Title: Economic Environment
Course: Demo 1

Q: The economic term “scarcity” describes which of the following conditions?
- Global oil reserves are limited.
- The number of doses of the flu vaccine is not as great as the population.
- The number of slices of pizza remaining on the buffet at a local pizzeria.
A: Global oil reserves are limited.; The number of doses of the flu vaccine is not as great as the population.

Q: Economics is best described as the study of:
- money and financial systems
- sustainable business practices
- how scarcity impacts decisions
A: how scarcity impacts decisions

Q: The economic term “scarcity” describes the condition where:
- there are more consumers with a high income than with a low income
- resources are consumed at a rate that exceeds a business’s forecast for demand
- human wants for goods, services, and resources exceed what is available
A: human wants for goods, services, and resources exceed what is available

Q: Which of the following items are scarce?
- money
- time
- natural resources
A: money; time; natural resources

Q: A hotel staff might be comprised of front desk clerks, housekeeping staff, concierges who provide directions and assistance with activities, and valets who help with luggage and parking. In economic terms, the staff of a hotel is/are an example(s) of:
- scarcity
- natural selection
- division of labor
A: division of labor

Q: The division of labor allows for increased productivity due to:
- scarcity
- natural selection
- specialization
A: specialization

Q: The local golf course just doubled in size from 18 to 36 holes. The cost of maintaining the course has not doubled; it is up by only 60%. If other costs responded similarly, this is an example of:
- the law of supply.
- scarcity.
- economies of scale.
A: economies of scale.

Q: Because resources such as time and money are scarce, businesses, governments and individuals make decisions regarding which of the following:
- how they will use their time and money to receive the greatest benefit.
- whether or not to charge people for using national parks.
- whether they want to produce something domestically or import it.
A: how they will use their time and money to receive the greatest benefit.; whether or not to charge people for using national parks.; whether they want to produce something domestically or import it.

Q: The field of economics that focuses on the actions of individual agents within the economy, like households, workers, and businesses is:
- macroeconomics.
- global economics.
- microeconomics.
A: microeconomics.

Q: An analysis of unemployment rates of the countries in North America since 2008 is an application of:
- microeconomics
- financial economics
- macroeconomics
A: macroeconomics

Q: A microeconomic decision may include(s):
- the price that a local automobile repair shop will charge for its services.
- how a family plans to pay for college tuition for the children.
- the rate of money supply growth set by the Federal Reserve of the United States.
A: the price that a local automobile repair shop will charge for its services.; how a family plans to pay for college tuition for the children.

Q: Which of the following measures are macroeconomic in scope?
- Tax revenue collected by the United States Treasury.
- The trade deficit.
- The taxes deducted from your last paycheck.
- The amount by which your retirement plan balance appreciated.
A: Tax revenue collected by the United States Treasury.; The trade deficit.

Q: The law of demand says that, all else remaining constant:
- market equilibrium will eventually result.
- that an increase in demand will cause market price to fall.
- there is an inverse relationship between price and quantity demanded.
A: there is an inverse relationship between price and quantity demanded.

Q: Wanda’s Widgets is willing to produce 100,000 widgets if they will sell for $10 each but is only willing to produce 10,000 widgets if they will sell for $5 each. If all other variables are held constant, this is an example of:
- the law of demand at work.
- equilibrium pricing.
- the law of supply at work.
A: the law of supply at work.

Q: According to the law of demand, assuming all other variables are held constant, ________.
- as the price of bread increases, the quantity of bread demanded will increase.
- as the demand for bread increases, the price of bread will also increase.
- as the price of bread increases, the quantity of bread demanded will decrease.
A: as the price of bread increases, the quantity of bread demanded will decrease.

Q: Complete the following sentence. If people expect that the price of electronics will increase soon, that belief may result in a(n):
- decrease in the demand for electronics today.
- decrease in the price of electronics today.
- increase in the demand for electronics today.
A: increase in the demand for electronics today.

Q: As the price increases:
- suppliers will produce more.
- buyers will purchase less of the good.
- buyers will demand more of the good to avoid paying even higher prices in the future.
A: suppliers will produce more.; buyers will purchase less of the good.

Q: All else remaining constant, when the price in a market rises:
- demand shifts.
- the quantity demanded rises.
- the quantity supplied falls.
- the quantity demanded falls.
A: the quantity demanded falls.

Q: The downward slope of a demand curve illustrates the pattern that as ________ rises, ________ decreases.
- quantity demanded : price
- quantity supplied : quantity demanded
- price : quantity demanded
A: price : quantity demanded

Q: A supply curve is a graphical illustration of the relationship between price, shown on the vertical axis, and ________, shown on the horizontal axis.
- supply
- quantity demanded
- quantity supplied
A: quantity supplied

Q: Which of the following events will increase supply in the market for natural gas?
- The price of natural gas rises.
- Demand for natural gas increases.
- A new technique for inexpensively accessing new reserves is discovered.
A: A new technique for inexpensively accessing new reserves is discovered.

