,
,
,
,
,17. If you are willing to purchase a house for $500,000 and you purchase the house for $500,000, this transaction will
generate:
a. There is no surplus created for either of the party.
b. $0 worth of seller surplus and unknown amount of buyer surplus.
c. $0 worth of buyer surplus and unknown amount of seller surplus.
d. No information provided.
ANSWER: c
TOPICS: Section 1: Capitalism and Wealth
18. Total surplus or gains created from trade equal
a. Seller surplus
b. Buyer surplus
c. The summation of seller and buyer surplus
d. Profits earned by a firm
ANSWER: c
TOPICS: Section 1: Capitalism and Wealth
19. The biggest advantage of capitalism is that
a. It generates wealth with the help of government intervention
b. Prices hinder in moving assets from high-value to low-value uses
c. It forces involuntary exchanges
d. It creates wealth by letting a person follow his or her own self-interest
ANSWER: d
TOPICS: Section 1: Capitalism and Wealth
20. The difference between the minimum price the producer is willing to accept and the price the producer actually
receives for a product is referred to as:
a. market surplus.
b. market shortage.
c. consumer surplus.
d. producer surplus.
ANSWER: d
TOPICS: Section 1: Capitalism and Wealth
21. If you are willing to sell your lawn mower business for $355,000 and someone offers you $420,000 for it, this
transaction will generate:
a. There is no surplus created
b. $65,000 worth of seller surplus and unknown amount of buyer surplus
c. $30,000 worth of buyer surplus and $35,000 of seller surplus
d. $65,000 worth of buyer surplus and unknown amount of seller surplus
ANSWER: b
TOPICS: Section 1: Capitalism and Wealth
22. Wealth is created when
a. Assets move from lower value use to higher value use
b. Assets move from higher value use to lower value use
c. Assets move from individuals who are willing to pay less for them to individuals who are willing to pay more
. Page 4
, for them
d. Both A and C
ANSWER: a
TOPICS: Section 1: Capitalism and Wealth
23. A creative entrepreneur is one who knows how to
a. Run a business
b. Escape the burden of taxes
c. Profitably exploit money making opportunities
d. All of the above
ANSWER: c
TOPICS: Section 1: Capitalism and Wealth
24. An advantage of capitalism is that
a. It allows the market to self-regulate and clear itself
b. It allows a person to follow his or her own self interest
c. It allows voluntary transactions, which create wealth
d. All of the above
ANSWER: d
TOPICS: Section 1: Capitalism and Wealth
25. Which of the following describes a firm?
a. Purchases labor hours from workers
b. Borrows capital from investors
c. Combines labor and capital to create production, moving them from their low value use to high value use
d. All of the above
ANSWER: d
TOPICS: Section 1: Capitalism and Wealth
26. If company X is successfully outsourcing its production of T-shirts to China, it is
a. Creating wealth by moving labor in China from lower value use to higher value use
b. Should be stopped on economic grounds since it is destroying wealth
c. Destroying wealth by acquiring cheaper labor from China
d. Both A & C
ANSWER: a
TOPICS: Section 1: Capitalism and Wealth
27. A retailer X that is operating at a loss gets bought out by a larger chain of department stores, which shuts down the
brand, using its assets for their own brand,
a. Wealth is destroyed since the company shut down
b. Wealth is created since the resources were of lesser value under the X brand and are now worth more
c. Wealth is neither created nor destroyed since the total amount of resources stay the same
d. None of the above
ANSWER: b
TOPICS: Section 1: Capitalism and Wealth
28. Government can
. Page 5
, a. Create wealth by not interfering in the markets in any way what so ever
b. Not affect wealth in the markets
c. Create wealth by enforcing property rights and contracts
d. Create wealth by making choice decisions for the market
ANSWER: c
TOPICS: Section 1: Capitalism and Wealth
29. Technological advancement creates unemployment in firms that shut down or labor that is laid off. Wealth in this case
is
a. Destroyed, since firms are shutting down and production of certain goods and services decreasing
b. Created, since the dislocated labor and resources are absorbed by new firms created through the technological
innovation, moving them to higher value use
c. Destroyed, since technological progress is leading to higher unemployment
d. None of the above
ANSWER: b
TOPICS: Section 1: Capitalism and Wealth
30. You are sick and tired of your old wardrobe. You decide to donate it to a charity of your choice. Your action
a. Creates wealth by moving the clothes from lower value use to higher value use
b. Destroys wealth since you lose your clothes
c. Creates wealth by making you feel richer
d. All of the above
ANSWER: a
TOPICS: Section 1: Capitalism and Wealth
31. Your cellular phone contract is due for renewal and the company offers you a new free phone. Since you want to use
your new phone, you decide to recycle your old phone. Your action
a. Creates wealth by moving the phone from lower value use to higher value use
b. Destroys wealth since you lose your phone
c. Creates wealth by making you feel richer
d. All of the above
ANSWER: a
TOPICS: Section 1: Capitalism and Wealth
32. When the market is in equilibrium, with no government intervention,
a. Total surplus is minimized
b. Total surplus is maximized
c. Government maximizes total revenue
d. None of the above
ANSWER: b
TOPICS: Section 2: Does the Government Create Wealth?
