1.

As economists, we refer to the doctrine that holds that government should leave
economic affairs primarily to the market as:
a. Capitalism c. Dormez-vous
b. Laissez-faire d. Communism
2. A market is:
a. a mechanism through which buyers and sellers interact to set prices and exchange
goods and services.
b. a place where goods are traded.
c. both a and b
d. neither a nor b
3. _______ coordinate the decisions of producers and consumers in the market.
a. Ushers c. Governments
b. Directors d. Prices
4. _____ and ______ provide incentives and disincentives to firms for them to produce the
desired goods in an efficient manner.
a. Profits; losses c. Prices; losses
b. Prices; profits d. Profits; government
5. _______, in his 1776 work _______, introduced the concept of the invisible hand.
a. Eli Hecksher; The Wealth of Nations c. Paul Samuelson; Economics
b. Adam Smith; The Wealth of Nations d. Karl Marx; The Wealth of Nations
6. The recent growth in the flows of goods and services across national borders is
described as:
a. Globalization c. communism
 b. Capitalism d. marketism
7. When market players impose costs or benefits on those outside the market _______
arise.
a. Externalities c. public goods
b. Internalities d. none of the above
8. Which of the following shows the relationship between the price of a good and the
amount of that good that consumers want at that price?
a. supply curve c. supply schedule
b. demand curve d. production possibility frontier
9. When the price of good X increases and consumers substitute good Y for good X, we call
that the:
a. income effect. C. substitution effect.
b. backwards effect. D. demand effect.
10. The Bertrand model assumes that the opponent's _______ will not change. The
outcome of the model results in an equilibrium output that is the same as the
__________.
a. quantity: single price monopoly c. quantity: perfect competition
b. price: perfect competition d. price: single price monopoly
11. Monopolistic competition is different from perfect competition in that monopolistic
competition does not assume____.
a. many buyers and many sellers. C. Low cost or free information.
b. a homogeneous product. D. Ease of entry and exit.
12. All of the following are examples of traditional economy, except:
a. Subsistence agriculture c. the barter system
b. Large scale manufacturing d. hunting and gathering
13. Which activity most characteristic of the people in a traditional society?
a. Working in an industrialized cities c. having occupations same as their
parents
b. Establishing a mercantile system of trade d. serving in a government
assemblies
14. How are major economic decisions made in a command economy?
a. Official of the government controls all aspects of economic activity
b. Manufactures of industrial goods control the resources
c. Wholesaler of agricultural goods make all decisions
d. Supply and demand are determined by the consumers of the stuff
15. In which economic system would a person expect the widest selection of consumer
goods?
a. Communist c. socialist
b. Traditional d. free enterprise
16. Which group has the greatest influence in determining what goods and services will be
produced in communist system?
a. Consumers c. farmers
b. Bankers d. government officials
17. How does a command economy differ from a free market economy?
a. A variety of economic incentives encourages economic growth
b. There is a high rate of unemployment
c. Resources are allocated by the government decisions
d. Prices are set by consumers
18. Ceteris Paribus is a latin term in economics which means:
a. Increase in a price result and decrease in quantity demanded
b. No change in price
c. All things are Equal
d. None of the above
19. The rise and fall of a time series over periods longer than one year is called:
a. Cyclical variation c. trend
b. Seasonal variation d. irregular variation
20. In quantitative data analysis, which term means that the measurement and findings are
stable, repeatable, and generalizable?
 a. Validity c. significane
b. Reliability d. stability
21. Economics is the study of:
a. production technology c. how society decides what, how, and for whom to produce
b. consumption decisions d. the best way to run the society
22. The opportunity cost of a good is:
a. the time lost in finding it c. the expenditure on the good
b. the quantity of other goods sacrificed to get another unit of that good d. the loss of interest
23. In a free market __________ ___________.
a. governments intervene c. governments interfere
b. governments plan production d. prices adjust to reconcile scarcity and desires
