Economics Unit One
The study of economics includes all of the following EXCEPT -analysis -explanation -description -financing
financing
An income that does not increase even though prices go up. -stationary income -social security -fixed income -economic freedom
fixed income
Tangible commodities -needs -wants -goods -services
goods
All of the following are characteristics of a free enterprise economy EXCEPT -voluntary exchange -economic freedom -private property -government control
government control
The classic example used to illustrate opportunity costs along the production possibilities frontier. -opportunity cost -decision making grid -trade off -guns and butter
guns and butter
For something to have value, it must -never go out of style -be on sale -have utility -cost a lot of money
have utility
Which economy is efficient? -one that makes the most goods and services possible -one that uses fewer resources than are available -one that makes fewer goods because workers are laid off -one that wastes fuel when making goods
one that makes the most goods and services possible
The cost of the next best alternative when a choice is made. -trade off -opportunity cost -decision making grid -production possiblities frontier
opportunity cost
An alternative choice -production possiblities frontier -opportunity cost -trade off -decision making grid
trade off
If you choose between two summer jobs, what is the one you do not choose called? -opportunity cost -decision at the margin -opportunity at the margin -trade off
trade off
The act of buyers and sellers freely and willingly engaging in market transactions. -economic freedom -voluntary exchange -profit motive -free enterprise
voluntary exchange
Means of expressing needs. -wants -goods -services -market
wants
Why is economic growth an important goal of the United States? -Economic growth leads to price stability -Americans have discovered that economic growth is the only way to achieve economic equity -Americans have a strong sense of fairness -Economic growth is needed to better satisfy the wants and needs of a growing population
Economic growth is needed to better satisfy the wants and needs of a growing population
Why are goods and services scarce? -Resources used to produce them are limited. -People want more than they can have. -Some goods cost more than others. -Greedy people want too many goods.
Resources used to produce them are limited.
What is the difference between a shortage and scarcity? -There is no real difference. -Scarcity always exists. -Scarcity results from falling prices. -Scarcity concerns a single item.
Scarcity always exists.
What is the best explanation of "There is no such thing as a free lunch" (TINSTAAFL)? -The factors of production are the means for a society to produce and distribute goods and services. -Every society must answer the three basic economic questions. -There is always a cost when something is produced. -Businesses try to attract consumers with "free" offers that are really free.
There is always a cost when something is produced.
Which of the following is NOT a basic economic question? -HOW to produce -WHAT to produce -FOR WHOM to produce -WHEN to produce
WHEN to produce
Which is an example of economic growth? -A man decides to quit working as a waiter and begin a career in marketing -When a new ball bearing plant opens, 1,500 jobs are created -The price of vegetables increases sharply in the spring -An employer is fined for refusing to hire women to fill new job openings
When a new ball bearing plant opens, 1,500 jobs are created
A country is changing from a centrally planned economy to a free market economy. What will be one difficulty for citizens in this country? -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. -Entrepreneurs will have fewer opportunities to start new businesses.
Workers will lose job security and guaranteed incomes.
Which of the following is an example of a good? -an oil change -a tune-up -a car -a car wash
a car
What are the origins of the seven major economic and social goals of the United States? -the results of elections -an official list prepared by the federal government -passages from the major documents of America's history, including the Constitution -a combination of the beliefs and statements of American consumers, business people, and government officials
a combination of the beliefs and statements of American consumers, business people, and government officials
What type of economy was the former communist bloc countries of Eastern Europe and the former Soviet Union? -a market economy -a free enterprise economy -a traditional economy -a command economy
a command economy
Which of the following is likely to occur in a traditional economy? -a new clothing fashion increases the profits of textile mills -a large government agency decides to build more warships -A new factory opens to produce computer chips -a father teaches his son how to clear land for crops
a father teaches his son how to clear land for crops
The United States economy is a mixed economy based on: -a traditional economy, but allowing some government intervention. -a free market, but allowing some government intervention. -a centrally planned economy, but limiting government intervention. -a free market, allowing no government intervention.
a free market, but allowing some government intervention.
