Module 1 Economics V14 Practice Exam and Glossary
Term
Definition
Basic economic questions
Benefits
What to produce? How to produce? For whom to produce?
What we gain when making a choice
Characteristics of money
Counterfeit
Divisible, Stable in value, Durable, Portable, Scarce, Accepted
A fake copy of something valuable
Currency
Decrease in demand or supply
Coins and paper bills used in exchange for goods and services
Curve shifts to the left
Demand
Demand curve slope
Total amount of a good or service that people are willing to buy
(From left to right) slopes downward
Economic products
Goods and services
Economics
A study of the ways people obtain their wants with limited resources.
Equilibrium price
The point where supply and demand meet - This is how much suppliers sho
charge for their product.
Fiat currency
Like U.S. currency, is money the government declares legal for use in payme
have confidence that the money will hold its value because it was issued by
government.
Gold Standard
The value of money was based on gold - money is NO LONGER backed by go
Increase in demand or supply
Curve shifts to the right
Macroeconomics
Market
Study of the national and global economies
Exchange of goods and services between buyers and sellers
measure of value
Medium of exchange
Money is used to describe the worth of an item.
Money is accepted in exchange for another item.
Microeconomics
Study of the individual, household, and business firm economies
Opportunity Cost
The most valued alternative given up when a choice is made. Opportunity c
“opportunity lost” or whatever is given up.
Quantity demanded
The quantity people will purchase at a specific price - a specific point along
curve.
Quantity supplied
The quantity suppliers will produce at a specific price - a specific point on th
ROTTEN
Reasons a supply curve would shift: Resources, Other goods' price, Taxes (a
subsidies and government regulation), Technology (productivity), Expectatio
the producer, Number of firms in the industry
Scarcity
Limited resources, rarity
Shortage
When price is lower than the equilibrium price then not enough will be prod
there is a shortage (demand will increase due to the lower price, but supply
due to need to cover costs at a lower profit margin).
Standard of money
Store of value
Money has a consistent numerical measurement.
Money holds its value.
Supply curve slope
(from left to right) slopes upward
Total amount of a good or service available for purchase. Supply is the who
curve,‖ supply for goods and services at all prices.
Supply
Surplus
When price is higher than the equilibrium price then too much will be produ
there is a surplus (not as many people will want the good due to the higher
TRIBE
Reasons a demand curve would shift: Tastes and preferences, Related good
services, Income, Buyers, Expectations of price.
x-axis
y-axis
On a supply and demand graph, the line that indicates quantity
On a supply and demand graph, the line that indicates price
Module 1 Practice Exam – V14
1. In a week you could read two books or see four movies. The opportunity cost of choosing to read
one book is
A. one book
B. two books
C. one movie
D. two movies
2.
Ezra runs a gyro stall at the local farmers' market. He would like to expand and open his own
shop downtown. He has made the chart above, listing some potential costs and benefits of
expansion. Item 3 under Costs best illustrates which concept?
A. Businesses must grow to stay competitive.
B. Fluctuations in demand cause fluctuations in supply.
C. Labor shortages drive up business costs.
D. Scarcity of resources necessitates economic choices.
3.
In the graph above, a shift from point A to point B represents which of the following?
A. A decrease in demand
B. A decrease in quantity demanded
C. An increase in demand
D. An increase in quantity demanded
4.
Use the above graph to answer the following question. Which line indicates the demand curve?
A. one
B. two
C. The x-axis
D. The y-axis
5. Which of the following best describes the concept of "equilibrium price"?
A. Sellers are happy with the price, but buyers are unhappy with the quantity.
B. Sellers are unhappy with the price, but buyers are happy with the quantity.
C. Both sellers and buyers are happy with the price and quantity.
D. Both sellers and buyers are unhappy with the price and quantity.
6. A new superhero movie has become very popular, and its toy action figures have recently hit the
market. What impact will production of the new movie's toys have on the toys of last year's
superhero movie?
