Unit 1 Practice Exam

The market system's answer to the fundamental question "How will the system accommodate change?" Is essentially

"Through the guiding function of prices and the incentive function of profits."

The opportunity cost of constructing a new public highway is the

Value of other goods and services that are sacrificed in order to construct the new highway

In terms of economic resources, what is the difference between water and a wrench?

Water is characterized as a "land" resource, while wrench is characterized as a "capital" resource

Which of the following is one of the five fundamental questions?

What goods and services will be produced?

The distribution of income in a market system is a primary factor that resolves which of the following fundamental economic questions?

Who will get the output?

A nation can produce two products: tanks and autos. The table below is the nation's production possibilities: the marginal opportunity cost of the fourth unit of tanks is (see chart)

350 units of autos

The textbook authors do not consider money to be an economic resource because

As such it is not productive

The role of the entrepreneur in society is to

Bring the factors of production together and take the risks of producing output

"Consumer sovereignty" means that

Buyers determine what will be produced based on their "dollar votes" for the goods and services offered by sellers

One major element of the command system is

Central planning conducted by the government

The simple circular flow model shows that

Households are on the selling side of the resource market and on the buying side of the product market

What is the best economic explanation for why a person would drop out of college to take a job or start a business?

If the expected future benefits from starting a business are greater than the costs

A point outside (to the right of) the production possibilities curve of a nation

Is not attainable for this nation

Scarcity

Persists because economic wants exceed available resourcesn

Which is a microeconomic question and which is a macroeconomic question?

Question 1 is a microeconomic question and question 2 is a macroeconomic question

Which is a positive statement and which is a normative statement?

Statement 1 is normative and statement 2 is positive

Competition in a market system system denotes a condition where

The diffusion of Economic power limits its potential abuse

The law of increasing opportunity costs states that

if society wants to produce more of a particular good, it must sacrifice larger and larger amounts of another good to do so.

The economizing problem is one of deciding how to make the best use of

limited resources to satisfy virtually unlimited wants.