Test 1 Ch 1 2 3 ECO 2013 Final Review 1 Rebecca decides to buy a dress that Hillary has for sale they agree on a price of 20 Which of the following best describes who gains and who loses from the transaction a If the dress originally costs more than 20 Rebecca gains and Hillary loses b If the dress originally costs less than 20 Hillary gains and Rebecca loses c If Hillary gains from the transaction Rebecca must lose an equal amount d Both parties expect to gain from this transaction 2 3 4 Henry Ford made millions of dollars producing and marketing automobiles Many workers and consumers must have suffered in order for Ford to amass such enormous wealth The person who made this observation a has failed to comprehend the fallacy of composition b has failed to understand the principle of opportunity cost c has utilized the economic way of thinking by thinking the gains of producers are made primarily at the expense of consumers and workers d has failed to understand that specialization and exchange generally result in mutual economic gain If there is an increase in both the supply and demand for a good which of the following will definitely occur a The equilibrium quantity will increase b The price of the good will decrease c The equilibrium quantity will decrease d The price of the good will increase If there is both an increase in the supply of a good and a decrease in demand for a good which of the following will definitely occur a The equilibrium quantity will decrease b The price of the good will increase c The price of the good will decrease d The equilibrium quantity will increase 5 Which of the following is true when collective decision making is utilized to resolve economic questions regarding the allocation of resources a Central planning and political bargaining will replace market forces b Individual preferences are of no importance c Economic equality will result d Decentralized decision making is inevitable 6 The difference between positive economic statements and normative economic statements is that a positive statements are based on opinion while normative statements are based on fact b positive statements are true and normative statements are often false c positive statements are often false and normative statements are true d positive statements are based on fact while normative statements are based on opinion e both b and d 7 Economists use the term ceteris paribus to indicate which of the following a Supply and demand are in balance b Other things are assumed to be constant c Their conclusions are based on normative economics rather than positive economic analysis d The analysis is true for the individual but not for the economy as a whole 8 According to Adam Smith what is the primary source of a nation s wealth a A spirit of cooperation in which people share according to their means b The people s ability to produce products and trade in free markets c Strong central planning authorities d The amount of gold and silver in the government s possession 9 What does Adam Smith s invisible hand principle stress a That benevolence is a powerful motivator that encourages individuals to engage in productive economic activity b The tendency of the competitive market process to direct self interested individuals into activities that enhance the economic welfare of society c The tendency of self interested individuals to pursue activities that benefit themselves but harm the overall economic welfare of society d The potential of government regulation as a means of bringing the self interest of individuals into harmony with the economic welfare of society 10 In a competitive market economy a resource in short supply will be allocated a so that each firm gets enough to keep producing some portion of its output b according to how much each firm purchased before the shortage c by government regulation d to those firms that can make the most profitable use of it 11 After a hurricane in Florida knocked out the regional water supply for several days the demand for bottled water increased sharply In a market economy how will this increase in demand affect the equilibrium price and quantity of bottled water a Price will increase and quantity will decrease b Price will decrease and quantity will increase c Price will decrease and quantity will decrease d Price will increase and quantity will increase 12 If Georgia experiences a late frost that damages the peach crop we should expect the a demand curve for peaches to shift to the left and the price of peaches to fall b demand curve for peaches to shift to the right and the price of peaches to rise c supply curve for peaches to shift to the left and the price of peaches to rise d supply curve for peaches to shift to the right and the price of peaches to fall 13 Which of the following will occur if the price of a good is below the equilibrium price a Suppliers will find inventories being depleted They will increase production and raise prices b Suppliers will find inventories building they will cut output and raise prices c The demand curve will shift to the left until an equilibrium is established at the existing price d The supply curve will shift to the right until an equilibrium is established at the existing price 14 Which of the following would reduce the price of DVD players and increase the quantity sold a a decrease in the supply of DVD players b an increase in the supply of DVD players c an increase in the demand for DVD players d a decrease in the demand for DVD players 15 What do the forces of supply and demand assure a The equilibrium price of a good will be rising more often than it will be falling b When the supply curve for a good shifts the demand curve for that good shifts in response c The price of a good will eventually rise in response to an excess demand for that good d Demand curves and supply curves tend to shift to the right as time goes by 16 According to Adam Smith individual self interest a is a powerful force for economic progress when it is directed by competitive markets b is a major factor in retarding the economic progress of humankind c could be either a positive or negative force for economic progress depending on the moral influences of political leaders d is a powerful force for economic progress when individuals are wisely directed by a strong central government 17 Land used to grow alfalfa could also be used to grow hay Which of the following is true when the farmer plants hay and the market
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