A. Demand for the old action heroes will decrease, causing a decrease in equilibrium quantity.
B. Demand for the old action heroes will decrease, causing an increase in market price.
C. Demand for the old action heroes will increase, causing a decrease in market price.
D. Demand for the old action heroes will increase, causing an increase in equilibrium quantity.
7.
The graph above shows supply and demand for a popular brand of coffee. A gas crisis affects shipping
costs. What would a coffee company do in anticipation of a rise in shipping costs, and how would that
effect the equilibrium price?
A. Add D3 to the left of D2, showing decrease in equilibrium supply and equilibrium price.
B. Add D3 to the right of D2, showing increase in equilibrium supply and equilibrium price.
C. Add S2 to the left of S, showing decrease in supply and increase in equilibrium price.
D. Add S2 to the right of S, showing increase in supply and equilibrium price.
8. Lara has earned $20 mowing grass around her neighborhood. She takes her money to the
bookstore and purchases a CD for $11.99. She wants to buy a book as well, but she has to
choose between the hardcover for $12 and the softcover for six dollars. Lara's use of her money
and the decision she makes best illustrate which two functions of money?
A. Measure of value and standard
B. Medium of exchange and measure of value
C. Standard and store of value
D. Store of value and medium of exchange
9. Which situation best illustrates the basic economic questions?
A. Your sister decides to make beaded bracelets and give them to friends.
B. Your sister decides to make beaded bracelets and wear them all herself.
C. Your sister hand beads the bracelets and sells them to neighbors
D. Your sister goes to the store and purchases beaded bracelets from the jewelry department.
10 . Which situation best illustrates ALL THREE of the basic economic questions?
A. You start your own shirt design company and sell your services to local businesses.
B. You start your own shirt design company for fun, making shirts for your friends.
C. You pay a shirt design company to make shirts for you.
D. You start a shirt design company using your own equipment and serve local businesses.
11. Your friend wanted a big screen TV and a class ring for birthday gifts. When her mom said she
could only have one, she chose the class ring. Her opportunity cost is the
A. The enjoyment of having a big screen TV.
B. Price of the big screen TV.
C. The enjoyment of having a class ring.
D. Price of the class ring.
12. You have to choose between being in the school play or being on the baseball team because the
practices overlap. This choice exemplifies that
A. Time is scarce.
B. Demand is scarce.
C. Music lessons are scarce.
D. Sports teams are scarce.
13. A cookie costs $2 and a shirt costs $20. If your allowance is $20 and you choose to purchase a
shirt, your opportunity cost is
A. One cookie.
B. Ten cookies.
C. One shirt.
D. Ten shirts.
14. There is a shortage of milk at $1 per gallon. The equilibrium price for milk is
A. $1 per gallon.
B. Less than $1 per gallon.
C. More than $1 per gallon.
D. Not calculable.
15. On a supply and demand graph, the line that indicates quantity is
A. The longest line.
B. The line equal to zero.
C. The x-axis.
D. The y-axis.
16. Stores are overflowing with the latest car racing video game at $20. Store managers are frustrated
with the lack of sales. The equilibrium price for this video game is
A. More than $20.
B. Less than $20.
C. $20.
D. Not calculable.
17. A decrease in demand causes the demand curve to
A. Shift to the left.
B. Shift to the right.
C. Increase its slope.
D. Decrease its slope.
18. When price decrease, quantity supplied
A. Decreases.
B. Increases.
C. Becomes zero.
D. Stays the same.
19. Which may occur as a result of a decrease in the price of minivans?
A. Increase in demand
B. Increase in quantity demanded
C. Decrease in demand
D. Decrease in quantity demanded
20. Use the graph to answer the following question.
Which line indicates an increase in supply?
A. 1
B. 2
C. 3
D. 4
21. Use the graph to answer the following question.
Which of the following may occur as a result of a decrease in the price of cell phones?