33. Price ceilings are primarily intended to help
a. No one
b. Consumers
c. Producers
. Page 6
, d. Government
ANSWER: b
TOPICS: Section 2: Does the Government Create Wealth?
34. Government can intervene in the market through
a. Price floors
b. Price ceilings
c. Taxes
d. All the above
ANSWER: d
TOPICS: Section 2: Does the Government Create Wealth?
35. Government intervention
a. can provide incentives to conduct business in an illegal black market
b. plays no role in generating wealth
c. is the best way to eliminate poverty
d. does not enforce property rights
ANSWER: a
TOPICS: Section 2: Does the Government Create Wealth?
36. Wealth creating transactions are more likely to occur
a. With private property rights
b. With contract enforcement
c. Both a and b
d. None of the above
ANSWER: c
TOPICS: Section 2: Does the Government Create Wealth?
37. Price floors are primarily intended to help
a. No one
b. Consumers
c. Producers
d. Government
ANSWER: c
TOPICS: Section 2: Does the Government Create Wealth?
38. Rent controls
a. are an example of price floors.
b. are an example of price ceilings.
c. destroy wealth by preventing the movement of apartments to higher-valued use.
d. Both b and c
ANSWER: d
TOPICS: Section 2: Does the Government Create Wealth?
39. Price gouging
. Page 7
, a. Outlaw trade at prices above a certain price level
b. Outlaw trade at prices below a certain price level
c. Is an act of charging a high price to take advantage of shortages created by natural disasters
d. None of the above
ANSWER: c
TOPICS: Section 2: Does the Government Create Wealth?
40. Taxes cause:
a. Market distortions
b. A reduction in incentives to work
c. A decrease in wealth creating transactions
d. All of the above
ANSWER: d
TOPICS: Section 3 Why Economics is Useful to Business
41. Economic reasoning is based on the premise that:
a. all decisions or actions are costless.
b. only non-economic decisions or actions have a cost associated with them.
c. only economic decisions or actions have a cost associated with them.
d. all decisions and actions have a cost associated with them.
ANSWER: d
TOPICS: Section 3 Why Economics is Useful to Business
42. Subsidies can destroy wealth because
a. subsidies move assets from lower- to higher- valued uses
b. subsidies move assets from higher- to lower- valued uses
c. subsidies help producers only
d. subsidies help consumers only
ANSWER: b
TOPICS: Section 3 Why Economics is Useful to Business
43. A price ceiling can often be viewed as:
a. the government setting price above market equilibrium price.
b. an implicit tax on producers and an implicit subsidy to consumers.
c. the government setting price below market equilibrium price.
d. Both b and c.
