1. In Constructing models, economists:

    A. Make simplified assumptions.
  2. Which of the following is a microeconomic stattement?
    A. The real domestic output increased b 2.5% last year
    B Unemployment was 6.% of the labourforce last year
    C The price of wheat declined last year
    D The general price level increased by 4% last year
    C - The price of wheat declined last year.
  3. A hypothesis is:

    B. A tentative untested principle
  4. Microeconomics is concerned with:

    A. A detailed examination of specific economic units which comprise the economic system.
  5. Macroeconomics approaches the study of economics from the view point of

    A. The entire economy
  6. Generally speaking, it may be said that the inductive method:
    A. Begins with hypotheses that are tested against real world facts.
    B. Confuses correlation with cause and effect.
    C. Moves from facts to generalisations or theory
    D. Cannot be applied to economic analysis
    C Moves from facts to generalisations or theory
  7. The study of economics is primarily concerned with:
    A. Keeping private businesses from losing money
    B. Demonstrating that capitalistic economies are superior to socialistic economies.
    C Choices that are made in seeking to use scares resources efficiently.
    D. Determining the most equitable distribution of society's output.
    C. Choices that are made in seeking to use scarce resources efficiently.
  8. Economic Theories:
    A are useless becuase they are not based on laboratory experimentation.
    B. That are true for individual economic units are never true for the economic units are never true for the economy as a whole.
    C. are generalisations based upon a careful observations of facts.
    D. Are abstractions and therefore have no application to real situations.
    C. are generalisation based upon a careful observation of facts.
  9. Which of the following is a correct statement?
    A. Economic concepts or laws that are valid during depression are necessarily valid during prosperity
    B. Thought not quantitatively exact, economic laws are useful becuase they allow us to make predictions that are meaningful and useful.
    C. Economics is as scientific as physics and chemistry becuase economic laws are as quantitatively precise as the laws of physics or chemistry.
    D. Since economics is concerned with questions of 'ought', it is a branch of applied ethics and is not scientific.
    B Though not quantitatively exact, economic laws are useful because they allow us to make predicitions that are meaningful and useful.
  10. Economics may best be defined as:

    A. The study of the behaviour of people and institutions in the production, distribution and consumption of scarce goods.
  11. The term ceteris parbus means that:

    B. A number of relevant variables are assumed to be constant.
  12. The deductive method:

    C. Begins with hypotheses that are tested against real world facts.
  13. The term ceteris parbus means:

    A. Other things being equal.
  14. The basic purpose of the ceteris paribus assumption is to:

    C. Allow one to reason about the relationship between two variables, without the intrusion of other variables.
  15. Economic models:

    C. Emphasise basic economic relationship by abstracting from the complexities of the real world.
  16. The production possibilities curve illustrates the basic principle that:

    D. If all the resources of an economy are in use, more of one good can be produced if less of another good is produced.
  17. The economising problem is essentially one of deciding how to make the best use of:

    A. Limited resources, to satisfy virtually unlimited wants.
  18. The scarcity problem:

    A. Persists because material wants exceed available productive resources.
  19. The idea of 'allocative efficiency' refers to:

    C. The production of the product-mix most wanted by society.
  20. A fundamental problem of economics is:

    B. The scarcity of productive resources relative to material wants.
  21. Productive efficiency refers to:

    B. The use of the least-cost method of production
  22. An 'increase in efficiency' suggests that an economy:

    C. Is able to obtain more goods and services from a given amount of resources.
  23. Economic resources are also called:

    C. Factors of production.
  24. The concept of economic efficiency is primarily concerned with:

    B. Obtaining the maximum output from available resources.
  25. Which of the following will not entail an outward shift of the production possibilities curve?

    D. The reduction of unemployment
  26. An increase in the price of a product will reduce the amount purchased because:

    C. Consumers will substitute other products for the one whose price has risen.
  27. Economists use the term 'demand' to refer to:

    C. A scheduel of various combinations of market prices and quantities demanded.
  28. Alyssa rents 5 movies per month when the price is $3.00 each and 7 movies per month when the price is $2.50. Alyssahas demonstrated the:

    C. Law of demand
  29. If the number of buyers in the market decreases, the:

    C. Demand in the market will decrease.
  30. A market:

    C. Is an institution that brings together buyers and sellers.
  31. Represented graphically, the market demand curve is:

    A. The horizontal sum of individual demand curves.
  32. The law of demand states that:

    A. Price and quantity demanded are inversely related.
  33. A higher price for batteries would tend to:

    A. Increase the demand for electricity.
  34. The construction of demand and suppl curves assumes that the primary variable that influences decisions to produce and purchase goods is:

    C. Price.
  35. When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes:

    B. The income effect.
  36. A demand curve is:

    A. The downward sloping line relating the price of the good to the quantity demanded.
  37. If the price of product L increases, the demand curve for close-substitute product J will:

    B. Shift to the right
  38. A market demand is:

    A. A horizontal summation of individual demand curves
  39. Which of the following will not cause the demand for product K to change?

