Economics Practice Test #4

Economics Practice Test #4

1. / The Fabulous Fungus Factory (FFF) specializes in farming a rare type of mushroom called a "truffle." The truffle only grows underground in a remote region of the state, requiring a specific type of soil and climate. Every few months, workers use trained dogs to "sniff" out the truffles. They harvest the special crop, then return to the Fabulous Fungus Factory to clean and package the truffles.
Which productive resources help the Fabulous Fungus Factory specialize in truffles?
/ A. / assembly line workers (human resources)
/ B. / soil and climate (land resources)
/ C. / factory building and machines (capital resources)
/ D. / investors in the business (capital resources)

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2. / Which statement is true regarding private property in a market economy?
/ A. / Individuals and businesses have the right to private property if the government owns a piece of that property as well.
/ B. / Individuals have the right to own personal property, but businesses have to include the government in the ownership.
/ C. / Businesses are allowed to own personal property, but individuals cannot without the interference of government.
/ D. / Individuals and businesses have the right to personal property without undue interference from the government.

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3. / Property rights, such as copyright law, are enforced by the legal system. Explain why protecting property rights is essential to a market economy.
/ A. / Property protections provide an incentive for individuals to engage in economic activity.
/ B. / A market economy relies on the free exchange of goods and services without rules.
/ C. / Every individual or businesses has the right to copy other people's goods for profit.
/ D. / The government reserves the right to automatically transfer the income to others.

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4. /
Which of these fits best in the empty box?
/ A. / higher interest rates
/ B. / lower economic efficiency
/ C. / higher standard of living
/ D. / lower physical capital

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5. / How might marginal cost impact the activity of a producer?
/ A. / It might lead a producer to charge more for a product or service.
/ B. / It might increase production of a larger variety of goods and services.
/ C. / The producer would be forced into improving products and services.
/ D. / The producer would provide incentives for consumers to buy products.

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6. / China is one of the leading producers of children's toys in the world. The ABC Toy Company found that its toy factory in China is able to produce larger quantities of toys at a lower cost than the same size toy factory in the United States. Which resource is most likely helping the factory in China produce more toys for less cost?
/ A. / unlimited plastic supply
/ B. / less capital investors
/ C. / unlimited space for factories
/ D. / less expensive labor costs

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7. / Which of the following is true in a command economy?
/ A. / Business owners decide which goods to produce.
/ B. / The government decides which goods are produced.
/ C. / Consumers have many choices.
/ D. / The government makes no economic decisions.

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8. / Identify the role of the Federal Communications Commission.
/ A. / to communicate with federal governments
/ B. / to regulate federal communications
/ C. / to communicate with international governments
/ D. / to regulate all media communications

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9. / Which statement most accurately defines productivity?
/ A. / a measurement of the division of labor
/ B. / a measurement of output compared to input
/ C. / a measurement of renewable resources
/ D. / a measurement of economic interdependence

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10. / What is the definition of opportunity cost?
/ A. / The set of goods produced if all resources are used efficiently
/ B. / The value of the best forgone alternative
/ C. / The added cost when the level of some activity is raised by one unit
/ D. / Individual consumers and their decisions

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11. / Voluntary exchange is an everyday, necessary occurrence in a market economy. In order for the exchange to occur, both sides must expect they will benefit. Which of these is an example of a voluntary exchange in which both sides benefit?
/ A. / A hungry customer purchases a hamburger from a fast food restaurant.
/ B. / A dealer sells a used car to a customer without disclosing problems with the car.
/ C. / A person goes into a bank and exchanges a one-hundred dollar bill for smaller bills.
/ D. / A federal government requires its citizens to purchase treasury bonds.

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12. / What is the typical result of a decline in competition between businesses?
/ A. / better quality goods for a lower price
/ B. / average quality goods for the same price
/ C. / lesser quality goods for a higher price
/ D. / better quality goods for a higher price

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13. / Which regulatory agency oversees the United States' monetary system and credit supply?
/ A. / Federal Communications Commission
/ B. / Federal Elections Commission
/ C. / Economic Development Administration
/ D. / Federal Reserve Board

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14. / Which company below is working to improve human health?
/ A. / BP is selling biofuel stoves that reduce indoor air pollution.
/ B. / IBM is developing and improving technology for schools.
/ C. / Serena Hotels is shaping public policy to help build tourism.
/ D. / Cisco Systems is training thousands of network administrators.

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15. / The factory is an example of which factor of production?
/ A. / labor
/ B. / capital
/ C. / land
/ D. / entrepreneurial skills

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16. / Mr. Peterson runs a wildlife park 20 miles outside of town. His neighbor, Mrs. Jackson opened a restaurant to cater to visitors of the wildlife park. Ms. Jenkins bought a bus and created a shuttle to take visitors to and from the park. Every summer, hundreds of tourists visit the park and enjoy the local services.
The passage above shows examples of how
/ A. / industries specialize.
/ B. / consumers specialize.
/ C. / individuals specialize.
/ D. / nations specialize.

