Economics - Topic 2 - Lessons 2.5-2.7

How does improved technology allow the economy to operate more efficiently? a) It helps to make better use of the nation's limited resources. b) It ensures that all of the nation's resources will be used c) It enables people to work fewer hours. d) It ensures that all of the nation's workers are employed.

a) It helps to make better use of the nation's limited resources.

How might government water-pollution regulations serve the public interest? a) by ensuring that water does not contain toxins that could endanger people b) by restricting the watering of laws during a drought c) by keeping waterways open for the transport of goods d) by limiting the amount of water a business could use

a) by ensuring that water does not contain toxins that could endanger people

Suppose Congress passed a bill funding research into alternative sources of energy. What best describes this government action? a) promoting innovation and invention to help maintain technological advantage b) seeking gains in knowledge about the national economy c) seeking to prevent sudden, drastic shifts in prices d) monitoring and regulating banks and other financial institutions

a) promoting innovation and invention to help maintain technological advantage

Which of the following is the cornerstone of the American free enterprise system? a) property b) responsive prices c) competition d) variety of goods

a) property

"Whether we're talking about roads or bridges or mass transit, whether we're talking about canals and waterways, sewage and water facilities, whether we're talking about broadband, or we're talking about the grid to transmit electricity, whether we're talking about schools, an investment in infrastructure that serves the needs of our children and their education,...these infrastructure investments offer our nation job-creating opportunities to reinvigorate the American economy."-Nancy Pelosi, Speaker of the House, Press Release, March 11, 2008. Government-built infrastructure is a public good. Which of the following BEST paraphrases the intent of this press release by a government official? a) to persuade people that the benefits of repairing infrastructure outweigh the costs b) to warn people that the nation's infrastructure needs to be repaired c) to inform people about the various types of infrastructure d) to alert people to the large investment needed to repair infrastructure

a) to persuade people that the benefits of repairing infrastructure outweigh the costs

Why do government experts track the business cycle? a) to try to predict what will happen to the U.S. economy b) to help maintain competitive balance between businesses c) to provide a record of what has gone wrong in the past d) to give the government a competitive advantage over businesses

a) to try to predict what will happen to the U.S. economy

Which of the following is an example of the profit motive as an incentive? a) A consumer engages in a voluntary exchange. b) A business owner expands a factory to make more goods. c) A producer starts a benefits program for workers. d) A shopper chooses a product because of its low price.

b) A business owner expands a factory to make more goods.

If the economy were in the contracting phase of the business cycle, how might that affect your ability to find work? a) It might be easier to find work because businesses would have fewer workers to choose from. b) It might be more difficult to find work because businesses would be less likely to hire new employees. c) It would have no effect on finding work. d) It might be easier to find work because businesses would be more likely to hire new employees.

b) It might be more difficult to find work because businesses would be less likely to hire new employees.

Why would a federal government decision to increase spending be a matter of macroeconomic policy? a) Macroeconomics concerns the overall performance of the government. b) Macroeconomics concerns the overall performance of the economy. c) Macroeconomics concerns the performance of households. d) Macroeconomics concerns the performance of small businesses.

b) Macroeconomics concerns the overall performance of the economy.

If a student volunteers at a food pantry on Fridays after school, which of the following might be a negative externality? a) The student might make some new friends. b) The student's parents have to drive him or her to the food pantry. c) The student might learn a new skill. d) The student might decide to volunteer two days a week.

b) The student's parents have to drive him or her to the food pantry.

What is one reason that local law enforcement is considered a public good? a) Individual citizens pay directly for it. b) Private firms make a profit from producing it. c) Everyone in the community benefits from it. d) Nobody in the community has to pay for it.

c) Everyone in the community benefits from it.

Which of the following explains why a city fireworks display on the Fourth of July is provided as a public good? a) Fireworks are a scarce resource. b) Fireworks displays usually take place in a public area. c) Nonpayers cannot be prevented from seeing the fireworks d) Each consumer pays a fee to see the fireworks

c) Nonpayers cannot be prevented from seeing the fireworks

Which of these might indicate that the national economy is stable? a) Prices for groceries and other daily needs go up from year to year. b) Prices for groceries and other daily needs go down from year to year. c) Prices for groceries and other daily needs stay about the same from year to year. d) Prices for groceries and other daily needs are tightly regulated.

c) Prices for groceries and other daily needs stay about the same from year to year.

