The Market Economy- Grade 12

 

VIDEO ARCADE RENTAL FEES AND SALES

 

 

 

Name of

Game

 Machine

 

 

Rental Fee

per Month

(in dollars)

 

 

Sales

per Month

(in dollars)

 

 

DanceHopper

 

 

1,800

 

 

2,200

 

 

MaxiBlast

 

 

1,200

 

 

2,100

 

 

FantasyRing

 

 

800

 

 

1,500

 

 

RaceCarRoute

 

 

400

 

 

1,200

 

 

 

 

 

1.   The owner of a video arcade pays a monthly rental fee for each video-game

machine. She wants to add an additional game to the arcade.

Based on the information above, which video-game machine gives the arcade

owner the greatest incentive to place it in her arcade?

 

A.     DanceHopper

B.     MaxiBlast

C.     FantasyRing

D.     RaceCarRoute

 

Key

 B

2.   Which of the following defines the equilibrium price for a product in a

competitive market?

A.     The price that most consumers are willing to pay for the product

B.     The price at which business makes the maximum revenue

C.     The price that is equal to the total cost of producing and marketing the product

D.     The price at which the quantity supplied is the same as the quantity demanded

 

Key

 D

3.   The owners of Grass Cutters, a lawn-mowing service, decide to purchase four

additional mowers because demand for their services is increasing. The owners

make this decision projecting that the output, total costs, and total revenues of

their business will change in which of the following ways?

 

 

 

Output

 

 

Total Costs

 

 

Total Revenues

 

 

 

 

 

A.     

 

Increase

 

 

Increase

 

 

Increase

 

 

 

B.     

 

Increase

 

 

Increase

 

 

 Decrease

 

 

 

C.     

 

Increase

 

 

 Decrease

 

 

Increase

 

 

 

D.     

 

Decrease

 

 

Decrease

 

 

Increase

 

 

 

 

Key

 A

4.   Mary and Leticia are employed at a local company. Leticia has decided to put part

of her pay each week in a retirement savings program. Mary has decided not to

and spends the money instead.

Compare the short-term economic effects of these decisions on Mary and Leticia.

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Compare the long-term economic effects of these decisions on Mary and Leticia.

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What factors might explain why Mary’s and Leticia’s choices were different?

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Scoring Guide

 

Score & Description

Superior

Response offers an acceptable (A) short-term comparison, (B) long-term comparison, and (C) explanation of why the two women might have made different choices.

Satisfactory

The response has two of the three parts listed above.

Minimal

The response has one of the three parts listed above.

Incorrect

The response makes no relevant comparative statement.

 

5.   Which of the following best describes the amount of a product that people will

continue to buy at a given price?

A.     People will buy as many units as they can afford.

B.     People will buy another unit unless its benefit is zero.

C.     People will buy another unit as long as its benefit is positive.

D.     People will buy another unit as long as its benefit is greater than its cost.

 

Key

 D

6.   Which of the following best describes why the price of wheat might rise

following a poor wheat harvest?

A.     The demand for wheat has decreased.

B.     The demand for wheat has increased.

C.     The supply of wheat has decreased.

D.     The supply of wheat has increased.

 

Key

 C

7.   Which of the following is the most likely economic explanation for why a local

restaurant that is busy and has many loyal customers could go out of business?

A.     The restaurant is spending too little on advertising.

B.     The restaurant is paying too little for rent and food.

C.     The restaurant has more customers than it needs.

D.     The restaurant’s costs are higher than its revenues.

 

Key

 D

8.   Auto dealers begin to offer new cars for sale with no down payment required and

an interest rate of 0 percent. Which of the following is most likely to occur?

A.     Sales of new cars will decrease.

B.     More consumers will buy new cars.

C.     More people will use public transportation.

D.     Prices of used cars will increase.

 

Key

 B

9.   Luisa has decided to give up her full-time job to go back to school. Identify one

potential economic risk and one potential economic benefit that Luisa might

have considered in making her decision.

