AnswersPersonal Finance and EconomicsUnit 2: Understanding Microeconomics

Unit 2: Understanding Microeconomics — Test Answers

25 verified answers
1
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The point where supply and demand meet and prices are set is called

A
equality.
B
coordination.
C
correspondence.
D
equilibrium.
2
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A market supply schedule shows

A
how prices affect a single producer.
B
how prices affect a group of consumers.
C
the products of two companies only.
D
the prices and quantity in an entire market.
3

What role does a fast-food corporation play when it agrees to franchise its business? Choose four correct answers.

A
collect most profits
B
supply training
C
pay associated fees
D
select a location
E
license a trademark
F
supply advertising
4

Which of the following is a characteristic of prosperity in the peak phase of the business cycle?

A
ambivalence about the economy
B
reduced incomes
C
stagnant prices
D
high levels of production
5

What is the name of the period when an economy begins to shrink?

A
peak
B
recovery
C
recession
D
depression
6

Which best describes what is represented in the business cycle model?

A
supply and demand trends
B
macroeconomic trends
C
the interactions between producers and consumers
D
the change in production cost
7

An entrepreneur who opens a franchise must

A
select sites.
B
keep profits.
C
assume debts.
D
offer training.
8

How do changing prices affect supply and demand?

A
As price decreases, supply decreases, but demand increases.
B
As price increases, supply decreases, but demand increases.
C
As price increases, both supply and demand increase.
D
As price decreases, both supply and demand decrease.
9

When supply is higher than demand, prices will

A
fall until the demand rises.
B
fall until the supply rises.
C
rise until the supply falls.
D
rise until the demand falls.
10

Two doctors who join forces in business form a [Dropdown 1] .

Answer:

partnership

11

Which indicators do economists use to determine the state of the economy? Choose three correct answers.

A
agricultural output
B
employment levels
C
gross domestic product (GDP)
D
prices
E
immigration levels
12

A disadvantage of corporations is that shareholders have to pay [Dropdown 1] on profits.

Answer:

taxes

13

Which are examples of sole proprietorships? Choose three correct answers.

A
franchise restaurants in a partnership
B
freelance writers
C
lawyers working for a corporation
D
tax preparer working his own business
E
doctors in a partnership
F
independent workers
14

According to the law of supply, price and quantity move

A
from the same point away from one another.
B
along a track in the same direction.
C
from different points toward one another.
D
along a track in opposite directions.
15

Which can be considered disadvantages of sole proprietorships and partnerships?

A
Sole proprietorships require one person to do many things, while partnerships require many people to weigh in on decisions.
B
Partnerships require one person to do many things, while sole proprietorships require many people to weigh in on decisions.
C
Partnerships require many people to write a charter, while sole proprietorships require one person to write a charter.
D
Sole proprietorships require one person to know complicated tax laws, while partnerships require many people to know the rules.
16

Which stage of the business cycle is an economy in when it reaches its low point?

A
Peak
B
Trough
C
Expansion
D
Contraction
17

The total amount of a product available in a market at a given price is called the

A
number.
B
demand.
C
supply.
D
count.
18

Which best describes the difference between sole proprietorships and partnerships?

A
Sole proprietors pay taxes only on business profits, while partners do not have to pay taxes on profits.
B
Sole proprietors share responsibilities, while partners are responsible for only a portion of the business.
C
Sole proprietors split profits and share liabilities, while partners keep all profits and have unlimited liability.
D
Sole proprietors keep all profits and have unlimited liability, while partners split profits and share liabilities.
19

The most common business organizations in the United States are

A
corporations.
B
partnerships.
C
franchises.
D
sole proprietorships.
20

Based on the chart, the primary responsibility of shareholders is to

A
make business decisions on the advice of a board of directors, who follow the expertise of leaders.
B
make business decisions on the advice of a board of directors, a president, and other leaders.
C
run the business by electing a board of directors and hiring a president and other leaders.
D
run the business by electing a board of directors, who then hire the company’s leaders.

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