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Online Economics Final Exam- Multiple Choice

Economic decisions involve doing what with resources to produce goods and services for people to consume?

A. Allocating
B. Marginalizing
C. Renewing
D. Satisfying

A. Allocating
Economics is about the production of goods and services, which requires the allocation of what?

A. Benefits
B. Consumption
C. Resources
D. Utility

C. Resources
In an economic system, decisions need to be made about productive resources and which of the following?

A. Allocation
B. Growth
C. Protection
D. Sustainability

A. Allocation
Which of these government policies pursues the economic goal of equity?

A. Protecting consumers from fraud
B. Providing welfare benefits
C. Preventing monopolies
D. Ending a recession

B. Providing welfare benefits
Which of these government policies pursues the economic goal of growth?

A. Keeping taxes low
B. Increasing the money supply
C. Borrowing money using bonds
D. Protecting consumers from fraud

B. Increasing the money supply
Which of these government policies pursues the economic goal of freedom?

A. Ending a recession
B. Avoiding a budget deficit
C. Increasing the money supply
D. Protecting consumers from fraud

D. Protecting consumers from fraud
What is the purpose of a free-market system?

A. To protect the conditions that enable
specialization
B. To stimulate the growth of the gross domestic
product
C. To raise the standard of living for everyone in the
country
D. To allow consumers and producers to make their
own decisions

D. To allow consumers and producers to make their decisions
Which of these is one of the principles of a free-market system?

A. The gross domestic product must be as large as
possible.
B. The government must prevent consumers from
being coerced.
C. Productive resources must be protected against
overexploitation.
D. Public goods must be provided to secure a high
standard of living.

B. The government must prevent consumers from being coerced
Which of these is required to have a free-market system?

A. Laws against theft, fraud, and coercion
B. Government provision of public goods
C. Tight control over the money supply
D. Sustainable development

A. Laws against theft, fraud, and coercion
Why do economists measure the gross domestic product?

A. To see how much economic activity there is in a
particular country
B. To estimate how much the government must tax
to avoid a budget deficit
C. To enable the Fed to decide whether to increase
or decrease the money supply
D. To determine whether consumers and producers
are making free choices

A. To see how much economic activity there is in a
particular country
What does the inflation rate indicate?

A. How far in debt the government is
B. How much the minimum wage has increased
C. How quickly prices are rising
D. How much interest is being charged on mortgages

C. How quickly prices are rising
Which of these economic indicators is most likely to be high during a recession?

A. Retail sales
B. Gross domestic product
C. Unemployment rate
D. Per capita personal income

C. Unemployment rate
How does the assembly line benefit the economy?

A. It enables low taxation.
B. It provides maximum utility.
C. It keeps distribution costs low.
D. It increases productivity.

D. It increases productivity
How does use of cargo containers benefit the economy?

A. By decreasing pollution
B. By keeping distribution costs low
C. By preventing protective tariffs
D. By generating renewable energy

B. By keeping distribution costs low
How has the Internet benefited the economy?

A. By making it difficult for repressive governments to
censor their citizens
B. By lowering overhead costs for retailers and
driving prices to all-time lows
C. By providing the government with a more efficient
means of collecting taxes
D. By improving communication and allowing greater
trade and specialization

D. By improving communication and allowing greater
trade and specialization
In a free-market system, consumers let producers know what they want to buy and how much they’re willing to pay through what?

A. Boycotts
B. Their credit reports
C. Collective bargaining
D. Their purchases

D. Their purchases
In order to know what people want to buy and how much they’re willing to pay, producers pay attention to what?

A. The size of the money supply
B. Interest rates set by the Fed
C. Consumers’ purchases
D. Economic indicators

C. Consumers’ purchases
Producers use market research in order to do what?

A. Find out what consumers want to buy
B. Drive other companies out of business
C. Make better investment decisions
D. Keep the costs of production low

Find out what consumers want to buy
Utility is a measure of what?

