 1.

What is Economics?

A. The study of how people try to satisfy what appears to be seemingly

unlimited and competing wants through the careful use of relatively scarce
resources

B. Employment, gross domestic product, inflation, economic growth, and the

distribution of income

C. Deals with behavior and decision making by small units, such as

individuals and firms

D. A rise in the general level of prices occurs, workers need more money to
pay for good clothing and shelter

Correct Answer
A. The study of how people try to satisfy what appears to be seemingly unlimited and
competing wants through the careful use of relatively scarce resources

 2. What is Scarcity?

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 A. Giving something up to have something else

B. Extra cost of producing one additional unit of production

C. The condition that results from society not having enough resources to
produce all the things people would like to have

D. A rise in the general level of prices occurs, workers need more money to
pay for good clothing and shelter

Correct Answer
C. The condition that results from society not having enough resources to produce all
the things people would like to have

 3. What are the three basic economic questions?

A. What, where, whom

B. What, how, whom

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 C. How, whom, when

D. What, why, whom

Correct Answer
B. What, how, whom

 4. What are the four factors of production?

A. Land, capital, money, entrepreneurs

B. Land, capital, labor, entrepreneurs

C. Capital, money, supply, demand

D. Labor, capital, supply, demand

Correct Answer
B. Land, capital, labor, entrepreneurs

 5. Definition of Land?
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A. Anything from the earth

B. The space we occupy

C. Gifts of nature

D. All of the above

Correct Answer
C. Gifts of nature

 6. Definition of Capital?

A. The tools, equipment used in the production of goods

B. The machinery, and factories used in the production of goods

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 C. The tools, and machinery used in the production of goods

D. A and B

E. B and C

Correct Answer
D. A and B

 7. Definition of Labor?

A. People with all of the efforts, abilities, and skills

B. The people who are for hire for work

C. People with all of the workmanship, skills, and work

D. The act of performing work at any given time

 Correct Answer
A. People with all of the efforts, abilities, and skills

 8. Definition of Entrepreneur?

A. A risk taker in search of profits who's initila investment must be returned

B. A investor in search of profits who does something new with existing

resources

C. A investor in search of profits who's initial investment must be returned

D. A risk taker in search of profits who does something new with existing
resources

Correct Answer
D. A risk taker in search of profits who does something new with existing resources

 9. What are the many payments for the factors of productions called?

A. Land - wages, labor - interest, capital - rent, entrepreneurs - profit

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B.

Land - rent, labor - wages, capital - interest, entrepreneurs - profit

C.

Land - profit, labor - rent, capital - wages, entrepreneurs - interest

D.

Land - interest, labor - rent, capital - profit, entrepreneurs - wages

Correct Answer
B. Land - rent, labor - wages, capital - interest, entrepreneurs - profit

 10.

What is opportunity cost?

A.

The cost assosiated with any opportunity

B.

Giving the cost in order to have the opportunity

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C.

The cost required in order to succeed

D.

Giving something up to have something else

Correct Answer
D. Giving something up to have something else

 11.

What is PPF?

A.

Possible Production Frontier

B.

Production Possibilities Frontier

C.

Probable Projection Frontier

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D.

Projected Possibilities Frontier

Correct Answer
B. Production Possibilities Frontier

 12.

What do the points along the frontier represent?

A.

Maximum combination of output if all resources are fully employed

B.

Minimum combination of output if all resources are fully employed

C.

Maximum combination of input if all resources are fully employed

D.

Minimum combination of input if all resources are fully employed

 Correct Answer
A. Maximum combination of output if all resources are fully employed

 13.

On the PPF how can a nation achieve growth?

A.

By having more resources or increased productivity

B.

By having an increase in supply and demand

C.

By having less resources or declined productivity

D.

By having an increase in resources and decrease in productivity

Correct Answer
A. By having more resources or increased productivity

 14.
 What does a point inside the curve on a PPF represent?

A.

Production at greater than its minimum potential

B.

Production as less than its minimum potential

C.

Production at greater than its maximum potential

D.

Production as less than its maximum potential

Correct Answer
D. Production as less than its maximum potential

 15.