ANSWER: d
TOPICS: Section 3 Why Economics is Useful to Business
44. An example of price floor is
a. Minimum wages
b. Rent controls in New York
c. Both a and b
d. None of the above
. Page 8
,
,
,
,17. If you are willing to purchase a house for $500,000 and you purchase the house for $500,000, this transaction will
generate:
a. There is no surplus created for either of the party.
b. $0 worth of seller surplus and unknown amount of buyer surplus.
c. $0 worth of buyer surplus and unknown amount of seller surplus.
d. No information provided.
ANSWER: c
TOPICS: Section 1: Capitalism and Wealth
18. Total surplus or gains created from trade equal
a. Seller surplus
b. Buyer surplus
c. The summation of seller and buyer surplus
d. Profits earned by a firm
ANSWER: c
TOPICS: Section 1: Capitalism and Wealth
19. The biggest advantage of capitalism is that
a. It generates wealth with the help of government intervention
b. Prices hinder in moving assets from high-value to low-value uses
c. It forces involuntary exchanges
d. It creates wealth by letting a person follow his or her own self-interest
ANSWER: d
TOPICS: Section 1: Capitalism and Wealth
20. The difference between the minimum price the producer is willing to accept and the price the producer actually
receives for a product is referred to as:
a. market surplus.
b. market shortage.
c. consumer surplus.
d. producer surplus.
ANSWER: d
TOPICS: Section 1: Capitalism and Wealth
21. If you are willing to sell your lawn mower business for $355,000 and someone offers you $420,000 for it, this
transaction will generate:
a. There is no surplus created
b. $65,000 worth of seller surplus and unknown amount of buyer surplus
c. $30,000 worth of buyer surplus and $35,000 of seller surplus
d. $65,000 worth of buyer surplus and unknown amount of seller surplus
ANSWER: b
TOPICS: Section 1: Capitalism and Wealth
22. Wealth is created when
a. Assets move from lower value use to higher value use
b. Assets move from higher value use to lower value use
c. Assets move from individuals who are willing to pay less for them to individuals who are willing to pay more
. Page 4
, for them
d. Both A and C
ANSWER: a
TOPICS: Section 1: Capitalism and Wealth
23. A creative entrepreneur is one who knows how to
a. Run a business
b. Escape the burden of taxes
c. Profitably exploit money making opportunities
d. All of the above
ANSWER: c
TOPICS: Section 1: Capitalism and Wealth
24. An advantage of capitalism is that
a. It allows the market to self-regulate and clear itself
b. It allows a person to follow his or her own self interest
c. It allows voluntary transactions, which create wealth
d. All of the above
ANSWER: d
TOPICS: Section 1: Capitalism and Wealth
25. Which of the following describes a firm?
a. Purchases labor hours from workers
b. Borrows capital from investors
c. Combines labor and capital to create production, moving them from their low value use to high value use
d. All of the above
ANSWER: d
TOPICS: Section 1: Capitalism and Wealth
26. If company X is successfully outsourcing its production of T-shirts to China, it is
a. Creating wealth by moving labor in China from lower value use to higher value use
b. Should be stopped on economic grounds since it is destroying wealth
c. Destroying wealth by acquiring cheaper labor from China
d. Both A & C
ANSWER: a
TOPICS: Section 1: Capitalism and Wealth
27. A retailer X that is operating at a loss gets bought out by a larger chain of department stores, which shuts down the
brand, using its assets for their own brand,
a. Wealth is destroyed since the company shut down
b. Wealth is created since the resources were of lesser value under the X brand and are now worth more
c. Wealth is neither created nor destroyed since the total amount of resources stay the same
d. None of the above
ANSWER: b
TOPICS: Section 1: Capitalism and Wealth
28. Government can
. Page 5
, a. Create wealth by not interfering in the markets in any way what so ever
b. Not affect wealth in the markets
c. Create wealth by enforcing property rights and contracts
d. Create wealth by making choice decisions for the market
ANSWER: c
TOPICS: Section 1: Capitalism and Wealth
29. Technological advancement creates unemployment in firms that shut down or labor that is laid off. Wealth in this case
is
a. Destroyed, since firms are shutting down and production of certain goods and services decreasing
b. Created, since the dislocated labor and resources are absorbed by new firms created through the technological
innovation, moving them to higher value use
c. Destroyed, since technological progress is leading to higher unemployment
d. None of the above
ANSWER: b
TOPICS: Section 1: Capitalism and Wealth
30. You are sick and tired of your old wardrobe. You decide to donate it to a charity of your choice. Your action
a. Creates wealth by moving the clothes from lower value use to higher value use
b. Destroys wealth since you lose your clothes
c. Creates wealth by making you feel richer
d. All of the above
ANSWER: a
TOPICS: Section 1: Capitalism and Wealth
31. Your cellular phone contract is due for renewal and the company offers you a new free phone. Since you want to use
your new phone, you decide to recycle your old phone. Your action
a. Creates wealth by moving the phone from lower value use to higher value use
b. Destroys wealth since you lose your phone
c. Creates wealth by making you feel richer
d. All of the above
ANSWER: a
TOPICS: Section 1: Capitalism and Wealth
32. When the market is in equilibrium, with no government intervention,
a. Total surplus is minimized
b. Total surplus is maximized
c. Government maximizes total revenue
d. None of the above
ANSWER: b
TOPICS: Section 2: Does the Government Create Wealth?