A. Value
B. Money
C. Usefulness
D. Satisfaction

D. Satisfaction
The satisfaction that consumers get from their purchases is known as what?

A. Utility
B. Marginalism
C. Subjectivity
D. Materialism

A. Utility
Consumers use cost-benefit analysis in order to maximize what?

A. Productivity
B. Rationality
C. Utility
D. Value

C. Utility
The purpose of advertising is to do what?

A. Keep prices low
B. Create a monopoly
C. Influence consumer behavior
D. Conduct market research

C. Influence consumer behavior
A consumer who is reluctant to take chances has a high level of what?

A. Income
B. Profitability
C. Risk aversion
D. Marginal utility

C. Risk aversion
The non-monetary considerations that affect consumers’ decisions are often based on what?

A. Advertising
B. Values and beliefs
C. Government planning
D. Decreasing marginal utility

B. Values and beliefs
Match each type of market structure with an example of an industry that fits that type of competition.

A. Pure competition Fast food
B. Monopoly Cable television
C. Monopolistic competition Online auctioning
D. Oligopoly Airlines

A. Pure competition C. Fast food
B. Monopoly B. Cable television
C. Monopolistic competition A. Online auctioning
D. Oligopoly. D. Airlines
Match each type of market structure with its corresponding example.

A. Pure competition Digital cameras
B. Monopoly Online auctioning
C. Monopolistic competition Video rental
D. Oligopoly Sewer service

A. Pure competition D. Digital cameras
B. Monopoly A. Online auctioning
C. Monopolistic competition C. Video rental
D. Oligopoly B. Sewer service
Match each type of market structure with its corresponding example.

A. Pure competition Fast food
B. Near monopoly Computer operating systems
C. Monopolistic competition Online auctioning
D. Oligopoly Automobiles

A. Pure competition C. Fast food
B. Near monopoly B. Computer
operating systems
C. Monopolistic competition A. Online auctioning
D. Oligopoly D. Automobiles
Match each type of business with one of its features.

A. Sole proprietorship Board of directors
B. Partnership Limited liability
C. Public corporation Unlimited liability
D. Nonprofit corporation A goal to benefit its members

A. Sole proprietorship C. Board of directors
B. Partnership B. Limited liability
C. Public corporation A. Unlimited liability
D. Nonprofit corporation D. A goal to benefit its
members
Match each type of business with one of its features.

A. Sole proprietorship Unlimited liability
B. General partnership Public regulation
C. Public corporation Stockholder control
D. Government corporation Collective decision making

A. Sole proprietorship A. Unlimited liability
B. General partnership D. Public regulation
C. Public corporation C. Stockholder control
D. Government corporation B. Collective decision
making
Match each type of business with one of its features.

A. Sole proprietorship Profits paid out as dividends
B. Partnership Sharing of profits
C. Corporation No profits made
D. Government corporation All profits retained

A. Sole proprietorship C. Profits paid out as
dividends
B. Partnership B. Sharing of profits
C. Corporation D. No profits made
D. Government corporation A. All profits retained
According to the law of supply and demand, when supply increases what else happens?

A. Demand will decrease.
B. Productivity will decrease.
C. Quantity supplied will decrease.
D. Prices will decrease.

D. Prices will decrease
Which of these is most likely to lead to a decrease in the price of a good?

A. Demand decreases and supply remains the same.
B. Demand increases and supply decreases.
C. Demand increases as fast as supply increases.
D. Demand decreases and supply decreases the
same amount.

A. Demand decreases and supply remains the same
What happens when demand for a good increases but its supply decreases?

A. The level of profit increases.
B. The price for the good increases.
C. Government rationing takes place.
D. Competition among producers decreases.

B. The price for the good increases.
Match each of the terms below with an example that fits the term.

A. Fungibility The provision of a public good
B. Elasticity The demand for jewelry
C. Non-excludability The switch from white bread to
wheat bread
D. Substitution The production of potatoes

A. Fungibility C. The provision of a public
good
B. Elasticity B. The demand for jewelry
C. Non-excludability D. The switch from white
bread to wheat bread
D. Substitution A. The production of
potatoes
Match each of the terms below with an example that fits the term.