What is the classic example of a PPF?

A.
 A mythical country called omega producing two goods, guns:butter

B.

A mythical country called alpha producing two goods, bread:butter

C.

A mythical country called omega producing two goods, bread:butter

D.

A mythical country called alpha producing two goods, guns:butter

Correct Answer
D. A mythical country called alpha producing two goods, guns:butter

 16.

What is the circular flow model?

A.

A model which shows the wealth that an economy generates

B.
 A model which shows the wealth that the world generates

C.

A model that shows the recirculation of money in an economy

D.

A model that shows the debt that an economy generates

Correct Answer
A. A model which shows the wealth that an economy generates

 17.

What are the functions of the entrepreneur?

A.

They provide the money necessary for the resources of land, labor, and
capital

B.

They provide the procedures that combines the resources of land, labor,
and capital into new products

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 C.

They provide the initiative that combines the resources of land, labor, and
capital into new products

D.

They provide the drive necessary for the resources of land, labor, and
capital

Correct Answer
C. They provide the initiative that combines the resources of land, labor, and capital
into new products

 18.

Name three types of businesses

A.

Traditional, command, market

B.

Command, market, competitive

C.

Traditional, market, competitive

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D.

Command, traditional, competitive

Correct Answer
A. Traditional, command, market

 19.

Name the types of businesses

A.

Proprietorship, corporation, industrial

B.

Partnership, industrial, commercial

C.

Corporation, proprietorship, commercial

D.

Proprietorship, partnership, corporation

 Correct Answer
D. Proprietorship, partnership, corporation

 20.

Define paradox of value?

A.

Apparent contradiction between the low value of nonessentials and high

value of essentials

B.

Apparent agreement about the nonessentials being less needed and the
essentials being greatly needed

C.

Apparent contadiction between the high value of nonessentials and low

value of essentials

D.

Apparent agreement about the nonessentials being greatly needed and the
essetials being less needed
 Correct Answer(s)
A. Apparent contradiction between the low value of nonessentials and high value of
essentials
C. Apparent contadiction between the high value of nonessentials and low value of
essentials

 21.

What is the classic example of paradox of value?

A.

Water in great excess being worth less than diamonds in scarce excess
being worth more

B.

Water in scarce excess being worth more than diamonds in great excess
being worth less

C.

Water in great excess being worth more than diamonds in scarce excess
being worth less

D.
 Water in scarce excess being worth less than diamonds in great excess
being worth more

Correct Answer
A. Water in great excess being worth less than diamonds in scarce excess being worth
more

 22.

What are the goals of the American Free Enterprise?

A.

Economic freedom, voluntary exchange, private property rights, profit

motive, and competition

B.

Economic freedom, lack on monopolies, private property rights, profit

motive, and competition

C.

Economic freedom, voluntary exchange, prevailence of rights, profit

motive, and competition

D.
 Economic freedom, voluntary exchange, private property rights, profit
margain reduction, and competition

Correct Answer
A. Economic freedom, voluntary exchange, private property rights, profit motive, and
competition

 23.

What is the law of demand?

A.

Rule stating that the quantity demanded of a good or service does not vary
with its availability

B.

Rule stating that the quantity demanded of a good or service does not vary
with its price

C.

Rule stating that the quantity demanded of a good or service varies

inversely with its availability

D.
 Rule stating that the quantity demanded of a good or service varies
inversely with its price

Correct Answer
D. Rule stating that the quantity demanded of a good or service varies inversely with
its price

 24.

What is the law of supply?

A.

The principle that suppliers will normally offer less for sale at high prices
and more at lower prices

B.

The principle that suppliers will normally offer more for sale at high prices
and less at lower prices

Correct Answer
B. The principle that suppliers will normally offer more for sale at high prices and less
at lower prices

 25.

What causes the demand curve to shift?

A.
 The increase/decrease in need

B.

The increase/decrease in volume

C.

The increase/decrease in price

D.

The increase/decrease in production

Correct Answer
C. The increase/decrease in price

 26.

What causes the increase in supply?

A.

The increase/decrease in demand

B.
 The increase/decrease in production

C.

