Name: ________________________ Class: ___________________ Date: __________

ID: A

Econ Mid-term 100 Points - Study Guide True/False Indicate whether the statement is true or false. ____

1. A desire to buy a product is the only requirement needed for demand to exist.

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2. If producers expect lower prices in the future, they may withhold some of the supply.

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3. The number of items sold multiplied by the average price of each item yields the total revenue of a business.

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4. The supply curve is likely to be elastic for products that can be made quickly without huge amounts of capital and skilled labor.

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5. The introduction of technology usually has no effect on supply.

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6. The U.S. government intervenes in the economy to reduce the costs of imperfect competition.

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7. It is illegal for the president of the United States to interfere in labor disputes.

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8. Supply and demand are used to predict the incidence of a tax.

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9. A person's payroll withholding statement summarizes federal, state, and local tax deductions.

____ 10. When the government produces goods and services, it often competes with producers in the private sector. ____ 11. Interstate highway construction programs are examples of grants-in-aid. ____ 12. Approximately two-thirds of the federal budget consists of discretionary spending. ____ 13. For much of the late 1900s, national defense comprised the largest category of spending. ____ 14. Government spending can directly affect both the allocation of resources and the distribution of income. ____ 15. At the present time, Social Security is the federal government's largest category of spending. ____ 16. Some states have enacted balanced budget amendments that prohibit annual spending from exceeding annual revenues. ____ 17. States spend the largest portion of their revenues on intergovernmental expenditures and public welfare. ____ 18. To be a successful medium of exchange money must exist in an unlimited supply. ____ 19. Despite the Federal Reserve System, massive banking failures occurred during the Great Depression. ____ 20. Half of all savings and loan associations went out of business during the 1980s. ____ 21. During the 1990s commercial banks, savings and loan associations, and savings banks became more similar. ____ 22. High returns on investments are usually associated with low risks. ____ 23. When consumers build up a lot of debt, they may choose to apply for a bill consolidation loan that they can use to pay off their other bills. ____ 24. The risk of investing in junk bonds is usually lower than the risk of investing in CDs. ____ 25. Munis are bonds issued by state and local governments. ____ 26. When people invest in the futures markets, they are usually investing in livestock and grain. ____ 27. The four factors of production influence economic growth. 1

Name: ________________________

ID: A

____ 28. Economic growth in the United States does not affect the economies of other countries. ____ 29. Increasing labor productivity helps promote economic growth and raise living standards. ____ 30. Net national product and Gross National Product are two measures of national income. ____ 31. A supply curve is a graph that shows the various quantities supplied at a single market price. ____ 32. The theory of production deals with the relationship between the factors of production and the output of goods and services. ____ 33. Fixed cost is the cost that a business incurs even if there are no employees and no production takes place. ____ 34. The Law of Supply states that suppliers will normally offer less for sale at higher prices and more for sale at lower prices. Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 35. Advertising, fashion trends, and new product introductions serve to a. create consumer needs. c. create consumer demand. b. increase income effectiveness. d. minimize the income effect. ____ 36. Consumers' willingness to replace a costly item with a less costly item is an example of a. the substitution effect. c. demand elasticity. b. the income effect. d. complements. ____ 37. When a manufacturer of pain medication reduced the price of the medication by 30%, profits declined by almost exactly 30%. Demand for the product is a. inelastic. c. unit elastic. b. elastic. d. complementary. ____ 38. Total cost is the sum of the a. fixed costs and overhead. c. fixed and variable costs. b. all variable costs. d. fixed and marginal costs. ____ 39. The theory of production deals with the relationship between the factors of production and a. the cost of raw materials. c. fixed costs. b. the cost of marginal returns. d. the output of goods and services. ____ 40. Many businesses are engaging in e-commerce because a. subsidies are available to many e-commerce businesses. b. fixed costs are minimal. c. operating costs never increase. d. variable costs can be almost eliminated. ____ 41. In a market economy, a high price is a signal for a. producers to supply more and consumers to buy less. b. producers to supply less and consumers to buy more. c. government to intervene to protect consumers. d. producers to supply less and consumers to buy less. ____ 42. All of the following are characteristics of allocation by rationing EXCEPT a. lack of fairness. c. efficiency. b. high administrative cost. d. diminished incentive for workers.

