Economics Multiple Choice Study Guide

A person who consumes a good or service but does not pay for it is called which of the following? A. a free rider B. a volunteer user C. a private consumer D. an entrepreneur

A

How do consumers make their desires known to businesses most effectively? A. through buying products B. by protesting and boycotting products C. through mail and phone surveys D. by hiring lobbyists and joining consumer groups

A

How would you describe an economy that uses its resources to make the greatest possible number of goods and services? A. efficient B. using opportunity cost well C. globally aware D. underutilized

A

The government of a country must make a decision between spending money on a hospital or spending the same amount on border security. What kind of decision is this? A. guns or butter B. decision at the margin C. global trade-off D. production efficiency decision

A

The law of increasing costs means that when an economy increases the production of one item A. The opportunity cost goes up B. the actual cost of making the item goes down C. the actual cost goes up but the opportunity cost goes down D. the production costs will increase also

A

The opportunity cost of a decision can be examined by using a A. production possibilités graph B. factors of production chart C. global trade-off grid D. graph of increasing costs

A

What incentive do manufactures have to sell their products? A. making profits on sales B. pleasing the consumer C. putting others out of business D. popularity of the product

A

What is the purpose of competition? A. to act as a regulating force in the marketplace B. to cause producers to attempt to put each other out of business C. to cause buyers to have to be careful about spending their money D. to act as a motivating force behind the free market

A

Why does even a free market economy need some government intervention? A. to provide for things that the marketplace does not address B. to ensure that the government has the freedom to tax as necessary C. to make sure that the government can fulfill its needs for military personnel D. so that the government has some control over factor resources

A

Why does the government use its power to make sure that businesses disclose so much information to the public? A. to make buyers more knowledgeable and safer B. to make it hard for businesses to make an excess profit C. to make it easter for consumers to save money D. to make it easy for businesses to have good information

A

Land

All natural resources that are used to produce goods and services

Labor

Any effort a person devotes to a task for which that person is paid.

Capital

Any human-made resource that is used to create other goods and services.

The lack of which of the following represents a scarcity? A. orange juice because the trucks carrying it are on strike B.enough workers to finish two jobs be causes there's a limited supply of works C. enough workers to work at night because the pay is too low D. grapefruit juice because very few people want to buy it

B

The resources used to make all goods and services are the a. production possibilities B. factors of production C. production trade-offs D. opportunity costs

B

What can cause a production possibilities curve to move to the right? a. Thousands of people move out of the country. b. A new invention lowers the cost of production. c. An epidemic kills thousands of young men and women. d. The population is growing increasingly old.

B

What does the process of specialization do for an economy? A. it eliminates unemployment B. it makes it more efficient C. it fosters competition D. it makes it easter to control

B

What is a factory building an example of? A. human capital B. physical capital C. an economic trade-off D. technology

B

What is a positive externality? A. a way to generate trade that will benefit people who are form other countries B. an economic side effects that generates unexpected benefits C. a cash flow that will benefit both the government and the businesses who interact with it D. an extra payment to welfare recipients

B

What is an important advantage of a free market? A. it does not change unless the government directs it B. it offers a wide variety of good and services c. it is easy to regulate D. it protects the less fortunate

B

What is the function of an economic system? A. to make sure all people have equal access to goods B. to produce and distribute goods and services C. to give all producers the same access to consumers D. to make sure people are paid for their labor

B

What is the struggle among various producers for the consumer's business called? A. socialism B. competiiton C. incentive D. self-regulation

B

Why are all goods and services scarce? A. some goods cost more than others B. all resources are scarce C. Some things are needs and others are wants D. some people want to have more goods than others

B

Public interest

Both state and federal governments' involvement in concerns of the public as a whole, such as environmental protection, sanitary food production.