A. Fungibility The production of gasoline
B. Inelasticity The switch from coffee to tea
C. Non-excludability The provision of national defense
D. Substitution The demand for cigarettes

A. Fungibility A. The production of gasoline
B. Inelasticity D. The switch from coffee to
tea
C. Non-excludability C. The provision of national
defense
D. Substitution B. The demand for cigarettes
Match each of the terms below with an example that fits the term.

A. Fungibility Production of rice
B. Inelasticity Demand for food and shelter
C. Non-excludability Environmental protection
D. Substitution Switching from butter to margarine

A. Fungibility A. Production of rice
B. Inelasticity B. Demand for food and
shelter
C. Non-excludability C. Environmental protection
D. Substitution D. Switching from butter to
margarine
Which of these is most likely to lead to an increase in wages?

A. Outsourcing and offshoring
B. The use of an assembly line
C. The formation of a labor union
D. A government with a budget surplus

C. The formation of a labor union
What is likely to happen if the size of the labor pool suddenly increases?

A. Prices will go up.
B. Profits will decrease.
C. The minimum wage will rise.
D. Wages will go down.

D. Wages will go down
A high level of what is most likely to lead to a higher wage?

A. Education
B. Immigration
C. Market concentration
D. Government regulation

A. Education
Put the phases of the business cycle in the correct order in which they follow a depression.

Recession, Boom, Recovery, Depression

1. Recovery
2. Boom
3. Recession
4. Depression
Put the phases of the business cycle in the correct order in which they follow a recession.

Depression, Boom, Recession, Recovery

1. Depression
2. Recovery
3. Boom
4. Recession
Put the phases of the business cycle in the correct order in which they follow a boom.

Boom, Recovery, Recession, Depression

1. Recession
2. Depression
3. Recovery
4. Boom
Why is a fractional reserve banking system necessary?

A. To enable the government to charge lower taxes
B. To provide the regulation of the global economy
C. To enable banks to loan out money to make a
profit
D. To prevent the money supply from growing too
quickly

C. To enable banks to loan out money to make a
profit
What is the purpose of the required reserve ratio?

A. To keep central banks from having too much
influence over currency exchange rates
B. To provide government planners with accurate
information about economic indicators
C. To make sure banks have enough money on hand
to meet customers’ withdrawal requests
D. To prevent the government from getting so far
into debt that the economy is weakened

C. To make sure banks have enough money on hand to meet customers’ withdrawal requests
Under a fractional reserve banking system, the amount of money loaned out can only increase if what happens?

A. Taxes are reduced.
B. The money supply increases.
C. There are more government bonds for sale.
D. The required reserve ratio is lowered.

D. The required reserve ratio is lowered.
Which is not a policy tool used by the Fed?

A. Setting the discount rate
B. Buying and selling bonds
C. Making tax cuts
D. Setting the required reserve ratio

C. Making tax cuts
What is not a way that the Fed can generate an increase in the money supply?

A. Buying bonds
B. Lowering the discount rate
C. Reducing the required reserve ratio
D. Cutting taxes

D. Cutting taxes
Which of these is the Fed not able to do?

A. Prevent a budget deficit
B. Regulate private banks
C. Sell government bonds
D. Increase the money supply

A. Prevent a budget deficit
Which of these is most likely to lead to an increase in the price of a company’s stock?

A. Its dividends are reduced.
B. Its outstanding shares are sold.
C. Its profits increase.
D. Its market capitalization declines.

C. Its profits increase.
What is most likely to push the price of a company’s stock higher?

A. An increase in demand for the company’s stock
B. An increase in demand for the company’s products
C. An increase in the exchange rate for the U.S.
dollar
D. An increase in tariffs paid by the company’s
competitors

A. An increase in demand for the company’s stock
Which of these is most likely to lead to a decrease in the price of a company’s stock?