33. Price ceilings are primarily intended to help
a. No one
b. Consumers
c. Producers
. Page 6
, d. Government
ANSWER: b
TOPICS: Section 2: Does the Government Create Wealth?
34. Government can intervene in the market through
a. Price floors
b. Price ceilings
c. Taxes
d. All the above
ANSWER: d
TOPICS: Section 2: Does the Government Create Wealth?
35. Government intervention
a. can provide incentives to conduct business in an illegal black market
b. plays no role in generating wealth
c. is the best way to eliminate poverty
d. does not enforce property rights
ANSWER: a
TOPICS: Section 2: Does the Government Create Wealth?
36. Wealth creating transactions are more likely to occur
a. With private property rights
b. With contract enforcement
c. Both a and b
d. None of the above
ANSWER: c
TOPICS: Section 2: Does the Government Create Wealth?
37. Price floors are primarily intended to help
a. No one
b. Consumers
c. Producers
d. Government
ANSWER: c
TOPICS: Section 2: Does the Government Create Wealth?
38. Rent controls
a. are an example of price floors.
b. are an example of price ceilings.
c. destroy wealth by preventing the movement of apartments to higher-valued use.
d. Both b and c
ANSWER: d
TOPICS: Section 2: Does the Government Create Wealth?
39. Price gouging
. Page 7
, a. Outlaw trade at prices above a certain price level
b. Outlaw trade at prices below a certain price level
c. Is an act of charging a high price to take advantage of shortages created by natural disasters
d. None of the above
ANSWER: c
TOPICS: Section 2: Does the Government Create Wealth?
40. Taxes cause:
a. Market distortions
b. A reduction in incentives to work
c. A decrease in wealth creating transactions
d. All of the above
ANSWER: d
TOPICS: Section 3 Why Economics is Useful to Business
41. Economic reasoning is based on the premise that:
a. all decisions or actions are costless.
b. only non-economic decisions or actions have a cost associated with them.
c. only economic decisions or actions have a cost associated with them.
d. all decisions and actions have a cost associated with them.
ANSWER: d
TOPICS: Section 3 Why Economics is Useful to Business
42. Subsidies can destroy wealth because
a. subsidies move assets from lower- to higher- valued uses
b. subsidies move assets from higher- to lower- valued uses
c. subsidies help producers only
d. subsidies help consumers only
ANSWER: b
TOPICS: Section 3 Why Economics is Useful to Business
43. A price ceiling can often be viewed as:
a. the government setting price above market equilibrium price.
b. an implicit tax on producers and an implicit subsidy to consumers.
c. the government setting price below market equilibrium price.
d. Both b and c.
ANSWER: d
TOPICS: Section 3 Why Economics is Useful to Business
44. An example of price floor is
a. Minimum wages
b. Rent controls in New York
c. Both a and b
d. None of the above
. Page 8