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Name: ________________________

ID: A

____ 43. A monopoly that is based on the ownership or control of a manufacturing method, process, or other scientific advance is a a. geographic monopoly. c. government monopoly. b. natural monopoly. d. technological monopoly. ____ 44. The government is involved in the U.S. economy for all of the following reasons EXCEPT to a. promote and encourage competition. b. prevent monopolies that deny the public the benefits of competition. c. regulate industries in which a monopoly is in the public interest. d. promote the development of market externalities. ____ 45. When a major car company lowers its prices, other car makers will probably a. maintain existing prices. c. go out of business. b. raise their prices. d. lower their prices. ____ 46. The authority to levy a federal income tax comes from a. the Fifth Amendment. c. an act of Congress. b. the Sixteenth Amendment. d. the Bill of Rights. ____ 47. The alternative minimum tax a. is an additional tax above and beyond the base rate. b. requires people to pay a minimum tax of 20 percent. c. allows a reduction in business taxes based on investment in equipment. d. allows larger-than-normal depreciation charges. ____ 48. FICA includes taxes to pay for a. Social Security and medicare. c. unemployment and medicare. b. Social Security and unemployment. d. medicare and worker's compensation. ____ 49. An example of mandatory spending is financing for a. interest payments on the federal debt. b. national defense. c. welfare programs. d. elementary and secondary education programs. ____ 50. The largest category of spending for most local governments is a. elementary and secondary education. c. police protection. b. hospitals. d. public welfare. ____ 51. The United States government accumulated huge deficits during the 1980s due to a. a shift in the incidence of taxes to corporations. b. environmental cleanup. c. a doubling of spending on national defense. d. huge, annual increases in welfare. ____ 52. The sequence for the approval of the federal budget is a. president to Congress to Supreme Court. b. president to Congress back to president. c. House Appropriations Committee to Congress to president. d. Congress to House Speaker to president. ____ 53. The largest category of state spending is a. highways. c. intergovernmental expenditures. b. education. d. public welfare. ____ 54. Money that has an alternative use as an economic good is a. commodity money. c. wampum. b. fiat money. d. specie.

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Name: ________________________

ID: A

____ 55. Money loses its value when it a. becomes too portable. c. is durable. b. is divisible. d. becomes too plentiful. ____ 56. The FDIC was established to a. protect the savings of the American people. b. help with the financing of World War II. c. federalize the banking system. d. create a government banking monopoly. ____ 57. In order for money to have value, it must have all of the following characteristics EXCEPT a. portability. c. durability. b. plentiful availability. d. divisibility. ____ 58. As a result of the financial institution crisis of the 1980s, S&Ls are now insured by the a. FSLIC. c. Fed. b. FDIC. d. National Banking System. ____ 59. Junk bonds a. carry a low rate of return. c. are issued by municipalities. b. are usually tax-exempt. d. are exceptionally risky. ____ 60. The largest borrowers are a. governments and businesses. c. governments and households. b. households and businesses. d. insurance companies and households. ____ 61. Most stocks in the United States are traded on the a. New York Stock Exchange. c. American Stock Exchange. b. over-the-counter market. d. regional stock exchanges. ____ 62. A stock transaction that is made immediately at the market price is made in the a. futures market. c. futures options market. b. spot market. d. options market. ____ 63. To determine Gross National Product, a. multiply all final goods and services by their prices. b. divide all final products and services by their prices. c. add to GDP all payments received by Americans outside the U.S. and subtract payments made to foreign-owned resources in the U.S. d. add to GDP all payments made to foreign-owned resources in the U.S.and subtract payments received by Americans outside the U.S. ____ 64. The census is taken every a. two years. c. eight years. b. four years. d. ten years. ____ 65. Baby boomers are those people born between a. 1935 and 1945. c. 1955 and 1965. b. 1946 and 1964. d. 1965 and 1975.

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Name: ________________________

ID: A

Matching Match each statement with the correct item below. a. quantity demanded is greater than quantity supplied b. prices are relatively stable, and quantity supplied is equal to quantity demanded c. check sent to producers that makes up the difference between the actual market price and the target price d. monetary value of a product e. quantity supplied is greater than quantity demanded at a given price f. price that produces neither a surplus nor a shortage g. set of assumptions and/or relationships that can be used to help analyze behavior and predict outcomes h. ticket that entitles the holder to a certain amount of a product i. a socially desirable price determined by factors other than the market j. maximum legal price that can be charged for a product ____ ____ ____ ____ ____ ____ ____ ____ ____ ____

66. 67. 68. 69. 70. 71. 72. 73. 74. 75.

price price ceiling ration coupon target price economic model deficiency payment market equilibrium shortage surplus equilibrium price

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