AnswersEconomicsThe American Market Economy

Practice Test Answers

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1
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Why are utilities, such as electricity and water, examples of natural monopolies?

A
Consumers only trust known companies to provide these essentials.
B
There is no need for alternative options.
C
The cost of production restricts competition in the market.
D
There are limited natural resources to meet demand.
2
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Which best describes the economic impact of defaulting on bank loans?

A
The economy suffers because businesses are scared to take out loans.
B
The economy suffers because people are scared to take out loans.
C
The economy suffers because people have less money to spend.
D
The economy suffers because banks have less money to loan to others.
3

A monopoly is a market that has

A
a single supplier of a good or service.
B
few competing businesses.
C
many sellers of the same item.
D
many sellers of a variety of products.
4

A clothing store has ordered a new supply of jeans for the fall season and wants to sell off the remaining items from the previous spring. What action would the store owner most likely take?

A
The store owner would most likely lower the price of the spring jeans to encourage consumers.
B
The store owner would most likely raise the price of the spring jeans to encourage consumers.
C
The store owner would most likely raise the price of the spring jeans to encourage producers.
D
The store owner would most likely lower the price of the spring jeans to encourage producers.
5

What does elasticity measure in economics?

A
how the amount of a good changes when the producer uses new materials
B
how the amount of a good changes when its price goes up or down
C
how the amount of a good changes when the producer hires more employees
D
how the amount of a good changes when its distribution expands
6

How do bank loans help the nation’s economy?

A
They allow businesses to expand and improve.
B
They ensure consumer spending and confidence.
C
They ensure the success of new businesses.
D
They allow consumers to quickly pay off debts.
7

Which statement best explains the role of producers in economics?

A
Producers purchase goods and services.
B
Producers sell shares for companies in the market.
C
Producers supply goods and services.
D
Producers create theories about the market.
8

Which best describes why investing can be such a challenge?

A
There are no guaranteed investments.
B
All investments are totally unpredictable.
C
All investments involve major risks.
D
There is never a sure way to protect investments.
9

Equilibrium occurs when supply and demand coordinate to

A
raise prices and production.
B
set excess demand.
C
maintain excess supply.
D
set prices and production.
10

If quantity demanded exceeds quantity supplied, what most likely needs to happen to achieve equilibrium?

A
The price needs to decrease.
B
The demand needs to increase.
C
The price needs to increase.
D
The supply needs to increase.
11

According to the graph, the marginal cost begins to increase when the producer makes

A
five pies.
B
four pies.
C
three pies.
D
two pies.
12

This chart is an example of a

A
supply curve.
B
demand schedule.
C
demand curve.
D
supply schedule.
13

The graph demonstrates that changes in investment

A
can show if the economy is growing or shrinking.
B
occur only when the economy is growing.
C
occur only when the economy is shrinking.
D
have no relation to changes to the GDP.
14

What most likely will happen if the pie maker bakes a seventh pie?

A
The marginal cost will most likely increase to 2 point 0 0 dollars
B
The marginal cost will most likely decrease to 1 point 0 0 dollars
C
The marginal revenue will most likely decrease to 8 point 0 0 dollars .
D
The marginal revenue will most likely increase to 12 point 0 0 dollars .

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