Q: When an economist is interested in examining the relationship between the price and quantity demanded at various prices, which of the following will provide them with a graphical representation?
- supply schedule
- demand schedule
- demand curve
A: demand curve

Q: Almost all supply curves will share which of the following characteristics?
- The curve will slope down from left to right.
- The curve will slope up from right to left.
- The curve will slope up from left to right.
A: The curve will slope up from left to right.

Q: When the price in some market is above its equilibrium price:
- there is disequilibrium in the market.
- in the typical warehouse for that item, inventory is unintentionally rising.
- the quantity supplied is less than the quantity demanded.
- a shortage exists.
A: there is disequilibrium in the market.; in the typical warehouse for that item, inventory is unintentionally rising.

Q: In economics, “ceteris paribus” refers to an assumption that:
- supply and demand are changing at the same time as all other economic variables.
- price and supply are both changing and all other variables remain constant.
- for simplicity, we assume all external variables except one to be held constant.
A: for simplicity, we assume all external variables except one to be held constant.

Q: Which of the following would cause the supply curve to shift to the right?
- An improvement in technology that increases production efficiency.
- A decrease in production costs.
- An increase in the price of the product.
A: An improvement in technology that increases production efficiency.; A decrease in production costs.

Q: Which of the following are factors that influence the quantity that people are willing and able to consume?
- Price of the good or service and income.
- Consumer preferences and population size.
- Efficiency of production.
A: Price of the good or service and income.; Consumer preferences and population size.

Q: If a drop in the price of taxicab fares shifts the demand curve of private limousine rentals leftward, what does this signify?
- Taxicab rides and limousine rentals are inferior goods.
- Taxicab rides and limousine rentals are normal goods.
- Taxicab rides and limousine rentals are substitutes.
A: Taxicab rides and limousine rentals are substitutes.

Q: When a market is experiencing a shortage, or “excess supply”:
- the equilibrium price is higher than the current market price.
- the quantity supplied is less than the quantity demanded.
- in the typical warehouse for that item, inventory is unintentionally rising.
- there is pressure on the price to fall.
A: the equilibrium price is higher than the current market price.; the quantity supplied is less than the quantity demanded.

Q: Which of the following events will increase supply in the market and shift the supply curve to the right?
- A new technology is introduced that will allow the producer to use fewer natural resources to produce a unit of their good.
- A decrease in the price of inputs to production.
- The government announces that it will subsidize the producer.
A: A new technology is introduced that will allow the producer to use fewer natural resources to produce a unit of their good.; A decrease in the price of inputs to production.; The government announces that it will subsidize the producer.

Q: A change in quantity supplied results from a change in ________, and leads to ________.
- a supply shifter : a shift of the supply curve to the right or left
- quantity demanded : a shift of the supply curve to the right or left
- price : a movement along the supply curve
A: price : a movement along the supply curve

Q: When ________, a typical firm will supply a higher quantity at any given price for its output, and the supply curve will shift to the right.
- prices rise
- there is a population increase
- costs of production fall
A: costs of production fall

Q: A severe freeze has once damaged the Florida orange crop. As a result orange juice producers will pay more for oranges and ultimately consumers will have to pay more for orange juice at the grocery store. The impact on the market for orange juice will cause which of the following to shift to the left?
- the demand curve
- both the supply and demand curves.
- the supply curve
A: the supply curve

Q: In order to discourage people from using potentially dangerous fireworks, the government enacts legislation to tax fireworks. The taxes are treated as costs by businesses, and the result is that the cost of fireworks will increase by over 50%. As a result of this additional tax, which of the following will occur?
- increase in demand
- Increase in supply
- decrease in supply
A: decrease in supply

Q: The equilibrium price for Gizmos is $12, but Gizmos are currently priced at $10 throughout the market. In the typical store that sells gizmos, we might expect:
- the box of available gizmos is often empty.
- you meet people who offer more than $10 for a gizmo.
- the box of available gizmos is always full or overflowing.
A: the box of available gizmos is often empty.; you meet people who offer more than $10 for a gizmo.

Q: In a ________ economy, economic goals and the way that these goals are achieved are determined by the government or the leader (ruler).
- market
- traditional
- command
A: command

Q: Which type of economy is most likely to have fewer regulations and interference from the government?
- mixed market economy
- socialist economy
- market economy
A: market economy

Q: When an economic system is characterized by an emphasis on entrepreneurship and free enterprise, we would classify it as a ________ as opposed to a ________, where the government makes the majority of the decisions regarding economic goals.
- high-income : low-income
- regulated : lack of regulation
- market-oriented : command economy
A: market-oriented : command economy

Q: An economy has remained the same for many years and it is not unusual to see families stay in the same occupation for generations. This is most likely a ________ economy.
- socialist
- command
- traditional
A: traditional

Q: Command economies are characterized by a high degree of government control. Which of the following are examples of communist command economies?
- France and Cuba
- France and Canada
- North Korea and Cuba
A: North Korea and Cuba

