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Economics Quiz

Think you know economics? Here are 55 economics questions to test your knowledge. Most questions are microeconomic in nature but there are macroeconomics questions as well. (Multiple choice and Fill in the blank)

1. The assumption that all other markets remain equal is called _________________.

2. Which statement best characterizes the economic problem?
a. We have limited wants, but unlimited resources with which to satisfy them.
b. We have unlimited wants, but limited resources with which to satisfy them.
c. We have unlimited wants and resources but we do not have enough money
d. There is no problem.
e. None of the above

3. A rise in the general price level is measured by ______________.

4. The Unemployment Rate is:
a. A fee paid to the government for not working
b. The percentage of people who are unemployed
c. The percentage of people involuntarily unemployed
d. The percentage of people voluntarily unemployed
e. None of the above

5. Which one of these statements is a normative statement?
a. An increase in the price of pencils will affect the sale of erasers.
b. Lowering taxes is better than getting a higher wage .
c. The inflation rate has increased in the last 3 months.
d. All the above
e. None of the above.

6. Points inside a production possibility curve are:
a. not being used to their full capacity
b. being used beyond their full capacity
c. being used at their full capacity.
d. useless because they don't tell us anything.
e. None of the above

7. To calculate changes in Canada's total output is an example of _____________.
a. Microeconomics
b. Macroeconomics

8. To analyze the changes in the price of watermelons is an example of __________.
a. Microeconomics
b. Macroeconomics


9. What is the opportunity cost of a product?
a. How much it costs to make a product.
b. How much money is needed to purchase a product.
c. The amount of utility you would have to sacrifice in order to gain one more unit of utility from another product.
d. The utility that could have been gained from choosing the products best alternative.
e. c and d

10. The invisible hand theory of competition was proposed by the economist named _____________.

11. According the law of supply:
a. All resources are scarce and we must use them as efficiently as possible.
b. All producers have a supply curve with which they price their goods and services.
c. Supply will is always less then consumers' demand.
d. No producer is allowed to produce more than anyone else.
e. Price and quantity are positively related.

12. Which is an example of the law of demand?
a. As the price of pencils falls, quantity of pencils purchased falls.
b. As the price of pencils rises, quantity of pencils purchased falls.
c. As the price of pencils falls, quantity of pencils purchased rises.
d. b and c
e. All the above.

13. Pencils and erasers are considered what kind of goods?
a. Cheap goods
b. Complimentary goods
c. Substitute goods
d. a and b
e. None of the above

14. Apples and oranges are considered what kinds of goods
a. Expensive goods
b. Complimentary goods
c. Substitute goods
d. a and b
e. None of the above

15. A subway compared to a car is considered a(n) _____________ product.

16. If you are currently taking the subway as your means of transportation and your income suddenly increases, would you purchase more or less subway tickets? (Hint: Your answer should reflect your answer in question 15).
a. less
b. more

17. If the demand for pencils increased, the demand for erasers would most likely:
a. decrease
b. remain unchanged
c. increase
d. pencils and erasers do not affect each other's demand.
e. None of the above.

18. Having more supply than demand at a given price is called a ______________.

19. Having more demand than supply at a given price is called a ______________.

20. If there is a shortage in the Pretzel market, the price of pretzels will:
a. remain unchanged
b. fall
c. rise
d. rise then fall
e. fall then rise

21. Inelastic demand is defined as:
a. Demand for which a percentage change in a product's price causes a larger percentage change in quantity demanded.
b. Demand for which a percentage change in a product's price causes a smaller percentage change in quantity demanded.
c. Demand for which a percentage change in a product's price causes an equal percentage change in quantity demanded.
d. None of the above.

22. Elastic supply is defined as:
a. supply for which a percentage change in a product's price causes a larger percentage change in quantity supplied.
b. supply for which a percentage change in a product's price causes a smaller percentage change in quantity supplied.
c. supply for which a percentage change in a product's price causes a equal percentage change in quantity supplied.
d. None of the above.

23. A price set below an established equilibrium is known as a ______________.

24. A price set above an established equilibrium is known as a ______________.


25. Demand is inelastic if:
a. A 20% change in price leads to a 20% change in demand.
b. A 20% change in price leads to a 30% change in demand.
c. A 20% change in price leads to a 10% change in demand
d. A 20% change in price leads to no change in demand.

26. Demand is perfectly inelastic if:
a. A 20% change in price leads to a 20% change in demand.
b. A 20% change in price leads to a 30% change in demand.
c. A 20% change in price leads to a 10% change in demand
d. A 20% change in price leads to no change in demand.

27. Supply is perfectly inelastic if:
a. the supply curve is horizontal
b. the supply curve is vertical
c. an increase in demand raises equilibrium price, but keeps equilibrium quantity unchanged.
d. b and c
e. All of the above.

28. A rise in good's price from $5 to $7 causes quantity demanded for that good to decline from 5000 to 3000 units. This means the value of the price elasticity of demand is:
a. (-)1.5
b. (-)0.5
c. (-)1.0
d. (-)2.0
e. None of the above.

29. An example of a product that exhibits an inelastic demand would be:
a. Medicine
b. Gasoline
c. Toronto Maple Leafs Tickets for Game 7 of the Stanley Cup Final (No close substitutes)
d. All of the above.
e. None of the above.