Which of the following is an example of a service? -a blow dryer -scissors -a haircut -hair spray
a haircut
Which of the following people is an entrepreneur? -a highly-paid computer programmer -a person who starts a cleaning supplies -business -a person who teaches courses at college -a highly-paid singer
a person who starts a cleaning supplies business
Who would you most likely find participating in a market economy? -a worker deciding to leave his job early because the production quota has been met -a hunter deciding where to hunt to provide his family with a meal that night -a teenage girl deciding how to spend the extra money she earned working overtime -a government official deciding how much wheat to plant this season
a teenage girl deciding how to spend the extra money she earned working overtime
Which of the following is NOT a capital good? -an oven at a bakery -a cash register at a clothing store -a television set for sale at an appliance store -a bulldozer at a construction site
a television set for sale at an appliance store
Which person below is an entrepreneur? -A person who writes technical manuals for a computer company -an artist who runs a business painting murals -an ice skater in a professional ice show -a secretary in a law firm
an artist who runs a business painting murals
What is a free enterprise economy? -an economy that is free of markets -an economy that is free from a circular flow of economic activity -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
How do consumers exercise their power in the American economy? -by saving their money -by becoming entrepreneurs -by working for businesses -by deciding what to purchase
by deciding what to purchase
All of the following are weaknesses of a command economy EXCEPT that it -lacks the flexibility to deal with minor problems -requires a large decision making bureaucracy -provides few incentives for people to work hard -can change direction drastically in a short time
can change direction drastically in a short time
Economic system in which private citizens own the factors of production. -capitalism -mixed economy -private property -profit motive
capitalism
The government plays all of the following roles in the American economy EXCEPT -protector of consumers -central planner deciding what to produce -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. -traditional economy. -economic system -command economy. -market economy
command economy.
Free market economies are able to attain economic growth because -the government provides incentives. -well-regulated markets keep economic conditions stable. -consumers are willing to pay higher prices. -competition encourages innovation.
competition encourages innovation.
Concept that the consumer is the ruler of the market. -profit motive -capitalism -consumer sovereignty -private property
consumer sovereignty
A tool that can be used to help make an economic decision by identifying alternatives and criteria to evaluate the alternatives. -opportunity cost -decision making grid -trade off -guns and butter
decision making grid
An economic goal that is based on a sense of fairness. -economic freedom -economic equity -fixed income -social security
economic equity
An economic goal that is based on the desire of people to make their own decisions. -economic freedom -economic equity -social security -fixed income
economic freedom
The actions in one part of the country or world have an economic impact on what happens elsewhere. -specialization -economic interdependence -free enterprise -conspicuous consumption
economic interdependence
Which of the following is NOT a major economic and social goal of the United States? -economic interdependence -economic efficiency -economic security -economic growth
economic interdependence
An organized way of providing for wants and needs of a society. -command economy. -traditional economy. -market economy -economic system
economic system
Factor of production that involves risk-takers in search of profits. -labor -land -entrepreneurs -capital
entrepreneurs
Why are entrepreneurs important in a free enterprise economy? -entrepreneurs pay high wages to their employees -entrepreneurs don't pay taxes -entrepreneurs start new businesses -entrepreneurs help define the seven economic and social goals
entrepreneurs start new businesses
A rise in the general level of prices. -income erosion -social elevation -inflation -economic escalation
inflation
Which of the following is NOT a characteristic of a production possibilities frontier? -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 -it illustrates the concept of opportunity costs
it indicates the ideal production levels for goods and services
Which of the following is NOT a strength of a market economy? -it can adjust to change over time -it has decentralized decision making -it gives producers and consumers a great deal of freedom -it supports all of its people equally
it supports all of its people equally
Each society answers the three basic economic questions based on -its unique combination of values and goals. -the number of factor payments. -its degree of economic growth. -the desire to achieve economic freedom.
its unique combination of values and goals.
