Chapter 1 Intro Practice Quiz

The role of the entreprenuer in an economy is to?

Bring the factors of production (land, labor,capital and entrepreunrship) together and assume the risk of production.

Capital, as economists use the term, refers to

Final goods that are used to produce other goods and services

The opportunity cost of studying for an economics test is?

The activity that is the best alternative use of your time.

A point on a nation's production possibilities curve represents?

The full employment of resources to achieve a partiuclar combination of goods and services.

The fundamental problem of economics is?

The scarcity of resources relative to human wants

Which of the following is a positive statement?

The temperature is 92 degrees today.

the capitalist system relies on ____ ownership of resources a. community b. private c. both private and state d. state

answer: b (private) Why? the capalist system is the system made by Adam Smith. It focused on private ownership. the opposite of the system was Karl Marx system that focused on state ownership of production

what are market mechanisms?

market sales and prices send a signal to producers about what mix of output consumers want. For example: there is only so much farmland available, should farmers grow corn or beans. If consumers prefer corn, then people will buy more corn and not buy the beans. farmers will get that message that more corn is being bought and ultimately, farmers will produce more corn

What are mixed economies?

has characteristics of both market and command they have both private and state ownerships

What kind of system did Karl Marx believe in?

he believed in a communist system (when the state owned the means of production)

A normative statement is one that?

is based on value judgments.

nations that have adopted Marxist system have become (more or less) market orientated

more

A positive statement is one that is?

objective and is based on facts.

key feature of market mechanism

price signals. the consumers signal their desires for a specific good by paying a price for those goods. producers respond to the price signal by assembling factors of production to produce the desired amount

what are production possiblities? what does it represent?

represents the alternative combinations of goods and services that could be produced in a given time periods with all available resources

the abundance of goods and services that we have today is largely because our factories, offices, and homes have been transformed by what?

technology

___ is the use of market prices and sales to signal desired outputs

the market mechanism Why: remember the example of the corns and beans. when people buy more corn instead of beans, this sends a signal to the farmers (the producers) to make more corn instead of beans

When does market failure occur?

the market mechanism generates the wrong mix of output, undesirable methods of production, or and inequitable distribution of income

_____makes decisions such as increase the share of miltary spending or how many highways to build

the political process

Which of the following is the best example of land?

the water used to make a soft drink.

A positive statements is concerned primarily with?

what is its objective and true facts

Normative statements are concerned primarily with?

what ought to be based on the value of judgement

what are the three basic economic questions

what to produce how to produce for whom to produce

what is a communist system?

when the state owned the means of produciton

What book did Adam Smith write?

The Wealth of Nations (1776)

the economist who in 1776 promoted market capitalism was

Adam Smith

Opportunity cost may be defined as the ?

Goods or services that are forgone in order to obtain something else.

Ben says that "An increase in the tax on beer will raise its price." Holly argues that "Taxes should be increased on beer because college students drink too much." We can conclude that:

Holly's statement is normative, but Ben's is positive.

who predicted that the capitalist system of private ownership would eventually self destruct?

KArl MArx

who asserted that long-term prosperity would be possible only if the state owned production and managed the economy?

Karl Marx

The basic factors of production include?

Land, labor, capital and entrepreneurship.

Given that resources are scarce: ____ are experienced whenever choices are made

Opportunity costs

Factors of production are a. in abundance in every society b. scarce in every society

Scarce in every society Factors of production: land, labor, entrepreneurship, capital

In economics, scaracity means that?

Society's desires exceed resources available.

Opportunity cost is ?

What is given up in order to get something else.

in the US economy, which of these groups say they want more? (more than one answer is correct) a. middle income households b. higher income households c. lower income households d. the US economy is high income, therefore nobody wants more

a b and c are correct

whats the difference between a consumer and a producer

consumer - buys producer -makes

what is Laissez-faire economics

economic system where government should not interfere in the marketplace

what did the wealth of nations, by adam smith, encourage the governement to do?

encouraged the governement to pursue a policy of laissez faire, allowing the market to make basic economic decisions