Question 1 (Multiple Choice Worth 2 points)

[02.04] Diversification is best described as

a savings account at more than one bank.

spreading your assets among multiple investments.

investing to maximize risk and minimize return.

creating different sections of your financial portfolio.



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Question 2 (Multiple Choice Worth 2 points)

[06.02] Externalities cause inefficiency because

businesses ignore third-party costs and benefits in their plans.

calculating the value of external costs and benefits is difficult.

most analysts do not think externalities add significant costs.

the effects of externalities are completely unpredictable.



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Question 3 (Multiple Choice Worth 2 points)

[06.02] A soda company wishes to build a bottling plant in your community. Which externality is most likely to convince lawmakers to allow the company to build their plant?

The plant will place most of the soda in local stores, possibly increasing tax revenue.

The company owners pledge to build a plant that runs on renewable energy sources.

The plant will hire hundreds of workers, encouraging an increase in local business.

The company will need to purchase trucks to deliver the soda bottles to retailers.



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Question 4 (Multiple Choice Worth 2 points)

[01.03] An mp3 download costs $1 and a CD costs $10. If your allowance is $10 and you choose to purchase a CD, your opportunity cost is

1 mp3 download.

10 mp3 downloads.

1 CD.

10 CDs.



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Question 5 (Multiple Choice Worth 2 points)

[01.03] Which of the following forces us to make choices?

opportunity cost

scarcity

demand

money



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Question 6 (Multiple Choice Worth 2 points)

[02.02] One cost of going to work instead of college after graduation is

lower income potential.

earning money now.

on-the-job training.

the cost of tuition.



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Question 7 (Multiple Choice Worth 2 points)

[03.02] The founder of a restaurant is an example of

land.

labor.

capital.

entrepreneurship.



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Question 8 (Multiple Choice Worth 2 points)

[04.05] Which of the following is not a goal of fiscal policy?

price stability

full employment

economic growth

increase currency



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Question 9 (Multiple Choice Worth 2 points)

[04.05] The best measure of price stability is the

economic growth rate.

unemployment rate.

stagflation rate.

inflation rate.

Question 11 (Multiple Choice Worth 2 points)

[05.06] To increase your standard of living, your wages must

rise faster than the inflation rate.

rise more slowly than the inflation rate.

keep pace with the inflation rate.

have a negative inflation rate.



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Question 12 (Multiple Choice Worth 2 points)

[03.05] The first step in marginal analysis is to determine

what price the company wishes to charge for its products.

fixed and variable costs for specified quantities of product.

the marginal cost of producing one additional unit of a product.

the marginal revenue of producing one additional unit of a product.



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Question 13 (Multiple Choice Worth 2 points)

[05.06] Globalization increases the interdependency of the world’s countries. Inflation in one country would most likely

not impact inflation in other countries.

cause deflation in other countries.

result in stagflation in other countries.

relate to inflation in other countries.



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Question 14 (Multiple Choice Worth 2 points)

[03.06] A company will continue to hire workers until

there is no more room in the facility.

the government restriction on workforce is reached.

the additional profit is less than the cost of hiring.

there is no more money available for capital investment.



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Question 15 (Multiple Choice Worth 2 points)

[02.04] A share of ownership in a public company is a

bond.

stock.

certificate of deposit.

money market account.

Question 17 (Multiple Choice Worth 2 points)

[04.02] An example of government regulation is

spending money on parks.

the minimum wage.

the federal debt.

a courthouse.



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Question 18 (Multiple Choice Worth 2 points)

[03.04] The level of competition least beneficial to business owners is

oligopoly.

monopoly.

pure competition.

monopolistic competition.



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Question 19 (Multiple Choice Worth 2 points)

[03.04] A cost of monopoly for the consumer is

lack of choice.

government control.

tricky advertising.

low quality.



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Question 20 (Multiple Choice Worth 2 points)

[03.06] Which is the least profitable investment for a candy shop that earns a $1 profit per pound of candy?

worker at $10 per hour, producing 8 pounds of candy per hour

worker at $12 per hour, producing 16 pounds of candy per hour

machine with $5 per hour operating cost, producing 10 pounds of candy per hour

machine with $8 per hour operating cost, producing 14 pounds of candy per hour



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Question 21 (Multiple Choice Worth 2 points)

[04.02] The best reason to regulate bridge construction is to

ensure safety standards are met.

reduce the number of bridges the public has to fund.

eliminate multiple bridges in one area because they are not pleasing to the eye.

minimize route options because different bridges often confuse drivers.