    B. A change in the price of K.
  40. Which of the following would not shift the demand curve for beef?

    B. A reduction in the price of cattle feed.
  41. Normal Profits are:

    C. A cost, because they represent payments made for the resources that the businessperson owns and supplies in his or her own expertise.
  42. The most efficient combination of resources producing any output is the combination that:

    B. Can be obtained for the smallest money outlay.
  43. For whom is a given mix of goods and services to be produced? In other words, how is the product to be distributed among people when such commodities and services are available? In a market economy, this problem is primarily resolved in the:

    B. Private sector, through the earning and spending of income.
  44. Economic profits are:

    C. Not an economic cost, because they need not be realised, in order for a business to acquire and retain entrepreneurial ability.
  45. Which of the following best describes the 'guiding function' of competitive prices?

    A. The market system can negotiate reallocations of resources that are appropriate to changes in consumer tastes, technology, and resource supplies.
  46. "Consumer sovereignty" refers to the:

    A. Notion that the decision of producers and resource suppliers, with respect to the kinds and amounts of goods produced, must be appropriate to consumer demands.
  47. The presence of economic profits in an industry suggests that the industry:

    B. Will attract more firms.
  48. Assume the demand for product Y increases and the subsequent market system response results the production of more Y. This illustrates:

    C. The directing or guiding function of prices.
  49. In a competitive market economy, firms will select the least-cost production technique because:

    C. To do so will maximise a firm's profit.
  50. When economists say that the demand for a resource is a 'derived demand', they mean that:

    B. The demand for resources depends upon the demand for the product produced by those resources.
  51. If a company owns plants at various stages of the production process, this is called a:

    A. Vertical Combination
  52. The three basic legal forms of business enterprises are:

    D. Proprietorships, partnerships and corporations
  53. An industry is best defined as a group of firms:

    B. Producing identical or similar products.
  54. Which of the following statements is correct?

    A. Manufacturing contributes the largest percentage to GDP and the volume of employment and income.
  55. The division of Australian businesses into categories of proprietorship, partnership, and corporation is based on:

    C. Basic legal considerations
  56. Coles supermarket is part of a:

    C. Horizontal combination
  57. A conglomerate is:

    B. A firm that owns plants in different markets and industries.
  58. A group of three plants owned and operated by a single firm and consisting of a wheat-growing farm, a flour-milling plant and a plant that bakes and sells bread, is an example of a:

    A. Vertical combination
  59. A group of chain store operating at the retail level - for example, Woolworths - is an illustration of:

    B. A horizontal combination
  60. Which of the following is true of partnerships?

    B. Each partner is responsible for all business debts.
  61. The advantages of the 'company form of business' include:

    A. All of the answers given
  62. Which form of business enterprise accounts for the largest proportion of total output?

    C. Company
  63. one of the major advantages of a sole proprietorship is that:

    A. There is little red tape and expense in organising such a business.
  64. Which of the following is numberically the dominant type of business in Australia?

    B. Proprietorship.
  65. If a company goes bankrupt, its shareholders will lose:

    B. Only the value of their shares.
  66. Price Elasticity of demand is generally:

    A. Greater in the long run than in the short run.
  67. The main determinant of elasticity of supply is ther:

    A. Amount of time the producer has to adjust inputs in response to a price change.
  68. The price of product X is reduced from $100 to $90 and, as a result, the quantity demanded increases from 50-60 units. From this we can conclude that the demand for X in this price range:

    A. Is elastic.
  69. Suppose the price elasticity coefficients of demand are 1.43, 0.67, 1.11 and 0.29 for products W, X, Y and Z respectively. a 1% decrease in price will result in an increase in total revenue in the case of:

    A. W and Y
  70. A given leftward shift in the supply curve of product X will increase equilibrium price to a greater extent the:

    D. More inelastic the demand for the product
  71. Supply curves tend to be:

    C. More elastic in the long run, because there is time for firms to enter or leave the industry.
  72. Suppose that the price of product X rises by 20%, and the quantity supplied of X increases 18%. The coefficient of price elasticity of supply for good X is:

    C. Less than 1 and , therfore, supply is inelastic.
  73. Suppose that, as the price of Y falls from $2.00 to $1.90, the demanded quantity of Y increases from 110 to 118. It can be concluded that the price elasticity of demand is:

    C. 1.37
  74. Suppose the supply of product X is perfectly inelastic. If there is an increase in the demand for this product, equilibrium price:

    D. Will increase, but equilibrium quantity will be unchanged.
  75. In which of the following cases will total revenue increase?

    C. Price rises and demand is inelastic.
  76. If the price elasticity of demand for a product is 2.5, then a price cut from $2.00 to $1.80 will:

    B. Increase the quantity demanded by 25%
  77. If the supply of product X is perfectly elastic, an increase in the demand for it will increase:

    B. Equilibrium quantity, but equilibrium price will be unchanged.
  78. The price elasticity of demand coefficient indicates:

    D. Buyer responsiveness to price changes.
  79. A perfectly inelastic demand schedule:

    B. Can be represented by a line parallel to the vertical axis.
  80. In which of the following instances will total revenue declien?

    B. Price rises and demand is elastic.
Card Set
Economics practice questions