Factor of production that includes people and their efforts, abilities, and skills. -labor -entrepreneurs -capital -land
labor
A factor of production that includes all natural resources. -capital -labor -land -entrepreneurs
land
A factory bottles apple juice and cranberry juice. If it wants to bottle more apple juice, what is the trade-off? -a bigger factory -less cranberry juice -a smaller factory -more cranberry juice
less cranberry juice
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 -more of good B also will be produced -less of good B must be produced -there are no opportunity costs involved
less of good B must be produced
An arrangement that allows buyers and sellers to come together to exchange goods and services. -economic system -market -market economy -traditional economy.
market
Location or other mechanism that allows buyers and sellers to exchange economic products. -market -wants -services -goods
market
An economic system in which basic economic decisions are make by people and firms acting in their own best interests. -command economy. -market economy. -traditional economy. -economic system
market economy.
Economic system in which free economic activity is subject to some government intervention and regulation. -consumer sovereignty -mixed economy -traditional economy -command economy
mixed economy
What is another term for a modified private enterprise economy? -free enterprise -mixed economy -pure capitalism -command economy
mixed economy
Basic requirements for survival. -wants -services -goods -needs
needs
What term refers to the value of a trade off? -choice -production possibility -opportunity cost -frontier
opportunity cost
Which of the following best describes the relationship between trade-offs and opportunity costs? -opportunity costs are the opposite of trade offs -trade offs occur when there are no opportunity costs -opportunity costs are incurred when trade offs are made -trade offs lower the opportunity costs of an economic decision
opportunity costs are incurred when trade offs are made
Concept that people have the right to control their possessions as they wish. -profit motive -private property -capitalism -consumer sovereignty
private property
Gives people the incentive to work, save and invest. -private property -free enterprise -economic freedom -voluntary exchange
private property
Diagram representing various combinations of goods and services an economy can produce when all resources are fully employed. -decision making grid -opportunity cost -production possiblities frontier -trade off
production possiblities frontier
A driving force that encourages people and organizations to improve their material well-being. -consumer sovereignty -mixed economy -profit motive -private property
profit motive
Condition that arises because society does not have enough resources to produce all the things people would like to have. -labor -effectiveness -scarcity -entrepreneur
scarcity
What is the fundamental problem of economics? -labor -scarcity -capital -the factors of production
scarcity
Economic goals are important because they -answer the For Whom to produce question -serve as benchmarks that help people determine if an economic system meets their needs -tell us What and How to produce -tell the government what kinds of regulations are needed
serve as benchmarks that help people determine if an economic system meets their needs
Works that are performed for someone. -wants -services -goods -needs
services
Traditional economies are usually -large, widespread communities that welcome change and new technology. -small, close communities that welcome change and new technology. -small, close communities that avoid change and new technology. -large, widespread communities that are able to deal effectively with environmental disaster.
small, close communities that avoid change and new technology.
A federal program of disability and retirement benefits. -economic freedom -fixed income -economic equity -social security
social security
Imagine you decide to purchase a soccer ball for $35. Which of the following is an opportunity cost of your decision? -$35 in cash -the time spent making the purchase and the tax paid on the ball -something else you wanted that could have been bought for $35 -the time spent deciding to spend your money on a soccer ball
something else you wanted that could have been bought for $35
Which of the following is NOT a way to increase productivity? -investment in human capital -structural interdependence -specialization of labor -division of labor
structural interdependence
Economics may best be defined as a -scientific study of supply and demand -branch of sociology -study of efforts to satisfy seemingly unlimited wants with scarce resources -limited description of economic activities
study of efforts to satisfy seemingly unlimited wants with scarce resources
Productivity refers to -the use of the four factors of production -the specialization of productive inputs -the process of creating goods and services -the efficient use of productive resources
the efficient use of productive resources
An economic system in which basic economic activity stems from ritual, habit, or custom. -command economy. -traditional economy. -market economy -economic system
traditional economy.