A country's production possibilities increase because available workers become more skilled at using a computer. This is an example of growth caused by A. global resources B. physical capital C. technology D. production opportunity

C

An efficient economy is one that A. has very few people who do not work for a living B. makes the best use of all its goods and services C. uses its resources to make the most goods and services D. makes the least costly use of its resources

C

An example of a shortage is limited amounts of A. water available for irrigating a crop because it is used for other crops B. labor available because workers have other jobs C. food available because the trucks carrying it are on strike D. food available because few people want to buy it

C

Any resources that are made by humans and used to create other goods and services are called A. services B. production C. capital D. labor

C

How could the Chinese economy be characterized? A. free market B. Centrally planned C. mixed, but on the side of centrally planned D. mixed, but on the side of free market

C

In what kind of an economy does the government make all the decisions? A. socialist B. laissez faire C. centrally planned D. free enterprise

C

Production possibilities frontiers curve when they are charted on a graph because they show a. the underutilization of resources B. the maximum output of goods and services C. the increasing costs resulting in increasingly less output D. the technological level of the economy's productivity

C

The purpose of a production possibilities graph is to A. enable a country to mobilize to win a war B. keep an economy from having nonproductive workers C. show alternate ways to use an economy's resources D. make it possible to increase an economy's output

C

What best describes the role of government in a free enterprise system? A. Control business activities B. Decide what companies will be formed and then allow the managers to run them C. Allow individuals to operate their businesses in ways they think will maximize their profits D. Require companies to disclose information to consumers

C

What is the most effective way for consumers to make their desires known to businesses? A. through mail and phone surveys B. by protesting and boycotting products C. by the purchases they make D. By hiring lobbyists and joining consumer groups

C

What is the term for the total value of all goods and services produced in a particular economy? A. net worth B. open market value C. gross domestic product D. standard of living

C

Which of the following is NOT an example of a public good? A. highways B. national parks C. shopping malls D. municipal libraires

C

Which of the following is NOT characteristic of a centrally planned economy? A. the central government owns all land and capital B. the central government makes all economic decisions C. Each collective or factory sets its own goals D. each persons assigned a job

C

Which of the following is a critical rule for determining whether something is a public good? A. the benefit to each individual who uses the facility is greater than the cost B. The benefits of the facility are greater for the society than for the individuals using it. C. The total benefits to society are great than the total cost. D. The total cost is small for each individual taxpayer

C

Which of the following makes someone an entrepreneur? A. earning a lot of money as a computer programmer B. becoming a highly paid dancer C. running a service that hires people to install sprinkler systems in lawns D. inventing and selling video games

C

A production possibilities graph shows the cost of producing more of one item.

Cost

All of the following are types of decisions that can be made at the margin EXCEPT a. whether to grow beans or corn on a large farm. b. whether or not to hire 100 new workers. c. whether to leave early in the morning or late in the day for a trip. d. whether or not to go on a vacation.

D

How would the economy of Canada be likely to be characterized? A. Free market B. centrally planned C. mixed, but on the side of centrally planned D. mixed, but on the side of free market.

D

What does a production possibilities frontier show? A. scarce and less scarce resources B. global trade-offs and costs of doing business C. an economy that is producing but not at the maximum D. the maximum amount that an economy can produce

D

What effect does new technology usually have on an economy? A. it reduces the available jobs B. it slows an economy down for at least a while C. it reduces the dependence of the economy on business D. it makes the economy stronger and more efficient

D

What is one benefit provided by Social Security? A. medical care of rate indigent B. cash transfers to workers injured on the job C. compensation for all who lose jobs D. retirement income for the elderly

D

What is one of the most important advantages of a free market? A. It can change rapidly B. It protects the less fortunate C. It is easy to regulate D. It encourages growth

D

What is the opportunity cost of a decision? A. the series of alternative decisions that could have even made B. the best possible way the question could have been decided C. the different ways that a different person might have made the decision D. the most desirable alternative given up for the decision

D

What is the product market? A. the market in which payments are received for selling products to consumers B. the market in which income is received for supplying land, labor, or capital C. the market in which firms purchase the factors of production from households D. the market in which households purchase the goods and services that firms produce

D

Which of the following is NOT a key economic question? A. what goods and services should be produced? B. How should these goods and services be produced? C. Who consumes these goods and services? D. How should it be ensured that goods and services are paid for?

