ECON 1 and 2

Which of the following best characterizes the circular flow of income? -Businesses buy resources from the government, and households buy goods and services from businesses. -Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses. -The government purchases resources from businesses and households and then sells goods and services to businesses and households. -Households buy factors of production from businesses, and businesses buy goods and services from households.

-Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses.

In countries like _____________ the command economy predominates. -China and Vietnam -Cuba and North Korea -South Africa and Kenya -Germany and France

-Cuba and North Korea

The choice on a production possibilities set that is socially preferred, or the choice on an individual's budget constraint that is personally preferred, will display _____________________. -allocative efficiency -the production possibilities frontier -trade-offs -scarcity

-allocative efficiency

The model that economists use for illustrating the process of individual choice in a situation of scarcity is the _________________, sometimes also called the opportunity set, a diagram which shows what choices are possible. -consumption set -budget constraint -original budget -income cap

-budget constraint

The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good. -personal preference -utility level -budget constraint -opportunity set

-budget constraint

Which of the following best describes a fiscal policy tool? -government spending -bank lending -financial capital markets -household spending

-government spending

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? -division of labour -international trade -economies of scale -command economy

-international trade

Refer to Figure 2-2. At Point A in the production possibilities graph shown above, the economy: -is not using its resources efficiently. -is using its resources efficiently while producing clothing but no food. -is using its resources efficiently while producing food but no clothing. -is using its resources efficiently to produce both food and clothing.

-is not using its resources efficiently.

As a person receives more of a good, the _______________ from each additional unit of the good declines. -utility -sunk costs -marginal utility -budget constraint

-marginal utility

Philosophers draw a distinction between ___________________, which describe the world as it is, and normative statements, which describe how the world should be. -negative statements -positive statements -tradeoffs -utilitarianism

-positive statements

As depicted in _________________________________, it is necessary to give up some of one good to gain more of the other good. -the production possibilities frontier -allocative efficiency -scarcity -utility

-the production possibilities frontier

Scarcity exists because of: -the market mechanism. -specialization and division of labor. -the allocation of goods by prices -unlimited wants and limited resources.

-unlimited wants and limited resources.

In deciding how many hours to work, Beulah will make a choice that maximizes her _______; that is, she will choose according to her preferences for leisure time and income. -budget constraint -opportunity set -utility -production possibilities frontier

-utility

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. -division of labor -interconnected economy -task economy -modern economy

division of labor

The model that economists use for illustrating the process of individual choice in a situation of scarcity is the budget constraint, sometimes also called the _______________, a diagram which shows what choices are possible. -opportunity set -consumption choice -time value of money -risk premium

opportunity set