Public goods are examples of market failure, because producing these goods in the free market... a) shows that the free enterprise system cannot distribute resources b) helps entrepreneurs learn how to distribute public resources c) does not allow for the efficient distribution of resources d) encourages private businesses to distribute resources efficiently

c) does not allow for the efficient distribution of resources

Which of the following is an example of the limited role of government in the economy? a) setting prices b) seizing private property without compensation c) establishing food safety laws d) mandating production of a good or service

c) establishing food safety laws

What might be the economic benefit of the government providing a public good rather than the private sector? a) decreased cost for the good b) increased taxes needed to provide the good c) greater efficiency in providing the good d) decreased prices for the good

c) greater efficiency in providing the good

The due process clauses of the Constitution... a) give Congress the right to set direct taxes on incomes b) ensure all Americans the opportunity to compete c) protect Americans' private property rights d) eliminate barriers to women in the workplace

c) protect Americans' private property rights

The goal of government welfare programs is to... a) eliminate the income gap between the richest Americans and the poorest b) maintain a poverty threshold that matches the median income c) raise the standard of living of certain less-fortunate members of society d) eliminate the dependence of people on the welfare system

c) raise the standard of living of certain less-fortunate members of society

Which of the following is an example of a positive externality resulting from an outdoor band concert? a) A pair of endangered birds leave their nest in a nearby tree when the concert starts b) A pizza parlor closes early because all of its customers are at the concert c) A traffic jam occurs as drivers hunt for parking spots near the concert d) An elderly woman in her apartment hears a song that she liked as a child

d) An elderly woman in her apartment hears a song that she liked as a child

How is the gross domestic product used to monitor the business cycle? a) GDP indicates whether a city's economy is expanding or contracting. b) GDP indicates whether a business is expanding or contracting. c) GDP indicates whether the world's economy is expanding or contracting. d) GDP indicates whether the nation's economy is expanding or contracting.

d) GDP indicates whether the nation's economy is expanding or contracting.

What is the main economic benefit of public disclosure laws? a) They guarantee that businesses can make legally binding contracts b) They cut into the profits of highly regulated industries c) They protect employees from potential dangers in the workplace d) They ensure that consumers can make informed buying decisions

d) They ensure that consumers can make informed buying decisions

How do patents act as an incentive to technological innovation? a) by protecting unpatented creative works b) by protecting the government's right to patent creative works c) by protecting a business's right to profit from someone else's creativity d) by protecting a patent holder's right to profit from his or her creativity

d) by protecting a patent holder's right to profit from his or her creativity

Market failure occurs whenever... a) government builds infrastructure b) goods fail to arrive at a market in a timely fashion c) voluntary exchange in a market fails to result in a sale d) free markets fail to distribute resources efficiently

d) free markets fail to distribute resources efficiently

The due process clauses of the Constitution support the principle that... a) private property can never be taken from an owner b) only through a public trial can government take someone's private property c) no legislature can keep an owner from selling his or her private property d) government can take private property only to meet a public need

d) government can take private property only to meet a public need

What economic measurement helps to monitor the business cycle? a) guaranteed domestic policies b) guaranteed domestic product c) gross domestic policies d) gross domestic product

d) gross domestic product

The profit motive drives business owners to... a) protect the private property rights of those who consume their goods b) develop incentives for their employees to work fewer hours each week c) see that the principle of open opportunity applies to all Americans d) make sure their firm is operating at its highest level of efficiency

d) make sure their firm is operating at its highest level of efficiency

An entrepreneur can BEST be characterized as someone who... a) seeks to engage in a voluntary exchange b) tries to persuade officials to pass favorable laws c) signals businesses what and how much to produce d) takes risks in order to acquire profits

d) takes risks in order to acquire profits

The federal government can pursue economic policies such as spending or taxation to stimulate an economy that is contracting or to cool one that is expanding too rapidly. When the government acts to influence the economy in these ways, what is its goal? a) to support self-regulation in the market b) to encourage economic citizenship c) to maintain consumers' freedom of choice d) to promote stability in the business cycle

d) to promote stability in the business cycle

What is the overall purpose of federal regulatory agencies? a) to sue businesses that engage in illegal financial dealings b) to run businesses that private firms are unwilling to run c) to make sure what Americans eat and drink is safe d) to protect the health, safety, and well-being of the public

d) to protect the health, safety, and well-being of the public

What is critical in determining whether something is produced as a public good? a) whether the benefits are limited to the poor b) whether the government needs to use tax money to provide it c) whether the market has the resources to provide it d) whether the benefits to society are greater than the total cost

d) whether the benefits to society are greater than the total cost