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17. / What is the difference between a market economy and a mixed economy?
/ A. / In a mixed economy, there are no government regulations.
/ B. / In a market economy, the government controls prices.
/ C. / In a market economy, consumers have fewer choices of products to buy.
/ D. / In a mixed economy, there are more government regulations.

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18. / Which statement best explains the purpose of the Federal Deposit Insurance Commission (FDIC)?
/ A. / to educate the public on trading, borrowing, and investing
/ B. / to ensure that banks do not fail during an economic crisis
/ C. / to provide startup loans and grants to new banks
/ D. / to assist operations of savings and loan associations

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19. / What strategy has increased efficient use of production?
/ A. / five-hour work week
/ B. / assembly lines
/ C. / safety precautions
/ D. / social welfare

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20. / Which part of this chart represents labor?
/ A. / Factory
/ B. / Employees
/ C. / Product
/ D. / Idea

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21. / Give an example of how an individual producer specializes.
/ A. / An entrepreneur decides to produce unique tools for the plumbing industry.
/ B. / A regional government decides to give incentives to farmers producing corn.
/ C. / An agricultural business decides to expand into the manufacturing industries.
/ D. / A national car manufacturer decides to produce a new line of hybrid vehicles.

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22. / Which of the following is a characteristic of a market economy?
/ A. / People are free to choose any career that they want.
/ B. / Economic decisions are based on habits and customs.
/ C. / The government tells people which businesses they can run.
/ D. / The government subsidizes unprofitable businesses.

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23. / What role does the Food and Drug Administration play in the federal bureaucracy?
/ A. / It creates and maintains safety regulations for foods and drugs.
/ B. / It creates and maintains social programs related to health and food.
/ C. / It provides the transportation of all foods and drugs in the United States.
/ D. / It provides food and drugs to the federal government bureaucracy.

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24. / Why do employees with special skills usually receive higher wages?
/ A. / Skilled employees are paid more because they have knowledge other workers do not have.
/ B. / The differences in pay are used as a way to show low-level workers who the bosses are.
/ C. / Companies want to keep their skilled workers happy so they will stay.
/ D. / Government laws makes businesses pay skilled workers more money.

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25. / Jordan is faced with a decision: a burger or a taco? He buys a taco. Jordan is making choices based on
/ A. / competition.
/ B. / supply.
/ C. / resources.
/ D. / scarcity.

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26. / Which is the most likely reason Ohio specializes in manufacturing transportation equipment?
/ A. / Ohio has a scarcity of resources for most other industries.
/ B. / Ohio imports resources for transportation equipment.
/ C. / Ohio's employment needs are met by these industries.
/ D. / Ohio's resources support manufacturing equipment.

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27. / Which of the following is true in a market economy?
/ A. / The government decides what the prices of goods will be.
/ B. / Supply and demand influences the economic decisions of businesses and individuals.
/ C. / The government controls the most profitable businesses.
/ D. / People are told by the government what type of work they must do.

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28. / Utilities in the city of Primeville are publicly controlled and distributed to customers. The government of Primeville decides to sell the utilities to private businesses, arguing that services to customers will increase in quality if the businesses are competing in an open market.
This is an example of
/ A. / deregulation.
/ B. / a monopoly.
/ C. / public goods.
/ D. / redistribution.

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Productivity and Economic Growth
Job / Education Level / Salary
Retail Cashier / In High School / minimum wage
Fast Food Cook / High School diploma / minimum wage
Junior Level Journalist / Bachelor's Degree / $32,000
Engineer / Bachelor's Degree / $44,000
Engineer / Master's Degree / $50,000
Neurosurgeon / Medical Doctorate Degree / $200,000+
29. / Based on the chart, what is the correlation between education and a higher standard of living?
/ A. / People must have a Master's degree to have a higher standard of living.
/ B. / Everyone with a high school degree has a high standard of living.
/ C. / Workers who have some education can hold a decent job.
/ D. / People who have more education earn more money.

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30. / Antonio has noticed that the price of gas has gone up considerably. To save money when driving to work, he considers three options:
· buy a vehicle with better gas mileage
· carpool with a co-worker
· begin taking the bus to work
What would be an advantage of choosing to buy a new vehicle?
/ A. / It would be the most beneficial to the environment.
/ B. / He would save the most amount of money upfront.
/ C. / He would have the most control over his schedule.
/ D. / It would allow the most breaks from driving himself.

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31. / What is one of the key determining factors of whether or not a voluntary exchange will occur between two parties?
/ A. / the comparative advantage the buyer has over the seller
/ B. / the marginal cost of accepting one additional unit of the good
/ C. / the utility of the exchanged goods to each party
/ D. / the fixed costs both parties face when considering the exchange

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32. / Which of the following is true in a mixed economy?
/ A. / Businesses are free to make many choices, but they face some government regulation.
/ B. / Businesses are free to do whatever they want, and they face no government regulation.
/ C. / The government makes all economic decisions for businesses.
/ D. / There are often shortages of many goods.

