EOCT REVIEW

1 The nation of Keilmanland needs to build a new dam to control flooding near its larges city. If Keilmanland is a purely market economy, then these new improvements will MOST likely be left up to a. the government b. the individuals who are willing to pay for the new dam c. anyone who would benefit from the dam d. the owners of the property on which the dam would be built

1 B. Individuals are the ones responsible for paying for goods/services in a free market. Everyone would benefit from it regardless of who paid for it. The government does not intervene in a pure free market economy.

2. Specialization An assembly line can increase a factory’s productivity because it allows workers to A. diversify their skills B. focus on a specific task C. put in overtime hours on the job D. use a wide range of knowledge

2 B. Focus on a specific task.

3 Opportunity cost is best described as the A. most expensive resource used in production B. sum of all production costs C. value of the best alternative given up when a choice is made Monetary value of all alternatives forgone when a choice is made.

3 C. Value of best thing given up when making a choice

What best explains the shift of the production possibilities curve from P1 to P2? A. improvements in agricultural technology B. inflationary increases in process C. higher costs for producing corn D. higher costs of producing wheat 4.

4. A. improvement in agricultural technology will cause a growth or increase in the production of both corn and wheat.

5 Alex and Dylan mow and trim lawns. Currently, each man mows and trims a lawn by himself, but the process takes a long time. They would most likely improve their efficiency if A. alex and dylan mow a lawn and then trim together B. Alex mows a lawn while dylan trims the same lawn C. alex trims dylan’s lawn while dylan trims alex’s lawn D. Alex and Dylan reduce the number of lawns they mow and trim

5 B. Alex mows a lawn while Dylan trims the same lawn. This will allow for greater efficiency because it will eliminate the need to transition between two activities.

6 With which term is a command economic system most closely associated? A. Entrepreneurship B. Absolute Advantage C. Perfect Competition D. Government Regulation

6 Government Regulation

7 1 Anaxos just upgraded its capital equipment by buying a machine that makes fruit shakes faster and cheaper than the original machine. What effect should this have on price and quantity? Price / Quantity A Rises / Rises B Drops / Rises C Rises / Drops D Drops / Drops

7 B Drops Rises A Rises Rises C Rises Drops D Drops Drops The new machine makes shakes faster and cheaper. This allows the supplier to reduce the price, which eliminates choices A and C. Since the price is lower, the number produced can increase to meet the demand (on the same curve). This eliminates choice D. Therefore the correct answer is choice B.

8 A corporation MOST often seeks to increase its profit and expand the size of its operations by A issuing stock B joining an oligopoly C becoming a monopoly D controlling the money supply

A. Issuing Stock Choices B and C are types of market structures and have no relationship to strategies that a corporation can use to increase its profit or size of operation. A corporation cannot control the money supply, choice D. The Federal Reserve controls the money supply. Choice A is the correct answer.

9 A price ceiling; surplus B price ceiling; shortage Use this information to answer the question. Organizers of many high-interest sporting events such as the Super Bowl and the World Series usually set ticket prices lower than the equilibrium price, citing fairness to the public as their reason. What names do economists give to the resulting set price and disequilibrium situation? A price ceiling; surplus B price ceiling; shortage C price floor; shortage D price floor; surplus

9 B price ceiling; shortage Setting ticket prices below the equilibrium price creates a price ceiling. This eliminates choices C and D. Price ceilings create a shortage of a good, so choice B is the correct answer.

10 When the income in households increases, what is the likely result? A The supply curve will shift to the left. B The supply curve will become vertical. C The demand curve will shift to the D The demand will shift to the right.

10 D The demand will shift to the right. Houses can be considered normal goods, since people tend to increase their consumption of housing (by buying a bigger house) as their income increases. In the short run, this increased demand will lead the demand curve to move to the right, so the answer is choice D.