AnswersEconomicsThe American Market Economy

The American Market Economy — Test Answers

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1
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What most likely will happen if the pie maker continues to make additional pies?

A
The marginal costs will continue to rise, increasing the total cost, while the marginal revenue remains the same, increasing the profit earned for each pie.
B
The marginal costs will continue to fall, decreasing the total cost, while the marginal revenue remains the same, increasing the profit earned for each pie.
C
The marginal costs will continue to rise, increasing the total cost, while the marginal revenue remains the same, decreasing the profit earned for each pie.
D
The marginal costs will continue to fall, decreasing the total cost, while the marginal revenue remains the same, decreasing the profit earned for each pie.
2
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What role does the Federal Reserve play? Choose three correct answers.

A
Regulate the banking industry
B
Loan money to banks
C
Transfers any profits to the Treasury
D
Give corporate loans
E
Give individual loans
3

Supply and demand coordinate to determine prices by working

A
with other factors.
B
competitively.
C
together.
D
separately.
4

Which describes an investor’s primary goal of buying a loan?

A
to provide capital to a business
B
to bolster the economy
C
to grow a business
D
to earn a profit off the interest
5

Which is an example of a product that is considered a need?

A
sports equipment
B
breakfast food
C
video game
D
music player
6

A market supply schedule shows

A
the products of two companies only.
B
the prices and quantity in an entire market.
C
how prices affect a single producer.
D
how prices affect a group of consumers.
7

The total amount of a product available in a market at a given price is called the

A
number.
B
count.
C
demand.
D
supply.
8

Which best describes the role that government and business play in investments?

A
They both use taxes to support a country’s growth.
B
They both receive capital to use for growth.
C
They both invest money to earn a profit.
D
They both act as angel investors for start-ups.
9

Brenda’s Boards manufactures skateboards. Each skateboard sells for $45 and includes the following expenses: $3 for the wheels and mounts, $1 for the plastic board, $1 for the paint, and $10 for the labor. What is the total profit the company earns after selling 100 boards?

A
$300
B
$3,000
C
$3,500
D
$350
10

Goods that are considered to be needs tend to be

A
inelastic when the price changes.
B
elastic when the price changes.
C
inelastic when the supply changes.
D
elastic when the supply changes.
11

Which statements correctly explain price floors and price ceilings? Choose four correct answers.

A
Ineffective price ceilings tend to be too low.
B
Effective price floors are set above equilibrium.
C
Price ceilings help consumers by lowering prices.
D
Effective price ceilings are set below equilibrium.
E
Ineffective price floors tend to be too high.
F
Price floors help producers by raising prices.
12

The main role of banks in the nation’s economy is to

A
store, lend, and borrow money.
B
store, lend, and distribute money.
C
store, lend, and invest money.
D
store, lend, and approve money.
13

Which term refers to the possibility of an investor losing some or all of an investment?

A
likelihood
B
chance
C
risk
D
probability
14

Which example best describes how a bank injects money into the economy?

A
A bank approves a loan for a customer.
B
A bank opens a savings account for a customer.
C
A bank buys a company’s rapidly growing stock.
D
A bank buys property in a bustling business district.
15

The government has set a price floor on bread. Manufacturers cannot sell loaves for less than 5 point 0 0 dollars , which is a dollar above the market price. What will most likely result from this price control?

A
The quantity demanded and quantity supplied for bread will increase.
B
The quantity demanded and quantity supplied for bread will decrease.
C
The quantity demanded for bread will increase,and the quantity supplied will decrease.
D
The quantity demanded for bread will decrease, and the quantity supplied will increase.
16

Bank deposits help the nation’s economy by

A
giving banks the money to loan and invest.
B
providing protection for banks on investments.
C
giving consumers the ability to save money.
D
providing protection for consumers from theft.
17

Which best describes the availability of substitutes in a monopoly?

A
There are different brands.
B
Price points vary.
C
There are no substitutes.
D
Products have different features.
18

Equilibrium is defined when

A
supply is limited and demand decreases.
B
supply is higher than demand.
C
demand is higher than supply.
D
supply and demand meet.
19

Brenda’s Boards manufactures skateboards. Each skateboard sells for $45 and includes the following expenses: $3 for the wheels and mounts, $1 for the plastic board, $1 for the paint, and $10 for the labor. What is the total revenue the company makes after selling 10 boards?

A
$350
B
$300
C
$400
D
$450
20

On a graph, an equilibrium point is where

A
a supply curve is higher than a demand curve.
B
the supply and demand curves head down.
C
the supply and demand curves head up.
D
a supply curve and a demand curve meet.

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