Multiple Choice
Identify the choice that best completes the
statement or answers the question.
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1.
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Which of the following is a private organization that attempts to influence
public officials to act or vote in ways that will benefit the group’s members?
a. | market research group | c. | public policy group | b. | free enterprise group | d. | interest group |
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2.
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What is the most effective way for consumers to make their desires known to
businesses?
a. | through mail and phone surveys | b. | by protesting and boycotting
products | c. | by the purchases they make | d. | by hiring lobbyists and joining consumer
groups |
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3.
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Why does the government use its powers to make sure that businesses disclose so
much information to the public?
a. | to make buyers more knowledgeable and safer | b. | to make it hard for
businesses to make an excess profit | c. | to make it easier for consumers to save
money | d. | to make it easy for businesses to have good
information |
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4.
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What is a positive externality?
a. | a way to generate trade that will benefit people who are from other
countries | b. | an economic side effect that generates unexpected benefits | c. | a cash flow that
will benefit both the government and the businesses who interact with it | d. | an extra payment to
welfare recipients |
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5.
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What does the Temporary Assistance for Needy Families program provide?
a. | retirement income for the elderly | b. | cash to the states to help run their welfare
programs | c. | compensation to all who lose jobs | d. | cash to workers injured on the
job |
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6.
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What is the difference between a business cycle and the day-to-day ups and downs
of the market?
a. | The day-to-day ups and downs of the market can be much more extreme than a business
cycle. | b. | The day-to-day fluctuations are more likely to have an impact on people’s
finances. | c. | A business cycle is usually more restricted, whereas market fluctuations are
worldwide. | d. | A business cycle is a major, prolonged fluctuation rather than a day-to-day
movement. |
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7.
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What best describes the role of government in a free enterprise system?
a. | Control business activities. | b. | Decide what companies will be formed and then
allow the managers to run them. | c. | Allow individuals to operate their businesses
in ways they think will maximize their profits. | d. | Require companies to disclose information to
consumers. |
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8.
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What effect does new technology usually have on an economy?
a. | It makes the economy stronger and more efficient. | b. | It reduces the
dependence of the economy on business. | c. | It slows an economy down for at least a
while. | d. | It reduces the available jobs. |
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9.
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Which of the following is a critical rule for determining whether something is a
public good?
a. | The benefit to each individual who uses the facility is greater than the
cost. | b. | The benefits of the facility are greater for the society than for the individuals
using it. | c. | The total benefits to society are greater than the total cost. | d. | The total cost is
small for each individual taxpayer. |
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10.
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Which of the following is NOT an example of a public good?
a. | shopping malls | c. | highways | b. | national parks | d. | municipal
libraries |
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11.
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What protections does OSHA give to people in the United States?
a. | regulations on workplace safety and information about hazards in the
workplace | b. | consumer protection in buying foods | c. | regulations about clean
environment | d. | protection for certain key industries such as logging |
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12.
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What is the term for the total value of all goods and services produced in a
particular economy?
a. | net worth | c. | gross domestic product | b. | open market
value | d. | standard of
living |
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13.
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What is one benefit provided by Social Security?
a. | medical care for the indigent | b. | cash transfers to workers injured on the
job | c. | compensation for all who lose jobs | d. | retirement income for the
elderly |
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14.
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A person who consumes a good or service but does not pay for it is called which
of the following?
a. | a free rider | c. | a private consumer | b. | a volunteer user | d. | an entrepreneur |
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15.
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Assume that the poverty threshold for a single parent with one child is $11,869
per year. Catrina is a single mother who works 40 hours per week. What hourly wage does she need to
earn in order to rise above the poverty threshold?
a. | $5.71 | c. | $5.47 | b. | $5.15 | d. | $5.07 |
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16.
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Automakers are required to comply with public disclosure laws. What is one
example of a requirement of these laws?
a. | Salespeople must provide information about their competitors’ cars, so
customers can make informed decisions. | b. | Car dealers must prominently display a sticker
with the fuel efficiency in the car window. | c. | Salespeople must be willing to sell cars to
anyone who can afford them, regardless of gender, race, or ethnicity. | d. | Automakers must test
all car models regularly for crash-worthiness. |
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17.
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An externality is
a. | an economic side effect of a good or service that generates benefits or costs to
someone other than the person deciding how much to produce or consume. | b. | the total cost to
society of producing an additional unit of a good or service. | c. | the amount a
consumer pays to consume an additional amount of any particular good. | d. | a situation in which
the market, on its own, does not distribute resources efficiently. |
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18.
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In 1996, a new federal welfare program called Temporary Assistance for Needy
Families (TANF) began assisting poor families. Which of the following was NOT a provision of
TANF?
a. | direct cash payments to recipients | c. | lifetime limit of
benefits | b. | work incentives | d. | state-run welfare programs |
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19.
