PART I – Multiple Choice (2 points each – answer all questions; 60 points
PART I – Multiple Choice (2 points each – answer all questions; 60 points total) Complete the objective questions on the answer sheet provided 1. Which of the following would most likely shift a production possibilities curve to the right? a. shifting resources from the production of one good to the production of another b. a decline in the size of the labor force c. an improvement in the education level of the work force of a nation d. a sudden substantial increase in consumer desires to purchase goods 2. Money should not be considered an economic resource because: a. it is not a free gift of nature such as land b. the terms of trade between nations can be specified in non-monetary terms c. idle money balances do not earn interest income d. money, as such, is not productive 3. Which of the following is an example of real capital? a. a phonograph record b. a share of IBM stock c. a savings account d. a dump truck 4. A change in demand means that: a. the quantity demanded is changing as price changes b. there has been a change in the price elasticity of demand c. the shift of a demand curve is taking place d. a movement along a given demand curve is taking place 5. Which of the following statements is not true of economics? a. It is a social science. b. It assumes limited human wants. c. It is analytical. d. It promotes material well-being. 6. On the production-possibilities diagram, unemployment is represented by: a. a point on the production-possibilities curve; b. a point outside the production-possibilities curve; c. a point inside the production-possibilities curve; d. the point at which the production-possibilities curve touches each axis. 7. The production-possibilities curve: a. shows all of the combinations of two goods which are most preferred by a society; b. is a frontier between all combinations of two goods which can be produced and those combinations which cannot be produced; c. indicates that any combination of goods lying outside the curve are inefficient; d. shows all of those levels of production which are consistent with a stable price level. 8. If there is a shortage in the supply of a product, we can conclude that its price: a. is in equilibrium b. will fall in the near future c. is above the equilibrium level d. is below the equilibrium level 9. An increase in supply and an increase in demand will cause the equilibrium: a. price to rise and the quantity to change in an indeterminate way; b. price to fall and the quantity to change in an indeterminate way; c. price to change in an indeterminate way and the quantity to rise; d. price to change in an indeterminate way and the quantity to fall. 10. A decrease in supply and an increase in demand will cause the equilibrium: a. price to rise and the quantity to change in an indeterminate way; b. price to fall and the quantity to change in an indeterminate way; c. price to change in an indeterminate way and the quantity to rise; d. price to change in an indeterminate way and the quantity to fall. Which of the following is most likely to cause a decrease in the current demand for some product X? a. an increase in consumer prices; b. a decrease in the price of close substitute product Y; c. an increase in the expected future price of X; d. an increase in the price of product X. 12. Which of the following is unique to the capitalist ideology? a. the use of money b. specialization c. private property d. extensive use of capital goods 13. Which of the following will not cause the demand for product X to change? a. a change in consumer tastes b. an increase in consumer incomes c. a change in price of substitute product Y d. a change in the price of product X 14. If X is a normal good, an increase in consumers' money income will shift the: a. demand curve for X to the right b. demand curve for X to the left c. supply curve for X to the right d. supply curve for X to the left 15. The most efficient combination of resources which can be used to produce a given level of output is that which: a. conserves most on the resources which are most plentiful b. uses the smallest total amount of resources c. comes the closest to using equal quantities of all resources 16. The enactment of a guaranteed annual income for all families would be an illustration of which of the following governmental functions? a. stabilization b. Enhancing competition c. redistribution of income d. Provision of public goods 17. A social good might be defined as one which: a. yields benefits only to the individual who buys it b. yields widespread benefits which cannot readily be denied to the public at large c. entails rising costs of production d. has no spillovers associated with its production or consumption 18. The price system corrects for a shortage by: a. lowering the price and profits of firms causing the shortage b. raising the price and the producer's profits c. lowering the price, but increasing the producer's profits d. raising the price, but lowering the producer's profits 19. An owner's liability for the debts of a business is: a. limited in a partnership b. limited to the owner's investment in a sole proprietorship c. unlimited in a partnership d. is limited to the assets of bondholders in a corporate form of organization 20. Which of the following is the most important source of revenue to the various state governments in the United States? a. personal income taxes b. Payroll taxes c. sales taxes d. Corporate income taxes 21. On the basis of cost-benefit analysis, government should: a. undertake Plan A b. undertake Plan B c. undertake Plan C d. undertake Plan D 22. A tax is regressive if the: a. tax rate varies inversely with income b. percentage of income paid as taxes increases as income increases c. percentage of income paid as taxes is the same regardless of the amount of income 23. The benefits received principle of taxation is most evident in: a. the corporate income tax b. Excise taxes on gasoline c. the personal income tax d. Inheritance taxes 24. The economizing problem is essentially one of deciding how the make the best use of: a. limited resources to satisfy limited wants b. unlimited resources to satisfy limited wants c. limited resources to satisfy virtually unlimited wants d. virtually unlimited resources to satisfy virtually unlimited wants 25. “Because of unseasonably cold weather, the supply of oranges has decreased substantially.” This statement indicates that: a. the price of oranges will soon fall b. the amount of oranges that will be available at various prices in the market has declined c. the equilibrium quantity of oranges will rise d. the demand for oranges will necessarily rise 26. A market is in equilibrium: a. whenever the demand curve slopes downward and the supply curve slopes upward; b. if the amount which producers want to sell is equal to the amount which consumers want to buy; c. at all prices above that shown by the intersection of supply an demand; d. provided there is no surplus in the market. 27. Which of the following best describes the “invisible hand” concept? a. central direction by the government will improve resource allocation in a capitalist economy b. mixed capitalism is the best system for overcoming the limited resources – unlimited wants problem c. the non substitutability of resources gives rise to a conflict between private and public interests and the need for government intervention d. the desires of resource suppliers and producers to further their own self- interests will automatically further the public interest 28. In 1948, the money GNP was $520 billion and the price index was 120. In order to make the 1948 GNP comparable with the base year, the 1948 GNP must be adjusted to: a. $370 billion c. &
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