1. Minimum wage causes what type of disequilibrium situation to exist?
Price floor, shortage of labor
Price ceiling, shortage of labor
Price ceiling, surplus of labor
Price floor, surplus of labor

2. Which is likely to cause an increase in demand?
An increase in the price of resources
An expectation of lower future prices
A new ad campaign featuring prominent celebrity
A decrease in income

3. If the price of an item increases, demand for its substitutes
Is unaffected
Increases
Decreases
There is no way to tell

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6. Which would cause the supply of wheat to shift to the right?
An increase in household incomes
A decrease in producer subsidies
Wheat producing companies leaving the market
A new, faster wheat harvesting machine

7. Government agencies inspect restaurants on a regular basis to insure the restaurants are obeying health and food safety regulations. What economic effect does this have on the restaurants?
The price of food is typically lower because the regulations force restaurants to use cheaper ingredients.
Restaurants cannot serve food if they do not meet all of the regulations.
They charge higher prices to cover the costs of the time and resources used in meeting the regulations.
More food is produced because the regulations make the restaurant more productive.

8. How is supply different than quantity supplied?
Supply is the amount of a good that producers are willing to produce and quantity supplied is the actual number sold.
Supply is the amount of a good that producers are willing to produce at various prices and quantity supplied is the amount producers are willing to produce at a specified price.
Supply is the amount of a good that producers are willing to buy at various prices and quantity supplied is the amount producers are willing to buy at a specified price.
Supply is the amount of good that producers are willing to produce at a specific price and quantity supplied is the amount of a good producers are willing to supply at all possible prices.

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11. In which market structure do firms have the greatest control over their own prices?
Oligopoly
Pure competition
Monopolistic competition
Monopoly

12. The Law of Supply states that
As prices decrease, quantity supplied decreases
As prices increase, quantity demanded decreases.
As prices increase, supply increases
As prices decrease, demand decreases

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14. If supply and demand both increase by the same amount in a market, which statement will DEFINITELY be true?
Quantity supplied will decrease
Equilibrium price will increase
Equilibrium quantity will increase
Quantity demanded will decrease

15. In which type of business organization does the owner have the MOST liability?
Sole proprietorship
Partnership
Corporation
Monopoly

16. Comparing changes in quantity demanded to changes in prices is related which economic concept?
Equity
Opportunity costs
Elasticity
Consumer sovereignty

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18. Nearly impossible to maintain.
In purely competitive markets there are many producers selling nearly identical goods to consumers who are well informed about the goods they are buying. Because of this, long term profits are
Nearly impossible to maintain.
Very unpredictable, but typically large.
Always the same amount.
Easy to achieve.

19. Which is true concerning profits for firms that operate in purely competitive markets?
Most firms make short term profits through advertising
All firms make long term profits
Long term profits are nearly impossible
Short term profits are very likely

20. Which type of tax structure taxes people with higher incomes at higher percentages?
Progressive
Proportional
Regressive
Flat

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23. Assume Coke and Pepsi operate as an oligopoly
Assume Coke and Pepsi operate as an oligopoly. Which statement BEST represents this?
Coke and Pepsi own many different “brands”
Coke and Pepsi sell to over 75% of the market
Coke and Pepsi are major corporations with stockholders
Coke and Pepsi taste different, but are marketed the same way

24. If supply AND demand decreases at the same time, which statement will DEFINITELY be true?
The equilibrium quantity of the good will be lower
The equilibrium price of the good will be higher
The equilibrium price of the good will be lower
The equilibrium quantity of the good will be higher

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26. Which is NOT a condition for a monopoly to exist?
High demand for a good
No close substitutes
Difficult market entry
A single seller

27. The likelihood of conflict
Sherry runs a business with her sister. They are trying to decide whether to incorporate or not. If they decide to incorporate, what’s one major disadvantage they will face?
The likelihood of conflict
There is a greater possibility for loss of control of the company
It will be more difficult to raise capital for the business
They will increase their liability

28. Regressive tax Proportional tax Optional tax Progressive tax
The Federal Income Tax in the United States forces people making higher incomes to pay a higher percentage in taxes. This is an example of a
Regressive tax
Proportional tax
Optional tax
Progressive tax

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30. Alex and Dylan both wash cars and change oil
Alex and Dylan both wash cars and change oil. Currently, each man washes and changes oil by himself, but the process takes a long time. They would MOST LIKELY improve their efficiency if
Alex washes cars while Dylan changes oil.
Alex washes Dylan’s car while Dylan washes Alex’s car.
Alex and Dylan wash a car and change the oil together.
Alex and Dylan reduce the number of cars they wash.

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32. What occurs to equilibrium price and quantity in a market if demand increases, but supply remains the same?
Price is unknown, quantity increases
Price decreases, quantity increases
Price increases, quantity increases
Price increases, quantity decreases

33. Which statement is MOST LIKELY true if the Fed increases the reserve requirement and the discount rate?
They are trying to limit inflationary pressures.
The economy is in a trough.
There has been a recent increase in taxes.
Loans are difficult to get because little money is circulating.

