Chapter 1 Part 1
Economics is the study of how people :
A) calculate their income
B) choose from limited resources to meet their needs
C.) Respond to war and drought
D.) Gain knowledge and skills from study and experience
B) choose from limited resources to meet their needs
Countries often have to choose between producing military or consumer goods, a trade-off economists call:
A) export or import
B) a free market economy
C) farm goods or factory goods
D) guns and butter
D) guns and butter
Which of these is a key economic question faced by countries?
A) How big should the army be?
B) How much money should be raised in taxes?
C) How many schools should be built?
D) What goods and services should be produced?
D) What goods and services should be produced?
Which is true of the government in a centrally planned economy?
A) It builds every house in every village
B) It encourages workers to innovate
C)It makes all important economic decisions
D) It places much emphasis on the production of consumer goods
1. What is the difference between a shortage and scarcity?
(a) A shortage can be temporary or long-term, but scarcity always exists.
(b) A shortage results from rising prices; a scarcity results from falling prices
(c) A shortage is a lack of all goods and services; a scarcity concerns a single item.
(d) There is no real difference between a shortage and a scarcity.
(a) A shortage can be temporary or long-term, but scarcity always exists.
Shortages occur when...
A) many people are unemployed
B)interest rates go up
C) people have trouble supplying goods and services at current prices
D) the United States imports more than it exports
C) people have trouble supplying goods and services at current prices
Thinking at the margins means deciding about
A) maximizing goods and services
B) investing with borrowed money
C) adding or subtracting one additional unit of some resource
D) increasing or decreasing technological know-how
C) adding or subtracting one additional unit of some resource
In a traditional economy, economic decisions are based largely on:
A) custom
B) science
C) socialism
D) technology
C) socialism
Socialists believe that economic equality is only possible if:
A) everyone makes the same amount of money
B) the public controls the economy
C) medical care is free
D) no one has to pay taxes
B) the public controls the economy
Which of the following is an example of using physical capital to save time and money?
(a) hiring more workers to do a job
(b) building extra space in a factory to simplify production
(c) switching from oil to coal to make production cheaper
(d) lowering workers’ wages to increase profits
(b) building extra space in a factory to simplify production
The resources used to make goods and services are called:
A) factors of production
B) gross national product
C) production possibilities frontier
D) opportunity cost
A) factors of production
The purpose of a production possibilities curve is to
A) show alternative ways to use an economy's resources
B) show how a factory can use its workers in different ways
C) give engineers a new way of deciding how to build manufacturing plants
D) tell farmers how many watermelons to plant
A) show alternative ways to use an economy's resources
Markets allow us to :
A) get the highest prices for what we sell
B) get the lowest prices for waht we buy
C) sell the most goods we possibly can
D) exchange the things we have for the things we need
D) exchange the things we have for the things we need
The former Soviet Union was an example of a communist country where:
A) individual freedom was allowed
B) free enterprise was encouraged
C) consumers had many choices
D) most economic and political power was controlled by the government
D) most economic and political power was controlled by the government
Opportunity cost is
(a) any alternative we sacrifice when we make a decision.
(b) all of the alternatives we sacrifice when we make a decision.
(c) the most desirable alternative given up as a result of a decision.
(d) the least desirable alternative given up as a result of a decision.
(c) the most desirable alternative given up as a result of a decision.
Entraprenuers are people who
A) help settle labor disputes
B) work on the floor of the stock exchange
C) put together land, labor, and capital to create new businesses
D) produce all of the country's guns and butter
C) put together land, labor, and capital to create new businesses
Using resources in such a way as to maximize the production of goods and services is called :
A) efficiency
B) underutilization
C) thinking at the margins
D) growth
A) efficiency
Competition and self interest are two important forces in :
A) free market economies
B) traditional economies
C) centrally planned economies
D) comunist economies
A) free market economies
Which of the following countries has the most extreme example of a centrally planned economy?
A) North Korea
B) Hong Kong
C) China
D) Great Britain
A) North Korea
Economists use the phrase “guns or butter” to describe the fact that
(a) a person can spend extra money either on sports equipment or food.
(b) a person must decide whether to manufacture guns or butter.
(c) a nation must decide whether to produce more or less military or consumer goods.
(d) a government can buy unlimited military and civilian goods if it is rich enough.
(c) a nation must decide whether to produce more or less military or consumer goods.
Giving up one alternative for another is called:
A) underutilization
B) a trade-off
C) human capital
D) efficiency
B) a trade-off
A country's production possibilities will grow if it :
A) produces more guns than butter
B) lowers its opportunity costs
C) makes more trade-offs
D) increases its resources
D) increases its resources
Which economic goals are best promoted by the free market?
A) efficiency and freedom
B) efficiency and equity
C) innovation and security
D) Freedom and security
A) efficiency and freedom
The free enterprise system of the United States is best described as a:
A) free market economy
B) traditional economy
C) mixed economy with limited government intervention and a great deal of economic freedom.
D) mixed economy with equal amounts of economic freedom and government intervention.
C) mixed economy with limited government intervention and a great deal of economic freedom.
A production possibilities frontier shows
(a) farm goods and factory goods produced by an economy.
(b) the maximum possible output of an economy.
(c) the minimum possible output of an economy.
(d) underutilization of resources.
(b) the maximum possible output of an economy.