A. Shift from line 1 to line 2
B. Move from point S to point U
C. Shift from line 2 to line 1
D. Move from point U to point S
22. Your teacher says your history book is worth about fifty dollars. Your teacher is using money
as a
A. Standard.
B. Store of value.
C. Measure of value.
D. Medium of exchange.
23. The gold standard is:
A. What United States paper money is “backed” by
B. The weight of US paper money.
C. Government stores of valuables.
D. No longer in use – money is backed by public and government acceptance.
24. You chose to study for your final exam rather than go to the movies with your friends. You
made the choice with the lowest?
A.
B.
C.
D.
Demand
Supply
Benefit
Opportunity Cost
25. Which economic question is addressed by targeting shoppers that age from 30-40?
A.
B.
C.
D.
What to produce?
Where to produce?
How to produce?
For whom to produce?
26. The point where supply and demand meet is the?
A.
B.
C.
D.
X-axis
Y-axis
Equilibrium
Minimum price
27. Can you draw a conclusion as to what will happen to the quantity supplied when the price
increase?
A. It will decrease.
B. It will stay the same.
C. It will increase.
D. Nothing.
28. Please analyze the following scenario paying special attention to the wording.
Dominic is opening a pizzeria in which he will make pizzas from scratch as they are ordered.
He is located on the boardwalk.
Which of the three economic questions has he not considered?
A.
B.
C.
D.
For whom to produce?
How to produce?
What to produce?
When to produce?
29. What is the effect of the demand for a product or service increasing on the demand curve?
A. It shifts to the right.
B. It shifts to the left.
C. It does not shift.
D. It is deleted.
30.
Look at the graph. Where P is price and Q is quantity, what might cause a move from d to e?
A. The cost of raw materials to manufacture the product increases.
B. A National price celling was lifted.
C. Machinery was shut down for repair.
D. Minimum wage was increased.
31.
The supply and demand curves reflect the availability and cost of a smart phone. If the smart phone
market is currently at Demand and Supply, which change to the graph, would have to occur to increase
equilibrium price while lowering equilibrium quantity?
A.
B.
C.
D.
Add Demand 1 to left of Demand.
Add Demand 1 to right of Demand.
Add Supply 2 to left of Supply.
Add Supply 2 to right of Supply.
32. Jen has a twenty dollar bill in her pocket but she needs change. Shea gives her a ten dollar bill, a
five dollar bill and four ones and four quarters. Jen takes the one dollar to by some chips from the
vending machine. Which characteristics of money has Jen best demonstrated?
A. Medium, scarcity, and value
B. scarcity, and stability of value, Divisibility
C. Durability, portability, and standard
D. Acceptability, divisibility, and portability
33. After working very hard at your after school job you have managed to save $1000! You can
invest your money into the stock market or you can spend your money on a trip this
summer with your friends. If you decide to invest your money into the stock market, what is
your opportunity cost?
a. $1000
b. Going to college
c. Investing in the stock market
d. Going on a trip with your friends
34. The new IPhone has come out and is better than ever. All of your friends have the new
phone and it makes you want to have the new IPhone that much more. Which part of TRIBE
is impacted in this example?
a. Taste and Preferences
b. Related goods
c. Income
d. Buyers in the market
35. Interpret the graph below for Kookie cookies and pick an explanation as to why the line
shifts because of ROTTEN
Cookies
Price
S
S1
Quantity
a. Minimum wage increased to $10 an hour resulting in the cost to produce Kookie
cookies to increase.
b. Next week is cookie appreciation week. People come from all over to purchase
Kookie cookies
c. For every Kookie cookie produced a $1 tax must be paid to the government
d. The oven used to produce Kookie cookies broke.
36. Aaron heads to the store on a Wednesday to purchase the latest book in a series he enjoys.
He doesn’t get paid again until Friday, and uses the last 20 dollars he has to pay for the
book, which costs 15 dollars. When he hands the cashier the 20 dollar bill, she inspects it
with her counterfeit marker, determines it is a real bill, and then gives Aaron back his 5
a)
b)
c)
d)
dollars in change. Which characteristics of money are best demonstrated in Aaron’s
scenario?
