Economics

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Economics

This is a sample practice test created by Maryland FBLA to help you study for your competitive event! It is merely to help you study, so take your time and feel free to take the test as many times as you want. Answers will be shown after you submit.

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Maryland FBLA

Fundamentally, economics deals with *

1 point

Scarcity

Money

Poverty

Banking

Approximately what percentage of the world's economies experience scarcity?

1 point

10%

40%

85%

100%

Clear selection

In a competitive market, the quantity of a product produced and the price of the product are determined by

1 point

A single buyer

A single seller

One buyer and one seller working together

All buyers and all sellers

Clear selection

Which of the following is not a reason perfect competition is a useful simplification, despite the diversity of market types we find in the world?

1 point

Perfectly competitive markets are the easiest to analyze because everyone participating in the market takes the price as given by market conditions.

Some degree of competition is present in most markets.

There are many buyers and many sellers in all types of markets.

Many of the lessons that we learn by studying supply and demand under perfect competition apply in more complicated markets as well.

Clear selection

In general, elasticity is a measure of

1 point

the extent to which advances in technology are adopted by producers.

the extent to which a market is competitive.

how firms’ profits respond to changes in market prices.

how much buyers and sellers respond to changes in market conditions.

Clear selection

Which of the following statements about the consumers’ responses to rising gasoline prices is correct?

1 point

Because gasoline is a necessity, consumers do not decrease their quantity demanded in either the short run or the long run.

Consumers react to a 10% increase in price with about a 10% decrease in quantity demanded in both the short run and long run.

Consumers decrease their quantity demanded more in the short run than in the long run.

Consumers decrease their quantity demanded more in the long run than in the short run.

Clear selection

Welfare economics is the study of

1 point

taxes and subsidies.

how technology is best put to use in the production of goods and services.

government welfare programs for needy people.

how the allocation of resources affects economic well-being.

Clear selection

The particular price that results in quantity supplied being equal to quantity demanded is the best price because it

1 point

maximizes costs of the seller.

maximizes tax revenue for the government.

maximizes the combined welfare of buyers and sellers.

minimizes the expenditure of buyers.

Clear selection

Who once said that taxes are the price we pay for a civilized society?

1 point

Milton Friedman

Theodore Roosevelt

Arthur Laffer

Oliver Wendell Holmes, Jr.

Clear selection

When a country that imported a particular good abandons a free-trade policy and adopts a no-trade policy,

1 point

producer surplus increases and total surplus increases in the market for that good.

producer surplus increases and total surplus decreases in the market for that good.

producer surplus decreases and total surplus increases in the market for that good.

producer surplus decreases and total surplus decreases in the market for that good.

Clear selection

When the nation of Brownland first permitted trade with other nations, domestic producers of wheat experienced an increase in producer surplus of $4 million and total surplus in Brownland’s wheat market increased by $1 million. We can conclude that

1 point

Brownland became an exporter of wheat.

consumer surplus in Brownland increased by $3 million.

the opening of trade caused the domestic supply curve for wheat in Brownland to shift to the left.

this example is inconsistent with the economic theory of international trade.

Clear selection

When a certain nation abandoned a policy of prohibiting international trade in automobiles in favor of a free-tree policy, the result was that the country began to import automobiles. The change in policy improved the well-being of that nation in the sense that

1 point

both producers of automobiles and consumers of automobiles in that nation became better off as a result.

the gains to automobile producers in that nation exceeded the losses of the automobile consumers in that nation.

the gains to automobile consumers in that nation exceeded the losses of the automobile producers in that nation.

even though total surplus in that nation decreased, it was still true that consumer surplus and producer surplus increased.

Clear selection

Some environmentalists argue that we should protect the environment as much as possible, regardless of cost. Which of the following is not a likely outcome of pursuing such a course of action?

1 point

lower levels of nutrition, health care, and housing

a lower standard of living

slowing or reversing technological advancement

the elimination of all pollution

Clear selection

Which of the following statements is correct?

1 point

The use of pollution permits and corrective taxes reduces the cost of environmental protection.

Rich countries usually have cleaner environments than poor countries because a clean environment is like other normal goods in that it has a positive income elasticity.

Clean water and clean air are goods to which the law of demand applies.

All of the above are correct.

Clear selection

A command-and-control policy is another term for a

1 point

pollution permit.

government regulation.

corrective tax.

