ECO/561 Week 1 Knowledge Check - 65354

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1 . Revenue increases when

  • A. producer surplus increases
  • B. producer surplus decreases
  • C. consumer surplus increases
  • D. consumer surplus decreases


2 . An increase in the price of an inelastic good

  • A. decreases revenues
  • B. decreases the percentage change in quantity less than the percentage change in price
  • C. increases revenues
  • D. 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 decreases
  • B. the number of substitute goods decreases
  • C. people become more price sensitive over time
  • D. 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 sold
  • B. set constraints between buyers and sellers
  • C. bring buyers and sellers into contact
  • D. 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 surplus
  • B. Saving time by allowing a worker to focus on one task
  • C. Encouraging workers to learn new skills
  • D. 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 way
  • B. restricting the amount of capital directed to specific goods
  • C. slowly adjusting to changes in the prices of resources
  • D. providing incentive for technological advances


7 . Productive efficiency is achieved when

  • A. the most valued combination of resources is used
  • B. the best technology is used
  • C. when production occurs at a fair cost per unit
  • D. 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 surplus
  • B. there is potential for a surplus but not a shortage
  • C. neither a shortage nor a surplus exists
  • D. 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 demand
  • B. the increase in supply is greater than the increase in demand
  • C. the decrease in demand is greater than the decrease in supply
  • D. 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 increases
  • B. supply is constant and demand decreases
  • C. demand is constant and supply decreases
  • D. demand is constant and supply increases


11 . When a price ceiling occurs

  • A. the market price will be lower than the equilibrium price
  • B. the market price will be higher than the equilibrium price
  • C. the supply will exceed the demand
  • D. 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-interest
  • B. Invisible hand
  • C. Moral hazard
  • D. Free enterprise



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ECO/561 Week

Week 1 Knowledge Check.doc
Week 1 Knowledg...