Scarcity, acceptability, and divisibility
Medium, value, store
Divisibility, stability, portability
Standard, durability, scarcity
37. Louise wants to go to the Imagine Dragons concert next Saturday but her sister reminds her
it is also their dad’s birthday that day. Which of these is an opportunity cost of Louise
choosing to spend her dad’s birthday with him?
a) Her dad will be disappointed
b) She will save the cost of buying her dad a present
c) Enjoying the Imagine Dragons concert
d) The price of the Imagine Dragons ticket
38.
Use the equilibrium graph to help answer the question. Which situation would cause a shift
from line 4 to line 3?
a) A decrease in the cost of rubber to make the soles
b) A factory worker strike
c) A decrease in the price of Nikes
d) Kobe Bryant creating his own line of shoes
39. Mark has been given an invite by friends to attend the opening night of a movie but has also
received tickets to the upcoming football game on the same night, creating a dilemma as to
which event to attend. From this scenario, distinguish what is the scarcity most likely
creating the dilemma Mark is currently facing?
A: The choices
B: Location
C: Time
D: Number of friends
40. Mark has been given an invite by friends to attend the opening night of a movie but has also
received tickets to the upcoming football game on the same night, creating a dilemma as to
which event to attend. In assessing the scenario above, Mark’s opportunity cost for
choosing the football game would be….?
A: Cost of food
B: Going to the football game
C: Time spent
D: Going to the movie
41. Kalli has increased the sales of her jewelry business since setting up an online website for
people to shop from. With Valentine’s Day coming up, Kalli has decided to introduce a new
line heart shaped necklaces and charms. Within weeks her profits have increased by 20%. In
analyzing the scenario, what type of graph would best display Kalli’s choice to introduce a
new line of product?
A: Demand
B: Supply
C: Marginal Cost and Revenue
D: PPC
Module 1 Practice Exam Answer Key V14
1.D: Opportunity Cost = Opportunity Lost. She chose the books so she gave up the movies.
2.D: Scarcity – Time is a scare resource, you cannot be in more than one place at the same
time.
3.D: Quantity demanded is a shift along the same graph, from one point to a new point. A
change in demand would mean the entire line moves.
4.A: Demand goes Down to the group (and sUPply goes UP to the sky)
5.C: Equilibrium is where demand and supply intersect. It is the perfect price and quantity so
that there is not a surplus or a shortage. Buyers and sellers are both happiest at this price.
6.A. Demand drops, so the entire demand curve would shift to the left. As demand lessens,
the price will also drop.
7.C: As the price of gas increases, supply would decrease (left is less and right is more). Thus
the supply curve would shift to the left. Once supply moves to the left, equilibrium price
would decrease.
8.B: It illustrates a medium of exchange because she hands 11.99 to the cashier and in
return gets a CD. It shows the measure of value because the hardcover is worth $12 while
the softcover is worth $6.
9.C – The basic economic questions are: What to produce, How to produce, & For whom to
produce?
10.D – This answer demonstrates all three economics questions (option A does not show
“how to produce”).
11.A – “Opportunity cost = Opportunity lost”, the best alternative, what you gave up.
12.A – Scarcity is limited resources, or rarity. It is often time or money.
13.B – You could have spent the same $20 on cookies, since each cookie costs $2, you must
divide $20 by $2 to determine how many cookies were given up by buying 1 shirt.
14.C – Equilibrium is the point where supply and demand curves meet. This is how much
suppliers should charge for their product. If suppliers charge too little, it will create a
shortage. Charging too much will create a surplus.
15.C - On a supply and demand graph, the line that indicates quantity is the x-axis. Theyaxis indicates price.
16.B - Equilibrium is the point where supply and demand curves meet. This is how much
suppliers should charge for their product. If suppliers charge too little, it will create a
shortage. Charging too much will create a surplus.