The increase/decrease in volume

D.

The increase/decrease in price

Correct Answer
A. The increase/decrease in demand

 27.

What is equilibrium?

A.

A situation in which prices are very unstable

B.

A situation in which prices are very unreliable

C.
 A situation in which prices are relatively stable

D.

A situation in which prices always fluctuate

Correct Answer
C. A situation in which prices are relatively stable

 28.

What is Shortage?

A.

A situation in which the quantity demanded is greater than the quantity

supplied at a given price

B.

A situation in which the quantity demanded is less than the quantity

supplied at a given price

C.

A situation in which the quantity demanded is not offered by the

manufacturer
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D.

A situation in which the quantity demanded can not meet the supply
provided

Correct Answer
A. A situation in which the quantity demanded is greater than the quantity supplied at
a given price

 29.

What is Surplus?

A.

A situation in which the quantity supplied is not met by the manufacturer

B.

A situation in which the quantity demanded is greater than the quantity

demanded at a given price

C.

A situation in which the quantity supplied is less than the quantity

demanded at a given price
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D.

A situation in which the quantity supplied is greater than the quantity

demanded at a given price

Correct Answer
D. A situation in which the quantity supplied is greater than the quantity demanded at
a given price

 30.

What is a price ceiling?

A.

A minimum legal price in order to maintain agreement

B.

A maximum legal price in order to maintain agreement

C.

A maximum legal price that can be charged for a product

D.
 A minimum legal price that can be charged for a product

Correct Answer
C. A maximum legal price that can be charged for a product

 31.

What is a price floor?

A.

Highest legal price that can be paid for a good or service

B.

Lowest legal price that can be paid for a good or service

C.

Highest legal price that can be charged in order to maintain agreement

D.

Lowest legal price that can be charged in order to maintain agreement

Correct Answer
B. Lowest legal price that can be paid for a good or service
 32.

What is elastic?

A.

When a given change in price causes a relatively larger change in quantity

demanded

B.

When a given change in quantity demanded causes a relatively larger

change in price

C.

When a given change in price causes a relatively smaller change in

quantity demanded

D.

When a given change in quantity demanded causes a relatively smaller

change in price

Correct Answer
A. When a given change in price causes a relatively larger change in quantity
demanded
 33.

What is inelastic?

A.

When a given change in quantity demanded causes a relatively smaller

change in price

B.

When a given change in price causes a relatively larger change in the

quantity demanded

C.

When a given change in price causes a relatively smaller change in the

quantity demanded

D.

When a given change in quantity demanded causes a relatively larger

change in price

Correct Answer
C. When a given change in price causes a relatively smaller change in the quantity
demanded
 34.

What is unit elastic?

A.

If change in quantity demanded causes a proportional change in price

B.

If change in price does not cause a proportional change in quantity

demanded

C.

If change in price causes a proportional change in quantity demanded

D.

If change in quantity demanded does not cause a proportional change in

price

Correct Answer
C. If change in price causes a proportional change in quantity demanded

 35.

If prices and revenue move in opposite directions demand is?

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A.

Increased

B.

Decreased

C.

Unit elastic

D.

Unit inelastic

Correct Answer
C. Unit elastic

 36.

What is microeconomics?

A.
 The area of economics that deals with the behavior and decision making by
small units

B.

The area of economics that deals with the behavior and decision of the
whole world

C.

The branch of economics that deals with the economy as a whole

D.

The branch of economics that deals with the monetary value

Correct Answer
A. The area of economics that deals with the behavior and decision making by small
units

 37.

What is macroeconomics?

A.

The branch of economics that deals with the monetary value

 o

B.

The area of economics that deals with behavior and decision making by
small units

C.

The branch of economics that deals with the economy as a whole

D.

The are of economics that deals with the behavior and decision making of
your personal life

Correct Answer
C. The branch of economics that deals with the economy as a whole

 38.

What is a collusion?

A.

A formal agreement to set prices or to otherwise behave in a cooperative

manner

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 B.

An agreement to have a meeting discussing prices

C.

An informal agreement to set prices or to otherwise behave in a

uncooperative manner

D.

