Knowledge Check / Week 1 / ECO/561 ECO 561 ECO561
1 . Revenue increases when
- A. producer surplus increases
- B. producer surplus decreases
- C. consumer surplus increases
- D. consumer surplus decreases
2 . An increase in the price of an inelastic good
- A. decreases revenues
- B. decreases the percentage change in quantity less than the percentage change in price
- C. increases revenues
- D. increases the percentage change in quantity more than the percentage change in price
3 . Price elasticity of Demand increases when
- A. the number of complementary goods decreases
- B. the number of substitute goods decreases
- C. people become more price sensitive over time
- D. people become less price sensitive over time
4 . The purpose of a market in a market system is to
- A. allow government to control what is sold
- B. set constraints between buyers and sellers
- C. bring buyers and sellers into contact
- D. allow an organization to set prices in relation to their products
5 . By specializing in the production of one good, a company is able to benefit from economies of scale which increases its revenue. Which of the following is an attribute of specialization?
- A. Reducing costs by creating a surplus
- B. Saving time by allowing a worker to focus on one task
- C. Encouraging workers to learn new skills
- D. Encouraging workers to learn a number of different skills
6 . The market system promotes progress by
- A. creating incentive to continue to do things in the same way
- B. restricting the amount of capital directed to specific goods
- C. slowly adjusting to changes in the prices of resources
- D. providing incentive for technological advances
7 . Productive efficiency is achieved when
- A. the most valued combination of resources is used
- B. the best technology is used
- C. when production occurs at a fair cost per unit
- D. fewer resources are left for production of other goods
8 . The market is said to be in equilibrium when
- A. there is potential for a shortage but not a surplus
- B. there is potential for a surplus but not a shortage
- C. neither a shortage nor a surplus exists
- D. the quantity sold equals the quantity purchased
9 . The market will move to a higher equilibrium price if
- A. the decrease in supply is equal to the decrease in demand
- B. the increase in supply is greater than the increase in demand
- C. the decrease in demand is greater than the decrease in supply
- D. the increase in demand is greater than the increase in supply
10 . The intersection of supply and demand will be at a lower equilibrium price but a higher equilibrium quantity if
- A. supply is constant and demand increases
- B. supply is constant and demand decreases
- C. demand is constant and supply decreases
- D. demand is constant and supply increases
11 . When a price ceiling occurs
- A. the market price will be lower than the equilibrium price
- B. the market price will be higher than the equilibrium price
- C. the supply will exceed the demand
- D. buyers will not be willing to pay more than the ceiling price
12 . Because the goals of firms, entrepreneurs, and workers have different incentives, which of the following principles applies?
- A. Self-interest
- B. Invisible hand
- C. Moral hazard
- D. Free enterprise