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33. / Which of these services is provided by the national government?
/ A. / fire fighters
/ B. / electricity
/ C. / road repair
/ D. / military defense

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34. / Which company below is investing in physical capital such as buildings, factories, or machinery?
/ A. / Cisco Systems is training thousands of network administrators.
/ B. / BP is selling biofuel stoves that reduce indoor air pollution.
/ C. / Serena Hotels is shaping public policy to help build tourism.
/ D. / IBM is developing and improving technology for schools.

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35. / Imagine that the supply of water has become scarce in part of the country. Many farmers in the area cannot afford to water their crops. Which of these techniques would probably have the most success?
/ A. / use resources other than water
/ B. / water crops only half the amount they need
/ C. / grow crops that require less water
/ D. / compensate with extra soil and sunlight

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36. / "The US is the world's leading producer of mint oil. The top producing states are Indiana, Michigan, and Wisconsin. It also grows well in Oregon, Washington, Idaho, South Dakota and Montana because all these states are north of the 41st parallel, where the right amount of daylight produces good yield and quality of oil."
adapted from
Which sentence best explains why the states in the passage specialize in mint oil production?
/ A. / They can produce mint oil more efficiently than other states.
/ B. / They are the only states in the U.S. that can produce mint oil.
/ C. / They can produce better quality mint oil than any other states.
/ D. / They are the only states that grow crops north of the 41st parallel.

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37. / America participates in what type of economy?
/ A. / mixed economy
/ B. / free market
/ C. / command economy
/ D. / controlled market

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38. / In the late 1800s, railroads were the primary method for transporting people and products across the nation. Small towns usually had only one or two rail lines. Since the railroad companies provided the only service available, they could charge high shipping rates. The cost of shipping short distances was often higher than shipping long distances. This especially angered farmers and small businesses that needed the railroads to ship their goods. In 1887, the Interstate Commerce Act was passed to regulate railroad companies. The act required railroad companies to publish shipping rates and prohibited price discrimination against small markets.
Which is the most likely effect of the Interstate Commerce Act on small farmers?
/ A. / It helped them be more profitable.
/ B. / It made them ship longer distances.
/ C. / It required them to pay more fees.
/ D. / It caused them to use different carriers.

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39. /

1. Jan the sales woman attends a night class at the community college so she can learn how to speak with Spanish speaking customers.
2. Mike the mechanic does auto repair jobs on his friends' cars during his free time.
3. Karen the lawyer often reads the works of Plato and Aristotle for fun.
4. Dean the professional athlete plays pick-up basketball games with his friends.

Which sentences gives an example of a worker who is investing in professional skill development?
/ A. / 4
/ B. / 3
/ C. / 2
/ D. / 1

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40. / How does the relationship between marginal cost and marginal benefit impact producers?
/ A. / It helps producers market their products to new customers.
/ B. / It helps producers decide how much of a good to make.
/ C. / It shows producers what the demand for their product is.
/ D. / It means that producers make as much of their product as possible.

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41. / Which of these most influences a nation toward specialization?
/ A. / full employment
/ B. / factor endowments
/ C. / productive resources
/ D. / division of labor

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42. / All businesses have to pay sums of money to keep them running. After the expenses are paid, the money left over is considered
/ A. / free market.
/ B. / opportunity cost.
/ C. / profit.
/ D. / property.

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43. / Since 1970, the Environmental Protection Agency (EPA) has been working to protect human health and the environment. Which of these is most likely regulated by the EPA?
/ A. / child adoptions
/ B. / auto emissions
/ C. / tobacco taxes
/ D. / agricultural trade

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44. / Which economic indicator is measured by comparing the amount of goods or services produced with the amount of input that was used in production?
/ A. / employment
/ B. / per capita GDP
/ C. / productivity
/ D. / gross national product

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45. / The company that Karen works for has a shortage of office supplies. There are not enough pens, memopads, staplers, and tissues for everyone to have access to their own. However, because the people at Karen's office do most of their work on computers, they only need to use these supplies a few times during the day. The company will eventually buy new supplies, but for now they are limited.
What would be the most fair way for Karen's company handle this situation?
/ A. / force some workers to bring their own supplies
/ B. / have employees share these supplies
/ C. / make employees work without these supplies
/ D. / fire workers who do not have supplies

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46. / In the United States, there are many imported goods, such as food and automobiles that are higher priced than domestic goods. Why would some U.S. consumers decide to purchase these goods if cheaper goods were available?
/ A. / The domestic good has no perceived value or utility.
/ B. / The cost of the import tariff offsets the perceived benefit.
/ C. / The perceived value of the good is greater than the extra cost.
/ D. / The perceived cost of the imported good is greater.

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