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Unit 1 Practice Test

1. The quantity demanded of products is affected by


a. outputs versus inputs
b. surplus
c. price
d. inputs and outputs

2. The product most likely to have inelastic demand is


a. cereal
b. medicine
c. skis
d. fruit punch

3. If the price of an item is too high, the results will be


a. a surplus
b. a shortage
c. equilibrium
d. a seller’s product

4. If population increases, the demand curve for an item moves


a. not at all
b. to the left
c. unpredictably
d. to the right
5. Prices on goods and services are determined
a. only by demand
b. only by supply
c. both by supply and demand
d. neither by supply and demand

6. As the price rises for a good,


a. the quantity supplied decreases
b. the quantity supplied increases
c. demand and supply increase
d. neither demand nor supply increase

7. If the demand curve for a good shifts left,


a. demand decreases
b. quantity demanded increases
c. quantity demanded stays the same
d. both demand and supply shift to the right

8. The graph that shows the amount of a product producers are willing to supply at different
prices
is called:
a. the supply curve
b. the demand curve
c. not accurate for low priced goods
d. not accurate for high priced goods

9. The price of good X rises, the demand for good Y falls. Therefore, goods X and Y are
a. substitutes
b. normal goods
c. complements
d. inferior goods

10. At a price above equilibrium price, there is


a. a shortage
b. a surplus
c. excess demand
d. super-equilibrium

11. A minimum wage that is set above the equilibrium in a particular business will cause a
a. shortage of workers
b. illegal trades
c. fewer exchanges
d. surplus of workers
e. will shift the supply curve to the right

12. When prices become too high for consumers, they look for
a. substitutes
b. inflation
c. inelastic demand
d. luxuries

13. Which of the following best describes perfect competition?


a. there is only one producer of a particular good
b. there is a very small market for a particular good
c. there are many buyers but few sellers for a particular good
d. there are many buyers and many sellers of a particular good

14. If an industry that is involved in perfect competition


a. they are selling identical goods
b. they are selling goods that vary greatly in quality
c. it is difficult for other businesses to enter the industry
d. there is a great need for advertising

15. The best example in the U.S. that comes close to perfect competition is
a. agriculture
b. computers
c. transportation
d. fast food

16. How does perfect competition affect consumers?


a. consumers overpay for the products they buy
b. consumers pay a price that is determined by supply and demand
c. there is a surplus
d. there is a shortage

17. A situation where a single seller controls the quantity and price of a product
a. monopoly
b. monopolistic competition
c. oligopoly
d. perfect competition

18. This is a situation with many sellers, selling a similar but unique product
a. monopoly
b. monopolistic competition
c. oligopoly
d. perfect competition

19. The most extreme form of imperfect competition is


a. monopoly
b. monopolistic competition
c. oligopoly
d. perfect competition

20. There is easy entry in which of the following markets?


a. monopoly
b. oligopoly
c. both monopoly and oligopoly
d. neither monopoly nor oligopoly

21. Laws that prevent monopolies and break up those that exist are called
a. conglomerates
b. antitrust legislation
c. regulation
d. deregulation

22. When a corporation buys another corporation that sells the same products it is called
a. vertical merger
b. horizontal merger
c. illegal merger
d. interlocking directorate

23. When a corporation buys another corporation that sells products used in its production of
goods and/or services
a. vertical merger
b. horizontal merger
c. illegal merger
d. interlocking directorate
24. The government seeks to regulate monopolies in order to
a. control supply
b. increase competition
c. restrict pricing
d. oversee management

25. Many neighborhood businesses such as retail stores and grocery stores are involved in
a. imperfect competition
b. perfect competition
c. monopolistic competition
d. none of the above

26. Sole proprietorships and partnerships share the disadvantage of


a. limited opportunity
b. higher personal taxes
c. state registration fees
d. unlimited liability

27. The main incentive for accepting the risk of going into business is based on the
opportunity to
a manage others
b. make a profit
c. have more leisure time
d. pay fewer taxes

28. Which of the following describes a disadvantage of partnerships?


a. they are usually more efficient than proprietorships
b. decision making may be slow because of the need to have several people reach
agreement
c. they combine the capital of two or more people
d. losses in the business are shared

29. The document filed to establish a corporation is


a. the articles of incorporation
b. the corporate charter
c. the franchise
d. NASDAQ

30. Which of the following describes the board of directors of a corporation?


a. it supervises and controls the corporation
b. it is always make up of the founders of the corporation
c. its members are appointed by the president of the corporation
d. none of the above

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