D

Which of the following is a condition that most people would NOT expect the safety net of the government to provide for? A. injuries B. joblessness C. natural disasters D. low income

D

Which of the following is characteristic of a traditional economy? A. communities tend to be fast-growing B. They are usually based on light industrial production C. They have a high standard of living. D. Children tend to have the same jobs as their parents did

D

Freedom from government intervention in the production and distribution of goods and services. (ex: the former soviet union controlled everything;The US the consumer and producer has that freedom)

Economic freedom

Assurance that goods and services will be available, payments will be made on time, and a safety net will protect individuals in times of economic disaster.

Economic security and predictability

means using resources in such a way as to maximize the production of goods and services. An economy producing output levels on the production possibilities frontier is operating _______.

Efficiency

If more resources become available, or if technology improves an economy can increase its level of output and grow. When this happens, the entire production possibilities curve "shifts to the right."

Growth

Economic growth and innovation

Innovation leads to economic growth, and economic growth leads to a higher standard of living.

Public Disclosure laws

Laws that require companies to provide consumers with important information about their products, such as fuel efficiency of automobiles, side-effects of medication.

competition

Producers in a free market struggle for the dollars of consumers. the rivalry among sellers to attract consumers.

is a social and political philosophy based on the belief that democratic means should be used to distribute wealth evenly throughout a society.

Socialism

Profit Motive

The drive for the improvement of material well-being

the line that shows the maximum possible output for that economy.

The production possibilities frontier

Every Society must answer three questions: What... How... Who...

What Goods and services should be produced? How should theses goods and services be produced? Who consumes these goods and services

thinking at the margin

When you decide how much more or less to do, you are (ex: deciding how much time to sleep and study)

Externalities

an economic side effect of a good or service that generates benefits or costs to someone other than the person deciding how much to produce or consume. ex: house flipping in a neighborhood

trade-offs

are all the alternatives that we give up whenever we choose one course of action over others.

Mixed economies

are systems that combine tradition and the free market with limited government intervention. Ex: USA

What is the motivating force behind the free market? a. competition b. the invisible hand c. self-interest d. specialization

c

Market economy

economic decisions are made by individuals and are based on exchange, or trade. We do not have a free market economy.

making the most of resources

economic efficiency

Legal equality

equal rights to all

Economic equity

fair distribution of wealth

Communism

is a political system characterized by a centrally planned economy with all economic and political power resting in the hands of the government.

Public good

is a shared good or device for which it would be impractical to make consumers pay individually and to exclude nonpayers.

Market

is an arrangement that allows buyers and sellers to exchange goods and services.

Free riders

is someone who would not choose to pay for a certain good or service. Market failures

Specialization

is the concentration of the productive efforts of individuals and firms on a limited number of activities

guns or butter

nation must decide whether to produce more or less military or consumer goods.

shortages

occur when producers will not or cannot offer goods or services at the current prices (ex: Soviet Union having empty shelves in grocery stores)

scarcity

occurs when there are limited quantities of resources to meet unlimited needs or desires; this ALWAYS exists because our wants are greater than the resource supply (ex: Superbowl tickets)

The most desirable alternative given up as a result of a decision is known as (the one you give up)

opportunity cost

self-interest

own personal gain. A regulating force in the free market

Traditional economies

rely on habit, custom, or ritual to decide what to produce, how to produce it, and to whom to distribute it Ex: third world countries

Open opportunity

the ability for anyone to compete in the marketplace

Centrally planned economy

the central government makes all decisions about the production and consumption of goods and services. Ex: 20th century soviet countries

public sector

the part of the economy that involves transactions of the government.

Private property rights

the right to control your possessions as you wish

Free contract

the right to decide what agreements you want to take part in

Voluntary exchange

the right to decide what and when you want to buy and sell a product.

Macroeconomics

the study of the behavior and decision making of entire economies