Econ 101 - Microeconomics » Fall 2022 » Quiz 1

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Question #1
The role of government in a market economy includes all the following except:
A.   making and enforcing laws
B.   collecting taxes
C.   extensive ownership of productive resources
D.   providing services such as national defense
E.   a government in a market economy does none of the above
Question #2
In the product market of the circular flow model,
A.   consumers sell factors of production to firms.
B.   consumers buy finished products from firms.
C.   firms sell factors of production to consumers.
D.   firms buy factors of production from consumers.
E.   consumers buy factors of production from firms.
Question #3
Which of the following statements is true about how the market system deals with risk?
A.   Entrepreneurs bear risk and must share the rewards with their employees. Employees are shielded from risk and are not personally liable for business success or failure.
B.   Entrepreneurs bear risk and have financial incentives to make prudent business decisions. Employees are shielded from risk and are not personally liable for business success or failure.
C.   Entrepreneurs bear risk and must share the rewards with their employees. Entrepreneurs bear risk and have financial incentives to make prudent business decisions.
D.   Entrepreneurs bear risk and must share the rewards with their employees.
Question #4
All other things equal, which of the following would cause a decrease in the price of bicycles?
A.   The cost of gas increases.
B.   The government imposes a tax on bicycle producers for each bicycle sold.
C.   None of these
D.   The cost of rubber used in the production of bicycles falls.
E.   The cost of aluminum used in the production of bicycles increases.
Question #5
Consider the market for denim jeans. If the price of khaki pants increases, and at the same time, the price of cotton falls, what will be the effect on the price of jeans and the quantity sold?
A.   Price may increase or decrease and quantity sold increases
B.   Price increases and quantity sold decreases
C.   Price increases and quantity sold increases
D.   Price decreases and quantity sold increases
E.   Price increases and quantity sold may increase or decrease
Question #6
Consider the market for beef. If the World Health Organization identifies red meat as a carcinogen (something that causes cancer), and at the same time the government provides a subsidy to cattle ranchers, what will be the effect on the price of beef and the quantity sold?
A.   Price may increase or decrease and quantity sold decreases
B.   Price decreases and quantity sold increases
C.   Price decreases and quantity sold decreases
D.   Price increases and quantity sold increases
E.   Price decreases and quantity sold may increase or decrease
Question #7
Which of the following is not an example of fiscal policy?
A.   increasing personal income taxes
B.   increasing interest rates
C.   decreasing spend on social programs
D.   allocating more funds towards defense
E.   lowering the corporate tax rate

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