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Question 22 (Multiple Choice Worth 2 points)

[03.01] Margaret Rousseau developed techniques to mass-produce

cookies.

penicillin.

ammunitions.

beauty products.



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Question 23 (Multiple Choice Worth 2 points)

[05.08] The United States enjoys a comparative advantage over a rocky, mountainous country like Japan in the production of

video games.

agriculture.

automobiles.

magazines.



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Question 24 (Multiple Choice Worth 2 points)

[03.02] The easiest form of business organization to start and stop is the

limited liability company.

sole proprietorship.

corporation.

partnership.



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Question 25 (Multiple Choice Worth 2 points)

[01.06] Quantity demanded is the quantity

customers will purchase at a specific point in time.

producers will sell at a specific price.

government demands to be produced.

people will purchase at a specific price.

Question 27 (Multiple Choice Worth 2 points)

[01.07] What is the purpose of money?

It makes trading goods and services more efficient.

It gives the government a way to track our habits.

It gives society a national symbol of pride.

It keeps our nation from experiencing a depression.



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Question 28 (Multiple Choice Worth 2 points)

[04.04] Unemployment is on the rise though inflation is quite low. Gross Domestic Product is rising but more slowly than the goal rate. The Federal Reserve may buy government securities in open market operations in order to

increase the money supply and encourage economic growth.

decrease the money supply and encourage people to save in difficult times.

give consumers more money to open their own businesses.

force the banks to stop giving out loans in an uncertain economy.

Question 30 (Multiple Choice Worth 2 points)

[04.03] Banks that are members of the Federal Reserve have the benefit of

earning dividends from stock in the Federal Reserve.

voting rights on the Federal Open Market Committee.

appointment rights to the Board of Governors.

priority access to check-clearing services.



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Question 31 (Multiple Choice Worth 2 points)

[02.03] Who would pay the least as a portion of income under a regressive tax?

factory owner earning $90,000 per year

artist earning $20,000 per year

economist earning $60,000 per year

grill master earning $10,000 per year

Question 33 (Multiple Choice Worth 2 points)

[01.02] Your friend decides to open his own restaurant, choosing what foods to offer and the prices to charge. In your friend’s country there are no government taxes or laws for businesses. To be more competitive, he offers a unique experience compared to other area restaurants. Your friend lives in which type of economy?

traditional

pure market

command

mixed



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Question 34 (Multiple Choice Worth 2 points)

[01.02] Traditional economies are based on

currency.

money.

barter.

gold.



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Question 35 (Multiple Choice Worth 2 points)

[04.05] The United States owes billions of dollars in debt to

government officials.

bank owners.

entrepreneurs.

investors.



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Question 36 (Multiple Choice Worth 2 points)

[03.04] Advertising is a form of

pure competiton.

price competition.

nonprice competition.

ineffective competition.



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Question 37 (Multiple Choice Worth 2 points)

[05.03] Increases in the Gross National Product best indicate increasing economic

growth.

security.

freedom.

efficiency.



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Question 38 (Multiple Choice Worth 2 points)

[05.01] Adam Smith would most likely support a plan for

increasing all business safety standards.

government ownership of most production.

creating a worldwide free trade agreement.

eliminating income taxes only on the wealthy.



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Question 39 (Multiple Choice Worth 2 points)

[06.04] The first step in a decision-making model is

brainstorming all the possible choices.

identifying all the possible externalities.

defining the problem that you wish to solve.

calculating the costs of each possible choice.



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Question 40 (Multiple Choice Worth 2 points)

[05.05] The governments of the United States, Mexico, and Canada created the North American Free Trade Agreement in order to

remove barriers to trading products between the three countries.

increase the prices on products common to all three countries.

prevent each of the three from trading with other countries.

decrease growth in South America’s developing countries.



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Question 41 (Essay Worth 10 points)

[05.04] In a minimum of two paragraphs, explain how the United States may benefit from trade with one other country, discussing at least one particular product. Use the principle of comparative advantage in your explanation.






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Question 42 (Essay Worth 10 points)

[05.07] In a minimum of two paragraphs, explain the issue you researched for your Module Six Project. Discuss at least two positive and two negative externalities the issue creates.