EOCT REVIEW

1 The nation of Keilmanland

needs to build a new dam to control flooding near its larges city. If Keilmanland is a purely market economy, then these new improvements will MOST likely be left up to

a. the government b. the individuals

who are willing to pay for the new

dam c. anyone who

would benefit from the dam

d. the owners of the property on which

the dam would be built

1 B. Individuals are the ones responsible for

paying for goods/services in a free market. Everyone would benefit from it regardless of who paid for it. The government does not intervene in a pure free market economy.

2. Specialization An assembly line can increase a factory’s

productivity because it allows workers to A. diversify their skills B. focus on a specific task C. put in overtime hours on the job D. use a wide range of knowledge

2 B. Focus on a specific task.

3 Opportunity cost is best described as the

A. most expensive resource used in production B. sum of all production costs C. value of the best alternative given up when a

choice is made Monetary value of all alternatives forgone when a

choice is made.

3 C. Value of best thing given up when

making a choice

What best explains the shift of the production possibilities curve from P1 to P2?

A. improvements in agricultural technology

B. inflationary increases in process

C. higher costs for producing corn

D. higher costs of producing wheat

4.

4. A. improvement in agricultural technology

will cause a growth or increase in the production of both corn and wheat.

5 Alex and Dylan mow and

trim lawns. Currently, each man mows and trims a lawn by himself, but the process takes a long time. They would most likely improve their efficiency if

A. alex and dylan mow a lawn and then trim together

B. Alex mows a lawn while dylan trims the same lawn

C. alex trims dylan’s lawn while dylan trims alex’s lawn

D. Alex and Dylan reduce the number of lawns they mow and trim

5 B. Alex mows a lawn while Dylan trims the

same lawn.

This will allow for greater efficiency because it will eliminate the need to transition between two activities.

6 With which term is a

command economic system most closely associated?

A. Entrepreneurship B. Absolute

Advantage C. Perfect Competition D. Government

Regulation

6 Government Regulation

7 1 Anaxos just upgraded its

capital equipment by buying a

machine that makes fruit shakes faster

and cheaper than the original machine.

What effect should this have on

price and quantity?

Price / Quantity

A Rises / Rises B Drops / Rises C Rises / Drops D Drops / Drops

7 A Rises Rises

B Drops Rises C Rises Drops D Drops Drops

The new machine makes shakes faster and cheaper. This allows the supplier to reduce theprice, which eliminates choices A and C. Since the price is lower, the number producedcan increase to meet the demand (on the same curve). This eliminates choice D.Therefore the correct answer is choice B.

8 A corporation MOST

often seeks to increase its profit

and expand the size of its operations by

A issuing stock B joining an oligopoly C becoming a

monopoly D controlling the

money supply

A. Issuing Stock

Choices B and C are types of market structures and have no relationship to strategies thata corporation can use to increase its profit or size of operation. A corporation cannotcontrol the money supply, choice D. The Federal Reserve controls the money supply.Choice A is the correct answer.

9 Use this information to answer

the question. Organizers of many high-interest sporting events such as the Super Bowl and the World Series

usually set ticket prices lower than the equilibrium price, citing fairness to the public as their reason. What names do economists give to the resulting set price and disequilibrium situation?

A price ceiling; surplus B price ceiling; shortage C price floor; shortage D price floor; surplus

9 B price ceiling; shortage

Setting ticket prices below the equilibrium price creates a price ceiling. This eliminates

choices C and D. Price ceilings create a shortage of a good, so choice B is the correct

answer.

10 When the income

in households increases, what is the likely result?

A The supply curve will shift to the

left. B The supply curve will

become vertical. C The demand curve will

shift to the left. D The demand will shift to

the right.

10 D The demand will shift to the right.

Houses can be considered normal goods, since people tend to increase their consumption

of housing (by buying a bigger house) as their income increases. In the short run, this

increased demand will lead the demand curve to move to the right, so the answer is

choice D.