Economics 195 Chapter 1 Quiz 1

The circular flow diagram of economic activity is a model of the:

A. flow of goods, services, and payments between households and firms.

In a command economy, the __________ either makes most economic decisions itself or at least strongly influences how the decisions are made.

A. government

In a _______________________, most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers.

A. market-oriented economy

In a market-oriented economy, the amount of a good that is produced is primarily decided by the interaction of:

B. buyers and sellers.

Specialization:

B. can lead to an increase in overall production.

Economic models like the _____________________ are not physical models, but instead are diagrams or graphs or even mathematical equations that represent economic patterns or theories.

B. circular flow diagram

Because of their relatively small national economies, which of the following is most likely considered to be the most important factor for Belgium, Korea, and Canada to take full advantage of specialization?

B. international trade

Which of the following is generally accepted as a valid criticism of the production of useful goods and services?

C. environmental pollution

In the ______________, households receive goods and services and pay firms for them.

C. goods and services market

In the ____________, households work and receive payment from firms.

C. labor market

The basic difference between macroeconomics and microeconomics is:

C. microeconomics concentrates on the behaviour of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.

In the first chapter of The Wealth of Nations, Smith introduces the idea of the __________, which means the way in which the work required to produce a good or service is divided into a number of tasks that are performed by different workers.

A. division of labor

In which of the following countries will the national government have the greatest influence with respect to the nation's economy?

B. Cuba

In countries like _____________ the command economy predominates.

B. Cuba and North Korea

Which of the following best denotes the reason for the existence of substantial black markets?

B. a command economy

In a discussion of economics, which of the following would exert the most influence on an individual firm's decision to hire workers?

B. the macroeconomy

If macroeconomics looks at the economy as a whole, it focuses on which of the following?

C. unemployed people

Economics is the social science concerned with the best use of scarce resources to achieve maximum satisfaction of economic wants.

True

Products and services are scarce because resources are scarce.

True

Rational individuals may make different choices because their preferences and circumstances differ.

True