34. A major advantage corporations offer over sole-proprietorships is
Limited liability
Total control over the company
Ease of startup
The ability to set prices freely

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36. Monopolistic competition Pure competition Oligopoly
Use the following list to answer the question. There are only a few large sellers All the products sold are very similar, There is a high degree of interdependent pricing. This is MOST LIKELY describes which kind of market structure?
Monopoly
Monopolistic competition
Pure competition
Oligopoly

37. How does a corporation benefit from selling stock?
It gives them limited liability.
They can raise larger amounts of capital.
It eliminates the potential for conflict.
They get larger profits

38. A key advantage of a partnership is
Specialization of the partners
The life expectancy of the business
Unlimited liability of the partners
Ease of raising capital through stockholders

39. Monopolistic competition Pure competition Oligopoly Monopoly
Which market structure is typically characterized by a large number of producers selling similar, but differentiated products?
Monopolistic competition
Pure competition
Oligopoly
Monopoly

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41. Long term economic growth is MOST influenced by
Fed policies that reduce the money supply
Increasing marginal tax rates
Leftward shifts of the production possibilities curve
Investments in physical and human capital

42. What is MOST LIKELY to happen to the economy if the Federal Reserve Bank sells treasury securities at the same time that Congress passes a law increasing taxes?
There is not enough information to determine the outcome.
Contraction, because both of the policies are contractionary.
Stability, because the policies cancel each other.
Expansion, because both of the policies are expansionary.

43. When the money supply is increased, which is MOST likely to happen?
The price level will increase.
Each dollar will be able to buy more goods.
The price level will not be affected.
The price level will decrease.

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45. The government sets a price ceiling in a market
The government sets a price ceiling in a market. This is MOST LIKELY to cause
Equilibrium
A surplus
Efficiency
A shortage

46. Which statement describes the law of demand?
As prices rise, quantity demanded decreases.
As prices rise, demand decreases.
As prices fall, quantity demanded decreases.
None of the other answers listed are correct.

47. Which BEST describes entrepreneurship?
The physical and mental talents of workers
A person who uses land, labor, and capital in their job
A person willing to take a financial risk by combining resources to produce a good or service
The ability of a person to work more efficiently than another person

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49. An assembly line can increase a factory’s productivity because it allows workers to
Put in overtime hours
Diversify their skills
Focus on a specific task
Use a wide range of knowledge

50. Which strictly monetary policy combination would work best to slow down an overheating, overproducing economy?
Increase taxes, lower government spending
Decrease the discount rate, buy treasury securities
Increase taxes, increase the discount rate
Increase the discount rate, sell treasury securities

51. Demand for gasoline is said to be fairly inelastic for most people
Demand for gasoline is said to be fairly inelastic for most people. This is probably because
It has few substitutes and is necessary for most transportation
It has many substitutes and is easily attained
It has few substitutes and is in large supply
It is difficult to make cheaply

52. Sole proprietorship Partnership Corporation Monopoly
Serena’s business is small and was quick to start. Serena retains all of her profits, but is also responsible for all the debts and legal responsibilities of the business. Based solely on this information, Serena’s business is MOST LIKELY a
Sole proprietorship
Partnership
Corporation
Monopoly

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54. How are equilibrium price and quantity determined in most market in the U.S. Economy?
By the law of demand
By a point on a production possibilities curve
Government sets the price
Consumer and producer interaction

55. A price floor is problematic in a market because it leads to
Surpluses
Decreased productivity
Shortages
Increased taxes

56. What is the main difference between pure competition and monopolistic competition?
Firms in pure competition are selling nearly identical, rather than differentiated goods
Firms in pure competition rely more heavily on advertising
Firms in pure competition have no substitutes to their goods
Firms in pure competition make more profits

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58. Productivity of a business Economic system of a country
Sellers enter a market looking to make as much money as possible by offering a good or service. Buyers enter a market looking to spend as little as possible for a good or service. This interaction determines the
Productivity of a business
Economic system of a country
Production possibilities curve
Market clearing price of a good

59. Why do governments interact in economies to redistribute income, resolve market failures, and provide public goods and services?
To provide equity and stability to the economy
It is the easiest way to achieve economic growth
Central banks, like the Fed, do not have the ability to do these things
To maximize the ups and downs of the business cycle

60. Which describes price elasticity of demand?
The interaction of supply and demand to determine equilibrium price
The amount of a good that is demanded at a particular price
The measure of how much a change in price affects the quantity demanded
The measure of how a change in demand changes equilibrium price

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62. Which statement is true regarding monopolistic competition?
There is only one seller in the market.
All the sellers are selling identical products.
Businesses have great control over the price of their product.
Advertising plays a key role in the market.

63. If the price of a product falls, which is true regarding demand?
Demand increases
Demand decreases
Quantity demanded increases
Quantity demanded decreases

64. price floor with a surplus of 40 widgets
In the market seen here, a government-mandated price of $5 would cause?
price floor with a surplus of 40 widgets
price ceiling with a surplus of 20 widgets
price floor with a shortage of 20 widgets
price ceiling with a shortage of 40 widgets