A. Its annual profits decrease.
B. Its outstanding shares are sold.
C. Its suppliers decrease their prices.
D. Its competitors go out of business

A. Its annual profits decrease.
Why is it possible to make money in the currency exchange market?

A. Inflation always drives up the value of money.
B. Governments always buy their own currencies.
C. Exchange rates are always fluctuating.
D. Some currencies are minted with precious metals

C. Exchange rates are always fluctuating.
Buying a bond is similar to which of the following?

A. Paying a dividend
B. Giving a loan
C. Getting a mortgage
D. Going into credit card debt

B. Giving a loan
What kind of goods are sold in the commodity market?

A. Normal
B. Monetary
C. Substitution
D. Unprocessed

D. Unprocessed
When a company goes public, it begins doing what?

A. Issuing government bonds
B. Offering new products for sale
C. Paying corporate income taxes
D. Selling shares of stock

D. Selling shares of stock
An initial public offering (IPO) is when a company does what?

A. Enters into a new partnership
B. Offers a new line of products
C. Begins selling stock to the public
D. Gets taken over by the government

C. Begins selling stock to the public
The purpose of an initial public offering (IPO) is to do what?

A. Get unlimited liability
B. Break into a monopoly market
C. Comply with government regulations
D. Raise money

D. Raise money
Match each type of tax with an example of its use.

A. Capital gains tax 9% tax on all sales
B. Consumption tax 10% tax on gambling winnings
C. Excise tax $0.30 tax on a gallon gasoline
D. Sin tax 15% on profits from stock sales

A. Capital gains tax B. 9% tax on all sales
B. Consumption tax D. 10% tax on gambling
winnings
C. Excise tax C. $0.30 tax on a gallon
gasoline
D. Sin tax A. 15% on profits from stock
sales
Match each type of tax with an example of its use.

A. Capital gains tax 10% on profits from the sale of a house
B. Consumption tax 15% tax to pay for Social Security
C. Excise tax $5 tax on a cable television line
D. Payroll tax 6% tax on all sales

A. Capital gains tax A. 10% on profits from the sale
of a house
B. Consumption tax D. 15% tax to pay for Social
Security
C. Excise tax C. $5 tax on a cable television
line
D. Payroll tax B. 6% tax on all sales
Match each type of tax with an example of its use.

A. Consumption tax 10% tax on gambling winnings
B. Income tax 20% tax on wages earned
C. Excise tax $0.30 tax on a gallon gasoline
D. Sin tax 9% tax on the sale of luxuries

A. Consumption tax D. 10% tax on gambling
winnings
B. Income tax B. 20% tax on wages earned
C. Excise tax C. $0.30 tax on a gallon
gasoline
D. Sin tax A. 9% tax on the sale of
luxuries
The government needs to provide public goods for what reason?

A. Private companies cannot profit by providing them.
B. They are necessary for raising the standard of
living.
C. The government can reduce taxes by profiting
from public goods.
D. Citizens demand government regulation to protect
their freedom.

A. Private companies cannot profit by providing them.
Why are private companies unlikely to provide public goods?

A. Public goods are inferior goods that can never be
sold for a very high price.
B. Private companies are prevented by the
government from producing public goods.
C. The fungibility of public goods makes it easy for
consumers to substitute merit goods.
D. The non-excludability of public goods makes it
difficult to profit from them.

D. The non-excludability of public goods makes it
difficult to profit from them.
Which of these prevents private companies from deciding to produce public goods?

A. Government regulations
B. Protective tariffs
C. Decreasing marginal utility
D. The profit motive

D. The profit motive
Which of these promotes greater efficiency and lower prices by protecting competition?

A. Antitrust laws
B. Small-claims courts
C. Government contractors
D. Environmental-protection laws

A. Antitrust laws
Antitrust laws promote greater efficiency and lower prices by protecting what?

A. Workers
B. Consumers
C. Competition
D. Infant industries

C. Competition
Antitrust laws protect competition and bring about lower what?

A. Efficiency
B. Wages
C. Taxes
D. Prices

D. Prices
Match each unfair business practice with an example of its use.

A. Predatory pricing Local pizza delivery companies
agree to charge $20 for a large
cheese pizza.
B. Making misleading
statements A large auto maker charges a price
below production cost in
order to eliminate small competitors.
C. Price fixing A juice company falsely claims that its
drinks reduce the incidence of heart
attacks.