Both a and b are correct

Clear selection

A city street is

1 point

always a public good, whether or not it is congested.

a public good when it is congested, but it is a common resource when it is not congested.

a common resource when it is congested, but it is a public good when it is not congested.

always a common resource, whether or not it is congested.

Clear selection

A local park filled with picnickers is

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excludable and rival in consumption.

excludable and not rival in consumption.

not excludable and rival in consumption.

not excludable and not rival in consumption.

Clear selection

If a competitive firm is currently producing a level of output at which marginal revenue exceeds marginal cost, then

1 point

a one-unit increase in output will increase the firm's profit.

a one-unit decrease in output will increase the firm's profit.

total revenue exceeds total cost.

total cost exceeds total revenue.

Clear selection

Shrimp Galore, a shrimp harvesting business in the Pacific Northwest, has a 30-year loan on its shrimp harvesting boat. The annual loan payment is $25,000 and the boat has a market (salvage) value that exceeds its outstanding loan balance. Prior to the 2010 shrimp harvesting season, Shrimp Galore's accountant predicted that at expected market prices for shrimp, Shrimp Galore would have a net loss of $75,000 dollars after paying all 2010 expenses (including the annual loan payment). In this case, Shrimp Galore should

1 point

produce nothing and experience a loss of $25,000.

produce nothing and experience a loss of $75,000.

continue to operate because expected profits will rise in the future.

continue to operate even though it predicts a loss of $75,000.

Clear selection

When price is below average variable cost, a firm in a competitive market will

1 point

shut down and incur fixed costs.

shut down and incur both variable and fixed costs.

continue to operate as long as average revenue exceeds marginal cost.

continue to operate as long as average revenue exceeds average fixed cost.

Clear selection

Gross domestic product measures

1 point

income and expenditures.

income but not expenditures.

expenditures but not income.

neither income nor expenditures.

Clear selection

In a simple circular-flow diagram, total income and total expenditure are

1 point

never equal because total income always exceeds total expenditure.

seldom equal because of the ongoing changes in an economy’s unemployment rate.

equal only when the government purchases no goods or services.

always equal because every transaction has a buyer and a seller.

Clear selection

According to the circular-flow diagram GDP

1 point

can be computed as the total income paid by firms or as expenditures on final goods and services.

can be computed as the total income paid by firms, but not as expenditures on final goods and services.

can be computed as expenditures on final goods and services, but not as the total income paid by firms.

cannot be computed as either total income paid by firms or expenditures on final goods and services.

Clear selection

Consider three imaginary countries. In Aziria, saving amounts to $3,000 and consumption amounts to $7,000; in Graniva, saving amounts to $2,000 and consumption amounts to $8,000; and in Tanistan, saving amounts to $4,500 and consumption amounts to $10,500. The saving rate is

1 point

higher in Aziria than in Tanistan, and it is higher in Tanistan than in Graniva.

higher in Graniva than in Tanistan, and it is higher in Tanistan than in Aziria.

higher in Tanistan than in Graniva, and it is the same in Graniva and Aziria.

higher in Aziria than in Graniva, and it is the same in Aziria and Tanistan.

Clear selection

In some countries it is time consuming and costly to establish ownership of property. Reforms to reduce these costs would likely

1 point

have no affect on either real GDP nor productivity

raise real GDP and productivity.

raise real GDP but not productivity.

raise productivity but not real GDP.

Clear selection

The theory of efficiency wages explains why

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setting wages at the equilibrium level may increase unemployment.

it may be in the best interest of firms to offer wages that are above the equilibrium level.

the most efficient way to pay workers is to pay them according to their skills.

it is efficient for firms to set wages at the equilibrium level.

Clear selection

Emeril is the owner of a restaurant. He decides to raise the wages of his workers even though he faces an excess supply of labor. His decision

1 point

might increase profits if it attracts a better pool of workers to apply for jobs at his restaurant.

will reduce the excess supply of labor.

is an example of the benefits of a minimum-wage law.

All of the above are correct.

Clear selection

A relatively mild period of falling incomes and rising unemployment is called a(n)

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depression

recession

expansion

business cycle

Clear selection

On average, over the last 50 years, real GDP has grown by about

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3 percent per year.

2 percent per year.

1 percent per year.

4 percent per year.

Clear selection

Shifts in the aggregate-demand curve can cause fluctuations in

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neither the level of output nor the level of prices.

the level of output, but not in the level of prices.

the level of prices, but not in the level of output.

the level of output and in the level of prices.

Clear selection

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