17.A – For shifts in supply and demand, “Left is Less and Right is more”. Review ROTTEN and
TRIBE for reasons for supply or demand curve shifts.
18.A - Quantity supplied is the quantity suppliers will produce at a specific price - a specific
point on the curve. A change in price will not cause the entire curve to shift.
19.B - Quantity demanded is the quantity people will purchase at a specific price - a specific
point along the curve. A change in price alone will not cause the entire curve to shift.
20.C - Supply curves point from left to right up on the page. Shifts to the right indicate
increases. Shifts to the left indicate decreases.
21.B – Price alone will NOT cause the entire curve to shift. Use the values on the y-axisto
determine a reduction in price and the new plotted point on the original curve.
22.C - Measure of Value - Money is used to describe the worth of an item.
23.D – The gold standard was abandoned in the Great Depression. Now money is backed by
public and government acceptance.
24.D: Remember opportunity cost is opportunity lost. In this case, you made the decision to
study for your exam rather than go to the movies.
25.D: Companies will analyze which age group they are targeting for a particular product
then market that item to that specific age group. This will help them decide whom to
produce the item for.
26.C: The point where supply and demand meet is also known as the equilibrium price.
27.C: This occurs because the supplier is making an economic decision based on a prediction
for future demand of the product and also sees this as a good time to earn more profit.
28.A: because after analyzing the scenario you would see that the other two economic
questions are answered. (Which word(s) answers the economic question: How to produce?
= make pizzas from scratch. Which word(s) answers the economic question: What to
produce? = Pizzas. When to produce? Not an economic question)
29.A: because as demand for a product increases the amount paid for the product will also
increase.
30.B: Because to slide up and down on the line you need to have a change in price. Lifting
the price celling allowed prices to rise and supply to increase. The rest of the options would
cause a change in the overall supply and make the curve shift.
31.C: In this scenario you need to think about which way the curve moves to get an
increasing equilibrium price and a decreasing quantity. To do that the supply curve would
have to move left and make a new line.
32.D: In this scenario Jen’s 20 dollars was accepted by the vending machine, it was also
divisible by
Shea breaking it down into smaller amounts and it was portable by her carrying it to the
machine.
33.D (opportunity cost is your next valued alternative – you can invest your money or go on
a trip with your friends. If you decide to invest your money than your opportunity cost
would be a trip with your friends)
34.A (Taste and preferences target your likes and your dislikes)
35.B (producer expectations – producers expect people to purchase cookies. The supply will
increase to prepare for this)
36.A: When Aaron heads to the store with his LAST 20 dollars this demonstrates that money
is scarce. The cashier inspects his bill and determines it is real, thus accepting it and showing
acceptability. Getting his change shows that money is divisible and can be broken down into
smaller denominations.
37.C: Louise’s scarce resource here is time, not money. So her enjoyment from the Imagine
Dragons concert is what she will give up in order to spend time with her dad on his birthday.
Opportunity cost = opportunity lost.
38.A: Lines 3 and 4 are supply lines so your scenario relates to supply. Moving from line 4 to
line 3 indicates an increase in supply (remember “right is more” and “left is less”). A factory
worker strike would cause a decrease so b) is incorrect. C) is incorrect because price is not
an indicator for an entire line to shift. D) would also not cause an increase in supply for
Nikes, but rather a decrease.
39.C: Scarcity is a limited resource that creates the need to make a choice. In this case, Time
would be the most likely resource that would create the dilemma. Mark is unable to be at
both places at the same time.
40.D: Opportunity Cost is the opportunity lost in the making of a choice. In this case, by
choosing to go to the football game, Mark is giving up the opportunity to attend the movie.
41.A: With Valentine’s Day approaching the tastes and preferences of the consumer has
changed. By adding a new line of jewelry specifically for this change, Kalli has increased
theDemand of her line, making the demand graph the best to display this scenario.