A. Predatory pricing C. Local pizza delivery
companies agree to
charge $20 for a large
cheese pizza.
B. Making misleading
statements A. A large auto
maker charges a price
below production cost in
order to eliminate small
competitors.
C. Price fixing B. A juice company falsely
claims that its drinks
reduce the incidence of
heart attacks.
Match each action with the unfair business practice it represents.

A. Bid rigging A defense contractor gets its
competitors to agree to enter low
bids.
B. Production limitation Local coffee shops agree to
charge $3 for a cup of coffee.
C. Price fixing A group of oil companies agrees to
reduce the amount of oil each
member produces.

A. Bid rigging A. A defense contractor
gets its competitors to
agree to enter low bids.
B. Production limitation C. Local coffee shops
agree to charge $3 for
a cup of coffee.
C. Price fixing B. A group of oil
companies agrees to
reduce the amount of
oil each member
produces.
Match each type of unfair business practice with its description.

A. Vendor lock-in A large company charges a price
below production cost in order to
eliminate small competitors.
B. Price fixing A group of companies agrees that all
of them will charge the same price.
C. Predatory pricing A company says that a wide range of
products can be used with its
product but this is not true.

A. Vendor lock-in C. A large company charges
a price below production
cost in order to eliminate
small competitors.
B. Price fixing B. A group of companies
agrees that all of them will
charge the same price.
C. Predatory pricing A. A company says that a
wide range of products
can be used with its
product but this is not
true.
Rationing is an attempt to limit shortages that naturally result from what?

A. Boycott
B. Price ceiling
C. Trade embargo
D. Protective tariff

B. Price ceiling
In order to limit the shortages that naturally result from a price ceiling, the government can do what to certain goods?

A. Tax
B. Produce
C. Ration
D. Subsidize

C. Ration
The government sets a price floor in order to protect what?

A. Domestic workers
B. A vulnerable industry
C. International trade
D. Low-income consumers

B. A vulnerable industry
When does Country A have a comparative advantage over Country B in the production of televisions?

A. Country A can produce televisions more cheaply.
B. Country B charges higher prices for its televisions.
C. Country B experiences decreasing marginal utility
in its production of televisions.
D. Country A has a lower opportunity cost for
producing televisions.

D. Country A has a lower opportunity cost for
producing televisions.
When does County X have a comparative advantage in the production of coffee?

A. Country X allows coffee growers to pay very low
wages to their workers.
B. Country X has a higher protective tariff on coffee
than any other country.
C. Country X has the right climate and geography to
grow a lot of coffee for export.
D. Country X doesn’t give up a more efficient form of
production in order to grow coffee.

D. Country X doesn’t give up a more efficient form of production in order to grow coffee.
When does Country X have an absolute advantage over Country Y in the production of corn?

A. Country X can grow corn more cheaply than
Country Y.
B. Country Y has high opportunity costs for growing
corn.
C. The population of Country X consumes less corn
than is grown.
D. The global demand for corn is higher than the
supply from Country Y.
G

A. Country X can grow corn more cheaply than
Country Y.
Which of these results from the mobility of production that characterizes the current global economy?

A. Outsourcing
B. Protectionism
C. Immigration
D. Terrorism

A. Outsourcing
Companies use offshoring in order to do what?

A. Lobby the government
B. Increase market share
C. Reduce labor costs
D. Protect infant industries

C. Reduce labor costs
Low wages in the underdeveloped world give U.S. companies an incentive to do what?

A. Lobby
B. Boycott
C. Colonize
D. Outsource

D. Outsource
Why is renting an apartment usually cheaper than buying a house?

A. Apartments are usually smaller than houses.
B. Leases have lower interest rates than mortgages.
C. Renting involves hidden costs like the security
deposit.
D. Buying a house is an investment that pays off in
the long run.

