Unit 3 Test: Question Preview (ID: 26769)

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Buying stock through mutual funds is less risky than buying individual company stock because
a) You diversify your risk by buying small pieces of many companies at a time
b) Inflation is less likely to erode your investment
c) Investments made into mutual funds are insured by the FDIC
d) Individual companies usually go bankrupt

A man has $100 to invest and hopes to receive 10 times the amount back ($1,000) by the end of 5 years. This could be BEST accomplished by
a) placing the money in a savings and loan account
b) depositing the money in a commercial bank account
c) purchasing $100 worth of stock in a start-up company
d) buying $50 worth of bonds and investing $50 in a mutual fund

The government has recently raised the excise tax on gasoline making it more expensive. Which of the following consumer responses would NOT be a predictable response to this government imposed negative incentive?
a) Some consumers purchase hybrid vehicles
b) Consumers combine trips to reduce gasoline consumption
c) Consumers look for transportation alternatives like bikes, mass transit, and car pooling.
d) Consumers take more vacations that require long-distance car travel

In which market structure does a firm have greatest control over its product’s price?
a) perfect competition
b) monopoly
c) oligopoly
d) monopolistic competition

Which factor MOST often has the greatest role in determining the amount of money that workers earn during their careers?
a) their credit worthiness
b) their education level
c) the location of the business for which they work
d) the size of the business for which they work

When filing a claim with your own insurance company, you should expect to pay this before you receive compensation for the loss:
a) Premium
b) Deductible
c) Asset Cost
d) Liability Cost

A good example of the effect of education on income would be that
a) employees who learn to perform high-risk jobs always get paid more
b) workers who learn to make high demand products are well paid
c) only job applicants with high school diplomas get job interviews
d) people with college degrees usually earn more than those with less education

On which of the following do people pay a regressive tax?
a) their earned income
b) interest earned on their savings accounts
c) stocks purchased for investments
d) goods purchased for their personal use

When a borrower must repay a loan based on compound interest rather than simple interest, they should expect:
a) pay the lender more total interest than they would under simple interest
b) pay the lender less total interest than they would under simple interest
c) repay a larger principal loan balance than they would with simple interest
d) to be quoted a higher interest rate percentage

Sharon decided to open a dry-cleaning business. She borrowed some money from her sister and took a loan from a bank. She hired one helper. What is one disadvantage of Sharon’s business?
a) no separation of ownership and control
b) ease of organizing the firm
c) unlimited liability
d) double taxation

Organizers of many large sporting events such as the Super Bowl usually set ticket prices lower than the equilibrium price, citing fairness to the public as their reason. What names is given to the resulting set price and disequilibrium situation?
a) price ceiling; shortage
b) price ceiling; surplus
c) price floor; shortage
d) price floor; surplus

When economists measure the responsiveness of consumers to changes in price, they are measuring:
a) the percentage change in price
b) the price elasticity of supply.
c) the price elasticity of demand.
d) income elasticity.

As the price of a good rises in a market, it acts as a signal:
a) to consumers that they should buy a greater quantity of the good.
b) to consumer that they should increase their demand for the good.
c) to producers that they should increase their supply of the good.
d) to producers that they should supply a greater quantity of the good.

When the U.S. government purchases a submarine from a company, the government has made a major transaction in the
a) factor market
b) public market
c) product market
d) foreign exchange market

The nation of Welton needs to build a new dam to control flooding near its largest city. If Welton is a pure market economy, then these new improvements will MOST likely be left up to
a) the government
b) the individuals who are willing to pay for the new dam
c) anyone who would benefit from the dam
d) the owners of the property on which the dam would be built

With which term is a command economic system MOST closely associated?
a) entrepreneurship
b) absolute advantage
c) perfect competition
d) government regulation

Alex and Dylan mow and trim lawns. Currently, each man mows and trims a lawn by himself, but the process takes a long time. They would MOST likely improve their efficiency if
a) Alex and Dylan mow a lawn and then trim it together.
b) Alex mows a lawn while Dylan trims the same lawn.
c) Alex trims Dylan’s lawn while Dylan trims Alex’s lawn.
d) Alex and Dylan reduce the number of lawns they mow and trim.

The opportunity cost associated with going to college instead of taking a full-time job for $20,000 per year includes:
a) The alternative use of the money used to buy books
b) The alternative use of the money used to pay tuition
c) $80,000 of income while attending college for four years
d) All of the above

The fundamental problem of economics is:
a) to establish an equitable system of personal and business taxation.
b) to establish a democratic political framework for the provision of social goods and services.
c) the scarcity of factors of production relative to the unlimited wants of humans.
d) to achieve a more equitable distribution of money income in order to mitigate poverty.

Which of the following is an example of an investment in human capital?
a) A business trains a new employee.
b) A company builds a new factory.
c) A state puts in a new highway.
d) A country builds new bridges.

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