30. An increase in the price of an item from $400 to $800 leads to a rise in the item's quantity supplied from 200,000 to 300,000 units. The value of the price elasticity of supply is therefore:
a. 0.5
b. 0.7
c. 0.6
d. 1.0
e. 0.8

31. A situation in which a percentage increase in all inputs causes a larger percentage increase in output is known as _____________returns to scale.

32. A situation in which a percentage increase in all inputs causes a equal percentage increase in output is known as _____________returns to scale.

33. A business maximizes productive efficiency by:
a. using the fewest resources
b. using the most resources.
c. producing the most output
d. producing the output level with the lowest possible cost
e. producing a given output at the lowest possible cost.

34. In the short-run:
a. All costs are fixed.
b. All costs are variable.
c. At least one cost is fixed.
d. At least one cost is variable.
e. No costs are fixed or variable.

35. In the long-run:
a. All costs are fixed.
b. All costs are variable.
c. At least one cost is fixed.
d. At least one cost is variable.
e. No costs are fixed or variable.

36. Marginal Cost is:
a. The increase in cost as a result of producing 1 additional unit of output.
b. The same as Average Cost.
c. The costs that occur because production has stopped.
d. Variable Costs + Fixed Costs
e. None of the above.

37. A sole proprietorship and a partnership share this quality or qualities in common.
a. They have at least one owner.
b. The owner(s) have unlimited liability on business debts.
c. They are both unincorporated.
d. All the above.
e. None of the above.

38. Average Product rises when:
a. Total cost is falling.
b. Total revenue is rising.
c. When it exceeds Marginal Revenue.
d. When it exceeds Marginal Product.
e. None of the above.

39. Accounting profit and Economic profit are the same.
a. True
b. False

40. The minimum return necessary for owners to keep funds and their entrepreneurial skills in their business is known as ___________ profit.

Questions 41-44 are answered using the following terms below. Please only use each term once.
Perfect Competition, Monopolistic Competition, Oligopoly, Monopoly

41. A market structure characterized by many buyers and sellers of slightly different products and easy entry to, and exit from, the industry is known as __________________.

42. A market structure characterized by only one business supplying a product with no close substitutes and restricted entry to the industry is known as ____________________.

43. A market structure characterized by only a few businesses offering standard or similar products and restricted entry to the industry is known as _______________________.

44. A market structure characterized by many buyers and sellers of a standard product and easy entry to and exit from the industry is known as ____________________.

45. An unfair business practice of temporarily lowering prices to drive out competitors in an industry is known as:
a. Monopoly
b. Predatory Pricing
c. Price Fixing
d. Price gauging
e. Price Floor

46. When should a firm shutdown?
a. When profits are high, get out while you still can.
b. When average revenue equals the minimum average variable cost.
c. When average revenue equals the maximum average variable cost.
d. When average revenue equals the maximum average fixed cost.
e. When average revenue equals the minimum average fixed cost.

47. The maximizing profit rule says to produce where:
a. Average cost equals marginal revenue.
b. Marginal cost equals average cost.
c. Marginal revenue equals marginal cost.
d. Average cost equals average revenue.
e. None of the above.

48. The breakeven point is where:
a. (Price X Quantity) equals average cost
b. Marginal cost equals average cost.
c. Marginal revenue equals marginal cost.
d. Average cost equals average revenue.
e. a and d

49. What is collusion?
a. several business acting together to fix the price in the market place.
b. Oligopolies trying to act collectively as a Monopoly.
c. One business setting its price lower than other business in an Oligopoly.
d. a and b
e. b and c

50. A kinked demand curve
a. Occurs in an Oligopoly
b. Occurs only in an Oligopoly
c. explains why rival Oligopolists keep their prices constant
d. a and c
e. All of the above

51. A monopolist's demand curve:
a. is the same as the market demand curve
b. is elastic
c. is inelastic
d. is perfectly inelastic
e. is perfectly elastic

52. The effect of advertising:
a. is very effective for business and consumers.
b. is not very effective for businesses and consumers.
c. is unknown for businesses and consumers
d. is effective for consumers but costly to businesses.
e. is effective for businesses but costly for consumers.

53. Nonprice competition only occurs in these two markets.
a. Oligopoly and Monopoly
b. Oligopoly and Monopolistic Competition
c. Monopoly and Monopolistic Competition
d. Perfect Competition and Monopoly.
e. Perfect Competition and Oligopoly.

54. A Monopolistic Competitor's demand curve is:
a. is the same as the market demand curve
b. is elastic
c. is inelastic
d. is perfectly inelastic
e. is perfectly elastic

55. If an oligopolist in a market characterized by rivalry:
a. lowers its price, then market competitors will raise their prices
b. raises its price, then market competitors will attempt to persuade it to reverse this price increase
c. lowers its price, then market competitors will tend to keep their prices the same.
d. raises its price, then market competitors will tend to match this price rise.
e. lowers its price, then market competitors will tend to match this price drop.


Answers

1. ceteris paribus
2. b
3. inflation
4. c
5. b
6. a
7. b
8. a
9. e
10. Adam Smith
11. e
12. d
13. b
14. c
15. inferior
16. a
17. c
18. surplus
19. shortage
20. c
21. b
22. a
23. price ceiling
24. price floor
25. c
26. d
27. d
28. a
29. d
30. c
31. increasing
32. constant
33. e
34. c
35. b
36. a
37. d
38. d
39. b
40. normal
41. Monopolistic Competition
42. Monopoly
43. Oligopoly
44. Perfect Competition
45. b
46. b
47. c
48. e
49. d
50. e
51. a
52. c
53. b
54. b
55. e

 

 

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