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Scoring Guide

 

Score & Description

Correct

The response gives one potential economic risk and one potential economic benefit.

Partially Correct

The response gives either one potential economic risk OR one potential economic benefit.

Incorrect

The response gives no acceptable economic risk or benefit.

 

10.    A profit-maximizing company that manufactures sports clothing wants to spend

$25 million to have a professional athlete appear in commercials for its clothing.

Which of the following is the best economic reason for the company to spend

the money?

A.     The company sells $25 million worth of clothing per year.

B.     The company could cover the cost of the athlete’s contract with profits from

previous years.

C.     The additional revenue generated by the commercials would be greater than

the additional costs of producing the clothing.

D.     The additional revenue generated by the commercials would be greater than

$25 million plus the costs of producing the additional clothing.

 

Key

 D

11.    Willie loves ice-cream cones. He has found a store that sells ice-cream cones

at a bargain price of $0.50 each. He has just eaten two of these cones but has

decided not to buy a third one. Which of the following statements best explains

the economic principle at work in Willie’s decision not to buy a third cone?

A.     Consumers weigh the additional costs and benefits before buying

more goods.

B.     Consumers spend freely to increase business activity so that the price

of goods will drop.

C.     Consumers save more by buying larger quantities.

D.     Consumers buy more at lower prices.

 

Key

 A

 

 

12.    Suppose that the government set the price of chocolate at $6 per pound. Which of

the following statements best describes an effect of this price control?

A.     There would be a surplus of 40 pounds of chocolate.

B.     Less chocolate would be demanded at $4 than at $6.

C.     Producers of chocolate would want the price set at $4.

D.     There would be a shortage of 20 pounds of chocolate.

 

Key

 A

 

 

13.    If the government removes the price control of $6, what will be the price and

quantity sold of chocolate?

 

 

 

 

Price

 

 

Quantity Sold

(in pounds)

 

 

 

 

 

A.     

 

$6

 

 

  40

 

 

 

B.     

 

$5

 

 

  60

 

 

 

C.     

 

$5

 

 

100

 

 

 

D.     

 

$4

 

 

  80

 

 

 

 

Key

 B

14.    Other than wages, what are two issues commonly addressed by collective

bargaining between labor unions and employers?

A.     Amount of stock to issue and selection of union leaders

B.     Corporate image and company location

C.     Fringe benefits and work rules

D.     Selection of corporate leaders and advertising

 

Key

 C

15.    Tom has $1,000 that he can either spend now or deposit into a bank account.

The account pays a fixed rate of interest per year and does not allow withdrawal

for two years. List two economic factors that Tom should consider in making

his decision.

1)

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2)

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Scoring Guide

 

Score & Description

Correct

The student lists at least two of the factors listed below.

– The inflation rate estimated for the next two years

– The interest rate paid on the savings account

– The uses to which Tom could put the $1,000 if it is not put into savings

– The tax liability associated with earned interest

– Alternative investments, such as stocks and bonds

– Concern about the risks associated with investments

– Need for the money within the two year time horizon

– The compounding of interest

– Opportunity cost

– Need for additions to wealth for retirement or other purposes

– Concern for future expenses

– Consider penalty fee for early withdrawal

 

Partially Correct

The student lists one factor.

Incorrect

The student does not suggest any factors to be considered in the decision.

 

16.    What happens to most of the money deposited in checking accounts at a

commercial bank?

A.     It is used to pay the bank’s expenses.

B.     It is loaned to other bank customers.

C.     It is kept in the bank’s vault until depositors withdraw the funds.

D.     It is paid to owners of the bank as return on their investment.

 

Key

 B

NXTX INCORPORATED

 

 

Number of

Workers

 

 

Total Revenue

per Day

 

 

10

 

 

$1,000

 

 

11

 

 

$1,250

 

 

12

 

 

$1,325

 

 

13

 

 

$1,385

 

 

14

 

 

$1,400

 

 

 

 

 

 

 

17.    NXTX Incorporated currently has 10 workers. It would like to expand and hire

more workers. Each additional worker will cost the company $100 per day.