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The U.S. Constitution guarantees certain rights that allow people to engage in
business activities. Which of the following does the U.S. Constitution NOT guarantee?
a. | the protection against monopolies and oligopolies | b. | the recognition and
protection of private property rights | c. | a limitation on the kinds of taxes that
Congress can impose | d. | the right to make binding
contracts |
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20.
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Why is legal equality important to the free enterprise system?
a. | Ensuring that all businesses have the same legal rights will create healthy
competition in the marketplace. | b. | Requiring all lawyers to obtain the same
education will ensure that all business clients receive competent legal
representation. | c. | Protecting legal equality makes sure that all people may decide what legal agreements
they want to enter into. | d. | Guaranteeing all people the same legal rights
will maximize the use of human capital. |
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21.
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A large telephone company has hired lobbyists to try to persuade lawmakers to
reduce governmental regulation over the telecommunications industry. Why might the company do
this?
a. | Some regulations are costly to implement and cut into profits. | b. | Many regulations
promote too much competition, driving down prices. | c. | Certain regulations result in rapid business
growth, which some companies find difficult to handle. | d. | All of the
above |
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22.
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You read an article in a news magazine that explains how the economy expanded
for several years, then went into a period of contraction. What was the subject of this
article?
a. | the gross domestic product | c. | the business
cycle | b. | microeconomics | d. | voluntary exchange |
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23.
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To stabilize the economy, policymakers try to achieve three main outcomes: high
employment, steady growth, and
a. | technological advancement. | c. | competition. | b. | stable
prices. | d. | consumer
confidence. |
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24.
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Why does the government protect inventors and authors by offering them patents
and copyrights?
a. | to encourage free trade | c. | to regulate the business
cycle | b. | to promote innovation | d. | to strengthen American culture |
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25.
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Which of the following is the best example of a public good?
a. | highway system | c. | country club | b. | shopping mall | d. | movie theater |
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26.
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You will still be able to get public broadcasting whether or not you contribute
to their fundraising campaign. You decide not to contribute. This is an example of the
a. | public good problem. | c. | externality problem. | b. | public sector problem. | d. | free-rider
problem. |
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27.
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A new runway has opened up at the airport, and the flight path goes directly
over your apartment. The noise of the airplanes is a
a. | positive externality. | c. | negative externality. | b. | free-rider
problem. | d. | market
failure. |
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28.
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Each payday, some of your pay is withheld as payroll deductions for Social
Security. What happens to the money that is withheld?
a. | It is redistributed as cash transfers to workers who are injured on the
job. | b. | It is put into an account under your name to earn interest until you
retire. | c. | It is used to provide medical benefits to Americans over 65. | d. | It is redistributed
as cash transfers to elderly and disabled people. |
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29.
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Jeff and Margaret qualify for Section 8 housing, a subsidized housing program
from the federal government. What kind of benefit are they receiving?
a. | cash transfer | c. | Social Security benefit | b. | in-kind
benefit | d. | faith-based
initiative |
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Matching
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Identifying Key Terms
Match each term with the correct
statement below. a. | gross domestic product | f. | macroeconomics | b. | free
rider | g. | poverty
threshold | c. | public interest | h. | market failure | d. | private sector | i. | welfare | e. | in-kind
benefits | j. | public disclosure
laws |
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30.
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the study of the behavior and decision making of entire economies
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31.
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an income level below that which is needed to support families or
households
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32.
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the part of the economy that involves the transactions of individuals and
businesses
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33.
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goods and services provided by the government for free or at greatly reduced
prices
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34.
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someone who would not choose to pay for a certain good or service, but who
would get the benefits of it anyway if it were provided as a public good
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35.
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requirements for companies to provide full information about their
products
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36.
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the concerns of the people as a whole
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37.
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the total value of all final goods and services produced in a particular
economy
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Identifying Key Terms
Match each term with the correct
statement below. a. | market failure | f. | public disclosure
laws | b. | cash transfers | g. | business cycle | c. | public policy | h. | interest group | d. | externality | i. | microeconomics | e. | welfare | j. | poverty
threshold |
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38.
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government aid to the poor
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39.
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a situation in which goods are not fairly distributed
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40.
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the study of the economic behavior and decision making of small units such as
families, individuals, or businesses
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41.
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an income level below that which is needed to support families or
households
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42.
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a period of macroeconomic expansion followed by a period of contraction
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43.
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a private organization that tries to persuade public officials to act or vote
in a certain way
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44.
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laws and standards on topics of public interest
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45.
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an economic side effect of a good or service that generates benefits or costs
to someone other than the person deciding how much to produce or consume
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