Q: Anita lives in a country where the government makes all decisions about what goods and services are produced, how to produce them, and what prices can be charged for them. The government also determines how much to pay workers. What type of economic system is this?
- socialism
- market economy
- communism
A: communism

Q: Under which type of economic system do workers typically work fewer hours and have access to more social benefits provided by the government, such as healthcare, education and childcare?
- communism
- market economy
- socialism
A: socialism

Q: Which economic systems allow at least some businesses to be owned privately and operated for the purpose of making a profit for their owners?
- socialism
- market economy
- communism
A: socialism; market economy

Q: Economic decision making in a market economy is decentralized, meaning:
- market demand, rather than the government, determines the types of goods and services produced.
- businesses are owned and operated by private individuals or groups rather than by the government.
- where people devote their livelihoods is determined largely by the government.
A: market demand, rather than the government, determines the types of goods and services produced.; businesses are owned and operated by private individuals or groups rather than by the government.

Q: Tax rates are usually higher than “average” in ________ economies, to pay for the cost of generous social services provided by the government such as education, child care, health care, unemployment benefits, and pensions.
- traditional
- market
- socialist
A: socialist

Q: In a ________, resources are allocated by a combination of markets and the government.
- communist economy
- traditional economy
- mixed market economy
A: mixed market economy

Q: Government regulation:
- may lead to underground economies in which transactions happen without government approval.
- is often used to enforce fair practices within an economy.
- determines the rules for how an economy functions.
A: may lead to underground economies in which transactions happen without government approval.; is often used to enforce fair practices within an economy.; determines the rules for how an economy functions.

Q: The market value of all goods and services produced by the economy in a given year is known as:
- Rate of Inflation
- Consumer Price Index (CPI)
- Unemployment rate
- Gross Domestic Product (GDP)
A: Gross Domestic Product (GDP)

Q: The unemployment rate is:
- the percentage of adults who are able to work but are unemployed.
- the percentage of the labor force that is unemployed or underemployed.
- the fraction of the population that makes up the working age labor force.
- the percentage of the labor force that is unemployed and actively seeking work.
A: the percentage of the labor force that is unemployed and actively seeking work.

Q: Statistics that indicate change in the status of the economy a few months in the past are called ________ economic indicators.
- leading
- prognosticating
- lagging
A: lagging

Q: All economies in the world share three primary goals, which are:
- growth, happiness, and price stability.
- Productivity, high employment, and price stability
- growth, high employment, and price stability.
A: growth, high employment, and price stability.

Q: Economic indicators:
- are data or statistics used to judge the current or future health of the economy.
- are largely collected and released by government agencies or non-profit groups.
- can help identify new business opportunities in specific industries.
A: are data or statistics used to judge the current or future health of the economy.; are largely collected and released by government agencies or non-profit groups.; can help identify new business opportunities in specific industries.

Q: Using the Consumer Price Index, inflation can be calculated in terms of how the overall cost of ________ changes over time.
- large household goods and high-price services
- all goods and services
- an average basket of goods and services
A: an average basket of goods and services

Q: The percentage change in the weighted average price of consumer goods and services from one time period to the next is the ________.
- GDP deflator
- price index rate
- consumer price index
- inflation rate
A: inflation rate

Q: Reginald looked for work for six months but could not find a job that he wanted or was qualified for so he stopped seeking employment. For purposes of calculating the unemployment rate, he is considered:
- unemployed
- employed
- out of the labor force
A: out of the labor force

Q: If the Consumer Price Index was 120 at the end of last year and is 125 at the end of this year, the country is experiencing which of the following?
- expansion
- deflation
- stagnation
- inflation
A: inflation

Q: Economy-wide fluctuations in production, trade, and economic activity are known as:
- business cycles.
- a source of recurring unemployment.
- inflation.
A: business cycles.; a source of recurring unemployment.

Q: The unemployment rate generally ________ during contractions and ________ during expansions.
- falls : rises
- rises : rises
- rises : falls
A: rises : falls

Q: A business cycle reflects changes in economic activity, particularly real GDP. The phases of a business cycle, in order, are:
- contraction, recession, expansion and boom.
- expansion, trough, contraction and peak.
- trough, expansion, recession and peak.
- expansion, peak, contraction and trough.
A: expansion, peak, contraction and trough.

Q: Which of the following describes a business cycle?
- Inflation sometimes, but not others
- Periods of increasing and decreasing real GDP
- Regular growth rate of consumer spending
A: Inflation sometimes, but not others; Periods of increasing and decreasing real GDP

Q: The point of a business cycle fluctuation during which growth slows, unemployment increases, and pricing pressures subside is called a(n):
- peak.
- expansion.
- contraction.
A: contraction.

Q: Businesses are most likely to hire new employees during which stage of the economic cycle?
- contraction
- trough
- expansion
A: expansion

Q: During an economic ________, business is booming, prices are high, and it is difficult to hire new workers because virtually everyone is already employed.
- contraction
- trough
- peak
A: peak