Econ 101 - Microeconomics » Spring 2023 » Quiz 1

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Question #1
The role of government in a market economy includes all the following except:
A.   providing services such as national defense
B.   extensive ownership of productive resources
C.   making and enforcing laws
D.   collecting taxes
E.   a government in a market economy does none of the above
Question #2
In the product market of the circular flow model,
A.   firms buy factors of production from consumers.
B.   firms sell factors of production to consumers.
C.   consumers buy finished products from firms.
D.   consumers sell factors of production to firms.
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.   None of these
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. Employees are shielded from risk and are not personally liable for business success or failure.
D.   Entrepreneurs bear risk and must share the rewards with their employees. Entrepreneurs bear risk and have financial incentives to make prudent business decisions.
Question #4
A business finds that it is most profitable when it sells $10,000 of product a month. It can produce this amount of product using several different production methods. These methods, along with input costs are shown in the table below: Which method of production will this firm select, and how much profit will they make a month?
A.   Method 1 - $5,200
B.   Method 3 - $4,300
C.   Method 2 - $5,200
D.   Method 1 - $4,200
E.   Method 2 - $4,800
Question #5
All other things equal, which of the following would cause a decrease in the price of bicycles?
A.   The cost of rubber used in the production of bicycles falls.
B.   The government imposes a tax on bicycle producers for each bicycle sold.
C.   The cost of gas increases driving up the cost of driving..
D.   The cost of aluminum used in the production of bicycles increases.
E.   None of these
Question #6
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 decreases and quantity sold increases
B.   Price increases and quantity sold may increase or decrease
C.   Price increases and quantity sold increases
D.   Price increases and quantity sold decreases
E.   Price may increase or decrease and quantity sold increases
Question #7
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 decreases and quantity sold decreases
B.   Price decreases and quantity sold increases
C.   Price decreases and quantity sold may increase or decrease
D.   Price may increase or decrease and quantity sold decreases
E.   Price increases and quantity sold increases
Question #8
Which of the following is not an example of fiscal policy?
A.   increasing interest rates
B.   increasing personal income taxes
C.   lowering the corporate tax rate
D.   allocating more funds towards defense
E.   decreasing spend on social programs

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