According to the information in the table above, how many workers in total

should NXTX Incorporated employ to maximize its profits?

A.     11

B.     12

C.     13

D.     14

 

Key

 A

18.    Sandra and Miriam are the same age. Sandra’s parents deposited $10,000 into

a college savings account in the year she was born. Miriam’s parents deposited

$10,000 into a college savings account when she was 14. There were no additional

deposits or withdrawals from either account, and both accounts have earned an

8 percent rate of interest, compounded annually, each year.

Which student will have more money in her college savings account at age 18?

Explain by giving two reasons why this would occur.

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Scoring Guide

 

Score & Description

Correct

The response should include all of the following:

(A) Sandra will have more money in the account than Miriam because Sandra’s account was earning interest for a longer time than the other account (Miriam’s).

 

(B) The accounts also have grown because of compound interest. Not only did the original $10,000 in Sandra’s account earn interest for a longer time, but the interest payments earned further interest, which added to the difference between the accounts.

 

Partially Correct

The response identifies Sandra as having more money in the account and provides one explanation for why this is so.

               OR

The content of the response would get full credit (score of 3) but the names are reversed. This is a situation in which the student loses one point but the error is carried forward to the second part of the question.

Incorrect

The response merely states that Sandra’s account will have more money without a correct explanation.

               OR

No relevant answer provided.

 

19.    Recently, the hourly wage that parents are willing to pay babysitters increased

dramatically. Higher pay will most likely cause which of the following changes in

how babysitters divide their out-of-school time between babysitting and other

activities?

 

 

 

Time Spent

Babysitting

 

 

Time Spent

on Other Activities

 

 

 

A.     

 

No change

 

 

Decrease

 

 

 

B.     

 

Increase

 

 

Decrease

 

 

 

C.     

 

Decrease

 

 

No change

 

 

 

D.     

 

Increase

 

 

Increase

 

 

 

 

Key

 B

20.    After a festival, food vendors leave behind a great deal of garbage. Other than

telling the vendors to clean up the garbage, what is one policy the city can adopt

to reduce the amount of garbage left by food vendors at future festivals?

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How will this policy affect both the supply of foods offered during future festivals

and the price of these foods?

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Scoring Guide

 

Score & Description

Superior

Student response includes all three of the following:

             (A) A description of one of the following policies the city can

                    implement:

                           – Fine for vendor—give vendor a ticket

                           - Limit number of vendors

                           - Tax

                           - Registration fee/cleanup fee

                           - Security deposit

                           – Refundable fee/deposit

                           - Not allowed to return next year if leave garbage

             (B) A statement that the supply will decrease (fewer food vendors,

                    limited supply of food)

             (C) A statement that the price will increase

Satisfactory

Student response includes

(A) and (B) as listed above

OR

(A) and (C)

OR

(B) and (C)

Minimal

Student response includes

(A) or (B) or (C)

Incorrect

No appropriate response

 

21.    When people’s incomes increase, the demand for roses and the price of roses are

most likely to change in which of the following ways?

 

 

 

Demand for Roses

 

 

Price

 

 

 

 

 

A.     

 

Decrease

 

 

Decrease

 

 

 

B.     

 

Decrease

 

 

Increase

 

 

 

C.     

 

Increase

 

 

Decrease

 

 

 

D.     

 

Increase

 

 

Increase

 

 

 

 

Key

 D

22.    Which of the following is an example of capital for a firm that produces

wind-powered electricity?

A.     The wind that sets the windmill in motion

B.     The businessperson who established the firm

C.     The windmill that produces the electrical power

D.     The workers who build and repair windmills

 

Key

 C

23.    Which of the following actions is an example of an improvement in human capital?

A.     Carlos hires three workers for his business.

B.     Frank’s Furniture trains employees to use computers.

C.     Tasha applies for a job as an engineer.

D.     The city of Upland builds a new nursing home.

 

Key

 B