If demand falls by a greater amount than supply falls, then equilibrium price __________ and
equilibrium quantity __________. (Points : 2)

         rises; rises

         rises; falls

         falls; rises
          falls; falls
     0              882943946      MultipleChoice    142

50. Price floors (Points : 2)

          cause surpluses when they are effective.

          are effective when they are above the equilibrium price.

          cause fewer exchanges to be made.

          All of the above
     0              882943947      MultipleChoice    145




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