ECO 561 Week 1 Knowledge Check

ECO/561 Week 1
Knowledge Check

1 . Revenue increases when
A. producer surplus increasesB. producer surplus decreasesC. consumer surplus increasesD. consumer surplus decreases

2 . An increase in the price of an inelastic
good
A. decreases revenuesB. decreases the percentage change in quantity less than the
percentage change in priceC. increases revenuesD. increases the percentage change in quantity more than the
percentage change in price

3 . Price elasticity of Demand increases when
A. the number of complementary goods decreasesB. the number of substitute goods decreasesC. people become more price sensitive over timeD. people become less price sensitive over time

4 . The purpose of a market in a market system
is to
A. allow government to control what is soldB. set constraints between buyers and sellersC. bring buyers and sellers into contactD. allow an organization to set prices in relation to their
products

5 . By specializing in the production of one
good, a company is able to benefit from economies of scale which increases its
revenue. Which of the following is an attribute of specialization?
A. Reducing costs by creating a surplusB. Saving time by allowing a worker to focus on one taskC. Encouraging workers to learn new skillsD. Encouraging workers to learn a number of different skills
6 . The market system promotes progress by
A. creating incentive to continue to do things in the same wayB. restricting the amount of capital directed to specific
goodsC. slowly adjusting to changes in the prices of resourcesD. providing incentive for technological advances

7 . Productive efficiency is achieved when
A. the most valued combination of resources is usedB. the best technology is usedC. when production occurs at a fair cost per unitD. fewer resources are left for production of other goods

8 . The market is said to be in equilibrium
when
A. there is potential for a shortage but not a surplusB. there is potential for a surplus but not a shortageC. neither a shortage nor a surplus existsD. the quantity sold equals the quantity purchased
9 . The market will move to a higher
equilibrium price if
A. the decrease in supply is equal to the decrease in demandB. the increase in supply is greater than the increase in
demandC. the decrease in demand is greater than the decrease in
supplyD. the increase in demand is greater than the increase in
supply
10 . The intersection of supply and demand will
be at a lower equilibrium price but a higher equilibrium quantity if
A. supply is constant and demand increasesB. supply is constant and demand decreasesC. demand is constant and supply decreasesD. demand is constant and supply increases

11 . When a price ceiling occurs
A. the market price will be lower than the equilibrium priceB. the market price will be higher than the equilibrium priceC. the supply will exceed the demandD. buyers will not be willing to pay more than the ceiling
price

12 . Because the goals of firms, entrepreneurs,
and workers have different incentives, which of the following principles
applies?
A. Self-interestB. Invisible handC. Moral hazardD. Free enterprise

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