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ETS Business Major Field Test Review
Questions and Answers
Scarcity and Choice
Ans: Human wants and needs are unlimited and resources to satisfy
them are limited. Choices must be made between the possible
alternatives
3 Questions every economy must answer
Ans: What to produce?
How to produce it?
For whom it is produced?
3 Questions
What to produce?
Ans: Have to evaluate more than just needs. Involves the wants and
needs of individuals.
3 Questions
How to produce it?
Ans: Center upon the methods and resources (land, labor, capital,
enterprise) used in the production process. Optimum way to achieve the
desired output utilizing these methods and resources.
3 Questions
For whom it is produced for?
Ans: Issue of the distribution of the output resulting from the
application of the production methods and resources.
Market Imperfections/Market Failure
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Ans: when market equilibrium results in too many or too few resources
being used in the production of a good or service. This can be caused by
lack of competition, externalities, public goods
Lack of competition (Market Imperfections)
Ans: Must have competition among both producers and consumers for
markets to function effectively
Externalities (Market Imperfections)
Ans: When a cost or benefit is imposed on people other than the
consumers and producers of a product (Ex. pollution from
manufacturing negatively affects the community rather than either the
buyer or seller)
Public Goods (Market Imperfections)
Ans: Goods are collectively consumed by everyone and there is no way
to bar people who do not pay from consumption (Ex. National defense)
Law of Demand
Ans: Inverse relationship between the price of a good and that quantity
buyers are willing to purchase in a defined time period
Price as the Determinants (Demand)
Ans: Primary determinant of the quality demanded is the price of the
good.
Changes in the price of a good result in movement of the equilibrium
point along the demand line.
Nonprice Determinant (Demand
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Ans: These result in a shift (left or right) in the demand curve
- number of buyers
- buyer tastes and preferences
- buyer income
- expectation of buyers
- prices of related goods
Changes in Demand
Ans: Increase - (rightward shift) high equilibrium price and quantity
Decrease - (leftward shift) lower equilibrium price and quantity
Law of Supply
Ans: More of a particular good will be supplied as the price of that good
rises, while less will be purchased as its price declines.
Non-Price Determinant (Supply)
Ans: Result in a right or left shift in supply curve
- number of sellers in a market
-increases in technology that make suppliers more efficient
- prices of raw materials
- taxes of subsidies which increase or decrease the price of a product
- changes in the expectations of producers
- prices of other good the firm could produce
Increase in Supply
Ans: Rightward shift. Results in a lower equilibrium price and a higher
equilibrium quantity
Decrease in Supply
© 2025 All rights reserved
ETS Business Major Field Test Review
Questions and Answers
Scarcity and Choice
Ans: Human wants and needs are unlimited and resources to satisfy
them are limited. Choices must be made between the possible
alternatives
3 Questions every economy must answer
Ans: What to produce?
How to produce it?
For whom it is produced?
3 Questions
What to produce?
Ans: Have to evaluate more than just needs. Involves the wants and
needs of individuals.
3 Questions
How to produce it?
Ans: Center upon the methods and resources (land, labor, capital,
enterprise) used in the production process. Optimum way to achieve the
desired output utilizing these methods and resources.
3 Questions
For whom it is produced for?
Ans: Issue of the distribution of the output resulting from the
application of the production methods and resources.
Market Imperfections/Market Failure
© 2025 All rights reserved
, 2 | Page
Ans: when market equilibrium results in too many or too few resources
being used in the production of a good or service. This can be caused by
lack of competition, externalities, public goods
Lack of competition (Market Imperfections)
Ans: Must have competition among both producers and consumers for
markets to function effectively
Externalities (Market Imperfections)
Ans: When a cost or benefit is imposed on people other than the
consumers and producers of a product (Ex. pollution from
manufacturing negatively affects the community rather than either the
buyer or seller)
Public Goods (Market Imperfections)
Ans: Goods are collectively consumed by everyone and there is no way
to bar people who do not pay from consumption (Ex. National defense)
Law of Demand
Ans: Inverse relationship between the price of a good and that quantity
buyers are willing to purchase in a defined time period
Price as the Determinants (Demand)
Ans: Primary determinant of the quality demanded is the price of the
good.
Changes in the price of a good result in movement of the equilibrium
point along the demand line.
Nonprice Determinant (Demand
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, 3 | Page
Ans: These result in a shift (left or right) in the demand curve
- number of buyers
- buyer tastes and preferences
- buyer income
- expectation of buyers
- prices of related goods
Changes in Demand
Ans: Increase - (rightward shift) high equilibrium price and quantity
Decrease - (leftward shift) lower equilibrium price and quantity
Law of Supply
Ans: More of a particular good will be supplied as the price of that good
rises, while less will be purchased as its price declines.
Non-Price Determinant (Supply)
Ans: Result in a right or left shift in supply curve
- number of sellers in a market
-increases in technology that make suppliers more efficient
- prices of raw materials
- taxes of subsidies which increase or decrease the price of a product
- changes in the expectations of producers
- prices of other good the firm could produce
Increase in Supply
Ans: Rightward shift. Results in a lower equilibrium price and a higher
equilibrium quantity
Decrease in Supply
© 2025 All rights reserved
