Economics Quiz
Questions: 16 · 10 minutes
1. When household income falls, demand for a particular brand of instant noodles rises, with other factors unchanged. In this setting, the noodles are best described as what type of good?
A public good
A normal good
An inferior good
A complementary good
2. At the current price of a product, buyers want more units than sellers offer. With no price controls, which adjustment would normally move the market toward equilibrium?
The price falls, increasing quantity demanded further
Demand shifts left automatically until the shortage disappears
The price rises, reducing quantity demanded and increasing quantity supplied
Supply shifts left because sellers are selling out
3. The market price received by apple growers rises, with production conditions otherwise unchanged. How is this represented on an existing supply curve for apples?
As a leftward shift of the supply curve
As a rightward shift of the demand curve
As an increase in quantity supplied along the supply curve
As a decrease in quantity supplied along the supply curve
4. A shop owner is deciding whether to stay open for one additional hour. The expected extra revenue is $18, and the expected extra cost is $14. Ignoring other effects, what does marginal analysis suggest?
Close because total daily costs are already high
Stay open because the marginal benefit exceeds the marginal cost by $4
Stay open only if the shop has already recovered all sunk costs
Close because the extra hour has a positive cost
5. During a recession, which change is an example of an automatic fiscal stabilizer rather than a new discretionary policy?
Unemployment-benefit payments rise as more eligible people lose jobs
The central bank lowers its policy interest rate
The government introduces a newly designed tax rebate
The legislature passes a one-time infrastructure package
6. If a central bank wants to reduce inflationary pressure by slowing aggregate demand, which action is most directly contractionary?
Lowering its policy interest-rate target
Raising its policy interest-rate target
Purchasing government securities to add reserves
Encouraging banks to expand lending through cheaper credit
7. A product’s price increases by approximately 10%, and the quantity demanded decreases by approximately 20%. What does this suggest about demand over that range?
Demand is perfectly inelastic
Demand is elastic, with an elasticity magnitude of about 2
Demand is unit elastic, with an elasticity magnitude of about 1
Demand is inelastic, with an elasticity magnitude of about 0.5
8. Which characteristic combination best explains why national defense is commonly treated as a public good?
It is broadly non-rival and non-excludable
It is non-rival but always easy to sell to each user separately
It is rival in consumption and easy to exclude non-payers from using
It is privately owned and depleted whenever one person benefits
9. A worker’s nominal income stays unchanged for a year while the general price level rises. What happens to the worker’s purchasing power, all else equal?
It rises because nominal income is fixed
It stays constant because the number of dollars is unchanged
It becomes impossible to compare without knowing the unemployment rate
It falls because the same income buys fewer goods and services
10. Country A needs 2 labor hours for one unit of wheat and 6 for one unit of cloth. Country B needs 4 hours for wheat and 8 for cloth. Which statement is correct?
Country A has comparative advantage in both goods because it uses fewer hours
Country B has comparative advantage in cloth because it gives up 2 wheat units per cloth, while Country A gives up 3
Country A has comparative advantage in cloth because it produces cloth faster
Neither country can gain from specialization because Country A has absolute advantage in both goods
11. Which transaction contributes to current-year GDP?
Unpaid repair work someone performs on their own car
The full resale price of the previously owned car
A used-car dealer’s fee for arranging the sale of a previously owned car
The purchase of existing shares through a stock exchange
12. Tea and coffee are substitutes. If the price of coffee rises while other relevant factors remain unchanged, what is most likely to happen in the tea market?
The demand for tea shifts right
The supply of tea shifts left
The quantity of tea demanded falls along its existing demand curve
The demand for tea shifts left
13. A per-unit tax is imposed in a market where consumer demand is much less price-elastic than producer supply. Who is likely to bear more of the economic tax burden?
Producers, because taxes are legally collected from sellers
Neither side, because the government receives the tax revenue
Consumers and producers in exactly equal shares in every case
Consumers, because the less elastic side of the market bears more of the burden
14. A factory’s production creates air pollution costs for nearby residents that are not included in the product’s market price. Under standard economic assumptions, which policy most directly internalizes this negative externality?
A per-unit tax reflecting the marginal external cost
A subsidy for every unit the factory produces
A binding price ceiling on the factory’s product
A quota applied equally to all imported products
15. A city sets a maximum monthly rent below the market equilibrium rent. If the rule is enforced, what is the most likely immediate market outcome?
An increase in quantity supplied and a decrease in quantity demanded
A surplus of rental housing at the controlled rent
A higher equilibrium rent with no change in availability
A shortage of rental housing at the controlled rent
16. A student can spend Saturday either working for $80 or attending a free economics workshop. If the student attends the workshop, what is the clearest opportunity cost?
Zero, because the workshop charges no admission
The workshop’s operating cost
The value of every future job the student might obtain
The $80 the student could have earned