D. Buying a house is an investment that pays off in
the long run.
Why is buying a house a better investment than renting an apartment?

A. Mortgage payments increase the homeowner’s
equity.
B. Housing prices increase faster than rents.
C. Leases have higher interest than mortgages.
D. Houses are generally larger than apartments.

A. Mortgage payments increase the homeowner’s
equity.
Which of these is a disadvantage of buying a house instead of renting?

A. Homeowners have to get liability insurance.
B. Homeowners must pay for all repairs themselves.
C. Homeowners are in a higher income tax bracket.
D. Homeowners are not allowed to move out when
they want.

B. Homeowners must pay for all repairs themselves.
Match each type of insurance with an example of what it would pay for.

A. Auto insurance Funeral expenses
B. Renter’s insurance A trip to the emergency room
C. Life insurance Repair on a car involved in an
accident
D. Health insurance Replacement of a computer stolen
from an apartment

A. Auto insurance C. Funeral expenses
B. Renter’s insurance D. A trip to the emergency
room
C. Life insurance A. Repair on a car involved
in an accident
D. Health insurance B. Replacement of a
computer stolen from an
apartment
Match each type of insurance with an example of when the insurance company would make a payment.

A. Liability coverage You cause an accident that damages
someone else’s car.
B. Disability insurance You go to the emergency room after
a car accident.
C. Renter’s insurance Your stereo and computer are stolen
from your apartment.
D. Health insurance You have to take a month off from
work because of a broken leg.

A. Liability coverage A. You cause an accident
that damages someone
else’s car.
B. Disability insurance D. You go to the
emergency room after a
car accident.
C. Renter’s insurance C. Your stereo and
computer are stolen
from your apartment.
D. Health insurance B. You have to take a
month off from work
because of a broken
leg.
Match each type of insurance with an example of when the insurance company would make a payment.

A. Collision coverage You cause an accident that
damages your vehicle.
B. Disability insurance You go to the emergency
room after a car accident.
C. Homeowner’s insurance You have a fire in your house
that damages your furniture.
D. Health insurance You lose your job because of a
sports injury.

A. Collision coverage A. You cause an accident
that damages your
vehicle.
B. Disability insurance D. You go to the
emergency room
after a car accident.
C. Homeowner’s insurance C. You have a fire in
your house that
damages your
furniture.
D. Health insurance B. You lose your job
because of a sports
injury.
What is the purpose of a budget?

A. To pay as few taxes as possible
B. To avoid the costs of compliance
C. To keep expenses below income
D. To promote personal values and beliefs

C. To keep expenses below income
What is the goal of using a personal budget?

A. To reduce your tax burden
B. To eliminate your fixed expenses
C. To maximize the return on your investments
D. To save for your future financial goals

D. To save for your future financial goals
What does a budget help you do?

A. Get companies to change their behavior
B. Keep your expenses below your income
C. Avoid being manipulated by salespeople
D. Maximize the return on your investments

B. Keep your expenses below your income
Why are student loans usually guaranteed by the government?

A. Banks charge low interest rates for student loans.
B. Banks are required to maintain a certain reserve
ratio.
C. Banks don’t have any collateral for student loans.
D. Banks would give students credit cards they can’t

C. Banks don’t have any collateral for student loans.
Which of these is a form of self-help financial aid?

A. Liability coverage
B. Scholarships
C. Tuition fees
D. Student loans

D. Student loans
What is one of the features of most student loans?

A. Students don’t have to begin repaying until
they’re done with school.
B. Collateral is provided through the purchase of a
leased automobile.
C. Loan insurance is required in case the student
suffers an injury or illness.
D. Interest rates are high to cover the risk of
students defaulting on their loans.

A. Students don’t have to begin repaying until
they’re done with school.

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