ECON TEST 1

Why is economic growth an important goal of the United States? Economic growth is needed to better satisfy the wants and needs of a growing population Americans have a strong sense of fairness Americans have discovered that economic growth is the only way to achieve economic equity Economic growth leads to price stability

Economic growth is needed to better satisfy the wants and needs of a growing population

Which of the following is NOT a basic economic question? WHAT to produce WHEN to produce FOR WHOM to produce HOW to produce

WHEN to produce

A country is changing from a centrally planned economy to a free market economy. What will be one difficulty for citizens in this country? Entrepreneurs will have fewer opportunities to start new businesses. Farmers will have to grow the crops that the government instructs them to. Workers will lose job security and guaranteed incomes. Only poor quality goods will become available to consumers.

Workers will lose job security and guaranteed incomes.

Which of the following is an example of a good? a tune-up an oil change a car wash a car

a car

Which of the following is likely to occur in a traditional economy? a large government agency decides to build more warships a father teaches his son how to clear land for crops a new clothing fashion increases the profits of textile mills A new factory opens to produce computer chips

a father teaches his son how to clear land for crops

Which of the following is NOT a capital good? a television set for sale at an appliance store a bulldozer at a construction site an oven at a bakery a cash register at a clothing store

a television set for sale at an appliance store

What is a free enterprise economy? an economy that is free from a circular flow of economic activity an economy that is free of markets an economy in which consumers and privately owned businesses make the majority of basic economic decisions an economy in which the government makes the majority of basic economic descisions

an economy in which consumers and privately owned businesses make the majority of basic economic decisions

All of the following are weaknesses of a command economy EXCEPT that it lacks the flexibility to deal with minor problems provides few incentives for people to work hard can change direction drastically in a short time requires a large decision making bureaucracy

can change direction drastically in a short time

The government plays all of the following roles in the American economy EXCEPT central planner deciding what to produce protector of consumers regulator of business consumer of products

central planner deciding what to produce

An economic system in which basic economic decisions are made by a central authority. market economy economic system traditional economy. command economy.

command economy.

Free market economies are able to attain economic growth because consumers are willing to pay higher prices. well-regulated markets keep economic conditions stable. competition encourages innovation. the government provides incentives.

competition encourages innovation.

Concept that the consumer is the ruler of the market. consumer sovereignty profit motive capitalism private property

consumer sovereignty

An economic goal that is based on a sense of fairness. economic equity economic freedom social security fixed income

economic equity

An economic goal that is based on the desire of people to make their own decisions. fixed income social security economic freedom economic equity

economic freedom

The actions in one part of the country or world have an economic impact on what happens elsewhere. specialization free enterprise conspicuous consumption economic interdependence

economic interdependence

An organized way of providing for wants and needs of a society. traditional economy. command economy. market economy economic system

economic system

Which of the following is NOT a characteristic of a production possibilities frontier? it illustrates the concept of opportunity costs it indicates the ideal production levels for goods and services it is based on full employment of all productive resources it is used by economists as a tool for description and analysis

it indicates the ideal production levels for goods and services

Which of the following is NOT a strength of a market economy? it gives producers and consumers a great deal of freedom it supports all of its people equally it has decentralized decision making it can adjust to change over time

it supports all of its people equally

Factor of production that includes people and their efforts, abilities, and skills. land capital entrepreneurs labor

labor

A factor of production that includes all natural resources. capital labor entrepreneurs land

land

When a country that produces only two goods is producing on its production possibilities frontier, the decision to produce more of good A means that the same amount of good B will be produced less of good B must be produced there are no opportunity costs involved more of good B also will be produced

less of good B must be produced

An economic system in which basic economic decisions are make by people and firms acting in their own best interests. economic system traditional economy. command economy. market economy.

market economy.

Economic system in which free economic activity is subject to some government intervention and regulation. traditional economy command economy consumer sovereignty mixed economy

mixed economy

The cost of the next best alternative when a choice is made. opportunity cost decision making grid production possiblities frontier trade off

opportunity cost

Gives people the incentive to work, save and invest. economic freedom free enterprise private property voluntary exchange

private property

Diagram representing various combinations of goods and services an economy can produce when all resources are fully employed. trade off decision making grid production possiblities frontier opportunity cost

production possiblities frontier

A driving force that encourages people and organizations to improve their material well-being. consumer sovereignty mixed economy private property profit motive

profit motive

What is the fundamental problem of economics? labor the factors of production capital scarcity

scarcity

productivity refers to the specialization of productive inputs the efficient use of productive resources the use of the four factors of production the process of creating goods and services

the efficient use of productive resources

An economic system in which basic economic activity stems from ritual, habit, or custom. command economy. economic system market economy traditional economy.

traditional economy.

The act of buyers and sellers freely and willingly engaging in market transactions. free enterprise economic freedom profit motive voluntary exchange

voluntary exchange