24. Normative economics forms ___________ based on _____________.
a. positive statements, facts c. positive statements, values
b. opinions, personal values d. opinions, facts
25. Microeconomics is concerned with:
a. the economy as a whole c. the study of individual economic behavior
b. the electronics industry d. the interactions within the entire economy
26. Macroeconomics is the study of ___________________.
a. individual building blocks in the economy c. household purchase decisions
b. the relationship between different sectors of the economy d. the economy as a whole
27. Data are important in economics because __________ and __________.
a. they suggest relationships for explanation, allow testing of hypotheses
b. they can be used for tables, they can be graphed
c. they can be used in computers, governments use them
d. they provide interesting information, can be summarized
28. Time series data show information:
a. about the same point in time over different places
b. about different points in time over the same variable
c. about different variables over different places
d. about different points in time over different places
29. If your income during one year is P10,000 and the following year it is P12,000, then it
has grown by
a. 20% c. 12%
b. 2% d. 16%
30. A straight-line diagram can be drawn knowing the ______ and _________.
a. vertical axis and horizontal axis c. scale and slope
b. intercept and slope d. intercept and scale
31. On a graph, a positive linear relationship___.
a. moves down to the right c. moves up to the right
b. moves up to the left d. moves down to the left
32. When we know the quantity of a product that buyers wish to purchase at each possible
price, we know.
a. Demand c. excess demand
b. Supply d. excess supply
33. The equilibrium price clears the market; it is the price at which ________ _________.
a. Everything is sold c. Quantity demanded equals quantity supplied
b. Buyers spend all their money d. Excess demand is zero
34. An increase in consumer income will increase demand for a _______ but decrease
demand for a _________.
a. substitute good, inferior good c. inferior good, normal good
b. normal good, inferior good d. normal good, complementary good
35. If a price increase of good A increases the quantity demanded of good B, then good B is
a.
a. Substitute good c. bargain
b. Complementary good d. inferior good
36. When the general level of prices is rising, we call that:
a. Deflation c. elevation
b. Inflation d. dimension
37. When inflation is at a million or trillion percent per year, we call that:
a. Galloping inflation c. hyperinflation
b. Low inflation d. deflation
38. GDP =
a. C + I + G c. C + I + G + X
b. C + G + X d. C+I
39. The difference between exports and imports is called:
a. the total number of inputs used in production.
b. the amount of capital that has been used in a year.
c. government payments to individuals that are not made in exchange for goods or
services supplied.
d. net exports.
40. Fluctuations in total national output, income, and employment, usually lasting 2-10
years, marked by periods of expansion or contraction in most sectors of the economy
are called:
a. Recessions c. Booms
b. Depressions d. Business cycles
41. The situation in which there is not enough of something to satisfy all the desires for that
thing is called:
a. Abundance c. Demand
b. Scarcity d. Plethora
42. The study of the behavior of firms, individual markets, and households is called:
a. Normative economics c. Macroeconomics
b. Positive economics d. Microeconomics
43. The situation in which limited resources are being used most effectively is called:
a. Efficient c. Abundant
b. Economic d. Scarce
44. The study of the behavior of the overall economy is called:
a. Normative economics c. Macroeconomics
b. Positive economics d. Microeconomics
45. If we believed that event b occurs simply because it follows event a, then we would be
trapped by the:
a. Failure to hold other things equal c. Post hoc fallacy
b. Fallacy of composition d. Adam Smith syndrome
46. The three fundamental questions of economic organization are:
a. When, for whom, and how c. Who, how, and when
b. How, what, and for whom d. what, who, and why.
47. Economic questions that can be answered by examining data and making observations
are part of:
a. Normative economics c. Macroeconomics
b. Positive economics d. Microeconomics
48. Economic questions that can be answered through political debate and decisions are
part of:
a. Normative economics c. Macroeconomics
b. Positive economics d. Microeconomics
49. The _______ of a decision is the value of the good or service forgone.
a. opportunity cost c. Economics
b. efficiency d. Scarcity
50. Productive _______ exists when an economy cannot produce more of one good without
producing less of another good.
a. Scarcity c. Efficiency
b. Economics d. Opportunity cost