ETS Major Field Test – Business Advanced/Hard Difficulty
Questions 1–100: | College Students & Professionals |
100% Pass Guaranteed | Graded A+
1. In the market for automobiles, a decrease in the price of steel (a key input) will most likely
result in:
A. An increase in the equilibrium price and a decrease in the equilibrium quantity of
automobiles
B. A decrease in the equilibrium price and an increase in the equilibrium quantity of
automobiles
C. An increase in both the equilibrium price and quantity of automobiles
D. A decrease in both the equilibrium price and quantity of automobiles
☑ Correct Answer: B
☑ Explanation: A decrease in the price of steel reduces production costs for automobile
manufacturers, shifting the supply curve to the right. This results in a lower equilibrium price
and a higher equilibrium quantity, assuming demand remains constant.
,2. A firm in a perfectly competitive market maximizes profit by producing output where:
A. Price equals average total cost
B. Price equals marginal cost
C. Price equals average variable cost
D. Marginal revenue equals average total cost
☑ Correct Answer: B
☑ Explanation: In perfect competition, a firm maximizes profit by producing at the output
level where marginal revenue (MR) equals marginal cost (MC). Since the firm is a price taker,
price equals marginal revenue, so the condition is P = MC.
3. Which of the following is a characteristic of a monopolistically competitive market?
A. A single firm dominates the market
B. Firms produce homogeneous products
C. There are no barriers to entry
D. Firms have some degree of market power through product differentiation
,☑ Correct Answer: D
☑ Explanation: Monopolistic competition is characterized by many firms, product
differentiation, and relatively easy entry and exit. Firms have some degree of market power
because they can differentiate their products, but competition still exists.
4. The law of diminishing marginal returns states that:
A. As a firm increases output, average total cost will eventually increase
B. As additional units of a variable input are added to a fixed input, the marginal product of the
variable input will eventually decline
C. As additional units of a variable input are added, total output will eventually decline
D. As a firm increases output, marginal revenue will eventually decline
☑ Correct Answer: B
☑ Explanation: The law of diminishing marginal returns states that as a firm adds
additional units of a variable input (e.g., labor) to a fixed input (e.g., capital), the marginal
product of the variable input will eventually decrease. This is a short-run phenomenon.
, 5. Which of the following would be considered a positive externality?
A. Pollution from a factory
B. A person receiving a vaccination, reducing the spread of disease
C. A neighbor's loud music
D. Traffic congestion
☑ Correct Answer: B
☑ Explanation: A positive externality occurs when a third party benefits from an economic
activity without paying for it. Vaccination provides herd immunity benefits to others, which is a
positive externality. Pollution, loud music, and traffic congestion are negative externalities.
6. Gross Domestic Product (GDP) is the market value of all:
A. Goods and services produced within a country in a given period
B. Final goods and services produced within a country in a given period
C. Final goods and services produced by a country's citizens, regardless of location
D. Intermediate goods and services produced within a country in a given period
Questions 1–100: | College Students & Professionals |
100% Pass Guaranteed | Graded A+
1. In the market for automobiles, a decrease in the price of steel (a key input) will most likely
result in:
A. An increase in the equilibrium price and a decrease in the equilibrium quantity of
automobiles
B. A decrease in the equilibrium price and an increase in the equilibrium quantity of
automobiles
C. An increase in both the equilibrium price and quantity of automobiles
D. A decrease in both the equilibrium price and quantity of automobiles
☑ Correct Answer: B
☑ Explanation: A decrease in the price of steel reduces production costs for automobile
manufacturers, shifting the supply curve to the right. This results in a lower equilibrium price
and a higher equilibrium quantity, assuming demand remains constant.
,2. A firm in a perfectly competitive market maximizes profit by producing output where:
A. Price equals average total cost
B. Price equals marginal cost
C. Price equals average variable cost
D. Marginal revenue equals average total cost
☑ Correct Answer: B
☑ Explanation: In perfect competition, a firm maximizes profit by producing at the output
level where marginal revenue (MR) equals marginal cost (MC). Since the firm is a price taker,
price equals marginal revenue, so the condition is P = MC.
3. Which of the following is a characteristic of a monopolistically competitive market?
A. A single firm dominates the market
B. Firms produce homogeneous products
C. There are no barriers to entry
D. Firms have some degree of market power through product differentiation
,☑ Correct Answer: D
☑ Explanation: Monopolistic competition is characterized by many firms, product
differentiation, and relatively easy entry and exit. Firms have some degree of market power
because they can differentiate their products, but competition still exists.
4. The law of diminishing marginal returns states that:
A. As a firm increases output, average total cost will eventually increase
B. As additional units of a variable input are added to a fixed input, the marginal product of the
variable input will eventually decline
C. As additional units of a variable input are added, total output will eventually decline
D. As a firm increases output, marginal revenue will eventually decline
☑ Correct Answer: B
☑ Explanation: The law of diminishing marginal returns states that as a firm adds
additional units of a variable input (e.g., labor) to a fixed input (e.g., capital), the marginal
product of the variable input will eventually decrease. This is a short-run phenomenon.
, 5. Which of the following would be considered a positive externality?
A. Pollution from a factory
B. A person receiving a vaccination, reducing the spread of disease
C. A neighbor's loud music
D. Traffic congestion
☑ Correct Answer: B
☑ Explanation: A positive externality occurs when a third party benefits from an economic
activity without paying for it. Vaccination provides herd immunity benefits to others, which is a
positive externality. Pollution, loud music, and traffic congestion are negative externalities.
6. Gross Domestic Product (GDP) is the market value of all:
A. Goods and services produced within a country in a given period
B. Final goods and services produced within a country in a given period
C. Final goods and services produced by a country's citizens, regardless of location
D. Intermediate goods and services produced within a country in a given period
