Multiple Choice
Identify the choice that
best completes the statement or answers the question.
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1.
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By the end of the summer, Jason
had saved enough money for college from his job as a waiter. He even had some money left over.
Although he wanted both, he decided to buy a DVD player rather than a digital camera. Which of the
following is the opportunity cost in this scenario?
a. | the DVD
player | c. | the
job | b. | college | d. | the digital camera |
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2.
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Which of the following is NOT a
reason for the government to provide a good or service as a public good?
a. | Increasing the number of consumers
would increase the cost to a private provider. | b. | It would be impractical to make consumers pay
individually. | c. | It would be inefficient to exclude
nonpayers. | d. | The good or service should be made available to
everyone. |
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3.
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Which word BEST completes the
following sentence? Improvements in _____ allow an economy to produce more output from the same or a
smaller quantity of inputs.
a. | technology | c. | GDP | b. | free enterprise | d. | communication |
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4.
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How does a society answer the
three economic questions about the production and consumption of goods and
services?
a. | Its answer is based on the
importance it attaches to various economic goals and societal
values. | b. | Its answer is based solely on current environmental
regulation. | c. | Its answer is based on the importance it attaches to the stock
market. | d. | Its answer is based on recent technological
advances. |
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5.
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What are some of the basic
principles of free enterprise?
a. | research institutions, government
restriction, and stock qualifications | b. | profit motive, legal equality, private property rights, free contract, and
competition | c. | interest groups, disclosure laws, public interest, and negative
regulation | d. | absolute organizations, low prices, and quality control
indexes |
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6.
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Which of the following
statements is true about the graph of a production possibilities curve?
a. | One million tons of watermelons must
be sacrificed to produce 8 million pairs of shoes. | b. | It costs 2 million more tons of watermelons to produce 14
million tons of shoes. | c. | The cost of producing watermelons and shoes is roughly even on the production
possibilities frontier. | d. | The cost of moving from producing no watermelons to producing 8 million tons
of watermelons is 1 million pairs of shoes. |
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7.
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Improved technology helps
create a higher standard of living for future generations by
a. | reducing the number of unemployed
workers. | b. | preventing drastic shifts in general price
levels. | c. | providing additional goods and services. | d. | creating specialized jobs for
workers. |
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8.
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The purpose of the free
enterprise system is to
a. | create political campaign
slogans. | b. | eliminate economic choices. | c. | give consumers goods and services free of
charge. | d. | give consumers freedom to make economic
choices. |
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9.
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In which way does a public
disclosure law help consumers?
a. | by forcing companies to pay taxes
based on the amount of goods and services they sell or buy | b. | by requiring companies to give consumers important
information about their products | c. | by requiring businesses to report business relationships that could constitute
a monopoly on the marketplace | d. | by allowing consumers to file grievances about products and businesses with
the government |
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10.
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Self-interest is the motivating
force driving the free market. Which of the following is the regulating force?
a. | incentive | c. | competition | b. | group interest | d. | the invisible hand |
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11.
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China, like many other nations,
is undergoing a period of transition in which many of its state firms are being privatized. Which of
the following statements BEST describes the change in China’s mixed economy
system?
a. | The free enterprise system is
placing limits on property taxes and enforcing trade tariffs. | b. | The private sector economy is being managed by
state-appointed trustees. | c. | The economy is moving away from a market-based system toward a centrally
planned system. | d. | The economy is moving away from central planning toward a market-based
system. |
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12.
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Which of the following
statements is true, as market economies have evolved since Adam Smith’s
time?
a. | Government intervention in the
economy has stayed relatively the same. | b. | Government intervention in the economy is based on job
safety. | c. | Government intervention in the economy has
decreased. | d. | Government intervention in the economy has become
greater. |
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13.
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Ben’s family purchased a
dishwasher so that the family members could save time for more productive activities. What kind of
production factor is this?
a. | physical
capital | c. | efficiency
capital | b. | labor capital | d. | human capital |
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14.