A disagreement upon having a meeting discussing prices

Correct Answer
A. A formal agreement to set prices or to otherwise behave in a cooperative manner

 39.

What are the three functions of money?

A.

Measure of value, store of value, and direction of value

B.

Medium of exchange, measure of value, and store or value

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C.

Measure of value, medium of exchange, and compliance of value

D.

Medium of exchange, store of value, direction of value

Correct Answer
B. Medium of exchange, measure of value, and store or value

 40.

What are the characteristics of money?

A.

Durability, divisibility, limited availability, countability

B.

Divisibility, durability, portability, countability

C.

Limited availability, portability, durability, countability

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D.

Portablility, durability, divisibility, limited availability

Correct Answer
D. Portablility, durability, divisibility, limited availability

 41.

What is commodity money?

A.

Money that has a primary value in being a commodity

B.

Money that has been borrowed from the bank as a loan

C.

Money that has an alternative use as an economic good, or commodity

D.
 Money that has an alternative use as a external way of paying for goods or
services

Correct Answer
C. Money that has an alternative use as an economic good, or commodity

 42.

What is the FED

A.

The central bank

B.

The federal bank

C.

The commision bank

D.

The world bank

Correct Answer
A. The central bank
 43.

What is the FOMC?

A.

Federal Opinion Money Committee

B.

Federal Open Minded Committee

C.

Federal Open Market Committee

D.

Federal Option Money Committee

Correct Answer
C. Federal Open Market Committee

 44.

How many district banks?

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 A.

13

B.

12

C.

22

D.

16

Correct Answer
B. 12

 45.

What are the three tools of the FED?

A.

Open market operations, discount rate, and reserve requirement

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 B.

Open market operations, increased rate, and reserve requirement

C.

Closed market operations, increased rate, and reserve requirement

D.

Closed market operations, discount rate, and reserve requirement

Correct Answer
A. Open market operations, discount rate, and reserve requirement

 46.

Who is the chairman of the FED?

A.

Bob Bernanke

B.

Ben Bernanke

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 C.

Big Bird Bernanke

D.

Bubba Sparks Bernanke

Correct Answer
B. Ben Bernanke

 47.

What is inflation?

A.

A fall in the general level of prices occurs, workers need more money to
pay for goods, clothing, and shelter

B.

A rise in the general level of prices occurs, workers need less money to pay
for goods, clothing and shelter

C.

A fall in the general level of prices occurs, workers need less money to pay
for goods, clothing and shelter
 o

D.

A rise in the general level of prices occurs, workers need more money to
pay for goods, clothing, and shelter

Correct Answer
D. A rise in the general level of prices occurs, workers need more money to pay for
goods, clothing, and shelter

 48.

What is recession?

A.

A period during which real GDP increases for 2 quarters in a row, or 6

consecutive months

B.

A period during which real GDP declinces for 6 quarters in a row, or 2

consecutive months

C.

A period during which real GDP declines for 2 quarters in a row, or 6

consecutive months
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D.

A period during which real GDP increases for 6 quarters in a row, or 2

consecutive months

Correct Answer
C. A period during which real GDP declines for 2 quarters in a row, or 6 consecutive
months

 49.

What is "easy money"?

A.

The FED allows the money supply to grow and the interest rates to fall,
which normally stimulates the economy

B.

The FED stops the money supply from growing and the interest rates to
grow, which normally stimulates the economy

C.

The FED allows the money supply to grown and the interest rates to grow,
which normally deprives the economy
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D.

The FEW stops the money supply from growing and the interest rates to
fall, which normally deprives the economy

Correct Answer
A. The FED allows the money supply to grow and the interest rates to fall, which
normally stimulates the economy

 50.

What is "tight money" policy?

A.

The FED restricts the growth of the money supply, which drives interest
rates up

B.

The FED allows the growth of the money supply, which drives the interest
rates down

C.

The FED restricts the growth of the money supply, which drives the
interest rates down
 o

D.

The FED allows the growth of the money supply, which drives the interest
rates up

Correct Answer
A. The FED restricts the growth of the money supply, which drives interest rates up