Economics Basics Practice Questions
1)How does supply and demand affect prices of goods or services?
a)No effect, businesses charge a price based on the cost of the good or service with a reasonable mark-up.
b)No effect, consumers pay whatever the price is asked.
c)When supply by a company equals demand, buyers and sellers agree on a price.
d)When supply exceeds demand at a certain price, there is a shortage of products in the market.
e)None of the above.
2)A barley shortage raises the cost of producing root beer. The quantity of root beer purchased will:
a)Rise.
b)Fall.
c)Remain the same.
d)First rise, then fall.
e)First fall, then rise.
3)Pick the best definition of ‘Economies of Scale’.
a)The tendency of the total cost to go down when the items are bought or produced in large quantities.
b)The tendency of the cost per item to go up when the items are bought or produced in large quantities
c)The tendency of the total cost to go up when the items are bought or produced in large quantities
d)The tendency of the cost per item to go down when the items are bought or produced in large quantities.
e)The tendency of the cost per item to go down when the items are bought or produced in smaller quantities.
4)Natural resources, human resources, and capital resources are considered to be three kinds of:
a)economic resources.
b)assets.
c)choices.
d)channels of distribution.
e)ingredients.
5)Inflation is best defined as:
a)a time when overall purchasing power decreases, because prices are going up.
b)a time when overall purchasing power increases, because prices are going down.
c)a time in which overall purchasing power stays the same.
d)increased consumer spending, with job and business growth.
e)increased unemployment.
6)We all have needs and wants. However,
a)our wants always exceed our needs.
b)our wants are endless.
c)wants are not necessary for survival.
d)needs and wants differ from person to person.
e)all of the above.
7)The primary determinants of the price of a product are:
a)supply and demand
b)interest rates and inflation
c)producer costs and revenues
d)consumer needs and wants
e)government laws and regulations
8)A tornado whips through Saskatchewan destroying wheat fields. What statement is true about price and supply of whole wheat bread?
a)Price increases and supply increases
b)Price increases and supply decreases
c)Price decreases and supply decreases
d)Price decreases and supply increases
e)No effect on price or supply
9)If the inflation rate is 4% and your salary has increased by 3%, your purchasing power is ______by ______.
a)increased…4%
b)increased…2%
c)increased…1%
d)decreased..1%
e)decreased…3%
10)Our demand for a particular good or service depends on:
a)our needs and wants, and what we are willing to pay
b)government laws
c)the latest wage settlement of government workers
d)the manufacturer
e)peer pressure
11)A measure of the cost of goods and services for the average household in Canada is:
a)the CEO
b)the TSX
c)the CPI
d)the ATM
e)the IPO
12)The cost of using a scarce resource to do one thing instead of another is most usually called the:
a)social cost
b)opportunity cost
c)alternative cost
d)economic cost
e)business cost
13)Another label for a pure market economy is
a)Free market
b)Free enterprise
c)Capitalism
d)laissez-faire
e)All of the above
14)The amount of output (products) with a given input (resource) is called:
a)efficiency
b)productivity
c)the law of diminishing returns
d)variable resources
e)manufacturing
15)Which of the following items would be considered a want?
a)Water
b)Pair of socks
c)i-Pod
d)Bread
e)Mittens
16)Which of the following is not a natural resource?
a)Steel
b)Oil
c)Coal
d)Copper
e)Magnesium
17)Which of the following items would you expect to see the greatest fluctuation in price, both up and down?
a)Bridge toll
b)Transit fare
c)Bread
d)Coffee
e)Gasoline
18)The Demand curve on a Supply and Demand graph will generally slope
a)Up to the right
b)Down to the left
c)Down to the right
d)It will generally be horizontal
e)None of these
The Financial Literacy Competition Practice Questions are the sole and exclusive property of the School of Accounting and Finance (SAF) at the University of Waterloo. Access to these questions are granted exclusively to teachers who have registered for the Financial Literacy Competition and are to be used to enhance teaching in the classroom. Registered FLC teachers can make sufficient copies of the Practice Questions for their students, but copying is limited to students within the academic year.