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What is the difference between
a scarcity and a shortage?
a. | A scarcity occurs when supplies of
goods and services are suddenly attainable, and a shortage occurs when producers will not or cannot
offer goods or services at the current prices. | b. | A scarcity occurs when producers will not or cannot offer
goods or services at the current prices, and a shortage occurs when there are limited quantities to
meet unlimited wants. | c. | Scarcity is the effort that people devote to a task that meets unlimited
wants, and a shortage occurs when supplies of goods or services run
low. | d. | A scarcity occurs when there are limited quantities to meet unlimited wants,
and a shortage occurs when a good or service is
unavailable. |
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15.
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In a free market economy, the
factor market involves which type of exchange?
a. | Firms loan money to households to
purchase capital. | b. | Households purchase factors of production from
firms. | c. | Firms purchase factors of production from
households. | d. | The goods and services that households produce are purchased by
firms. |
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16.
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A legislative committee is
weighing the pros and cons of a clean-air program. If it spends $1 million on the program, the air
will be cleaner by 20 percent. If it spends $2 million, the air will be cleaner by 30 percent. If it
spends $3 million, the air will be cleaner by 35 percent. After comparing opportunity costs and
benefits at the margin, the committee agrees to fund the program with $2 million. Why did it not
choose to appropriate $3 million?
a. | It was too much to spend without a
guarantee. | b. | At $3 million, the air is not improved as much as the committee would
like. | c. | The air is improved by the same amount whether $2 million or $3 million is
spent. | d. | At $3 million, the costs are no longer worth the
benefits. |
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17.
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Which one of the following
relies on habit, custom, or ritual to decide what to produce, how to produce it, and to whom to
distribute it?
a. | a market
economy | c. | a traditional
economy | b. | a mixed economy | d. | a centrally planned economy |
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18.
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Centrally planned economies can
work effectively toward explicitly stated goals, but which of the following is one disadvantage of
such a system?
a. | It gives too many rewards for
innovation. | b. | These economies never produce an increase in
output. | c. | Its performance almost always falls short of its
ideals. | d. | The workers control all the production
factors. |
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19.
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According to the “guns
and butter” example, if a country decides to spend more on military goods, which of the
following will happen?
a. | The country will be forced to make
trade-offs in military purchasing. | b. | The country will have less money to devote to consumer
goods. | c. | The country will have an equal amount of money to devote to consumer
goods. | d. | The country will have more resources to devote to consumer
goods. |
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20.
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Which of the following is a
good indicator of economic stability?
a. | general foreign
trade | c. | foreign
policy | b. | job-related safety | d. | general price levels |
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Matching
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Identifying Key
Terms
Match each
term with the correct statement below. a. | free enterprise | f. | socialism | b. | continuum | g. | transition | c. | incentive | h. | traditional economy | d. | safety net | i. | authoritarian | e. | collective | j. | standard of living |
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21.
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an expectation that encourages
people to behave in a certain way
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22.
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a period of change in an
economy
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23.
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an economic system that relies
on habit, custom, or ritual to decide questions of consumption and production of goods and
services
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24.
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requiring strict obedience to
someone such as a dictator
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25.
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a philosophy based on the
belief that democratic means should be used to distribute wealth evenly throughout a
society
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26.
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an economic system that
permits the conduct of business with minimal government intervention
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27.
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a range with no clear
divisions
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28.
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government programs that
protect people experiencing unfavorable economic conditions
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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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29.
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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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30.
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laws and standards on topics
of public interest
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31.
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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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32.
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government aid to the
poor
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33.
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a period of macroeconomic
expansion followed by a period of contraction
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34.
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an income level below that
which is needed to support families or households
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35.
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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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36.
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a situation in which goods are
not fairly distributed
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Identifying Key
Terms
Match each
term with the correct statement below. a. | factors of production | g. | growth | b. | production possibilities frontier | h. | opportunity cost | c. | production possibilities graph | i. | underutilization | d. | trade-offs | j. | efficiency | e. | shortage | k. | services | f. | scarcity |
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37.
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the line that shows different
production possibilities for an economy
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38.
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greatest output of goods and
services through the best use of resources
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39.
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the most attractive
alternative that is given up when an economic decision is reached
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40.
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representation of the possible
ways an economy could use resources
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41.
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all the possible alternatives
that are rejected when a choice is made
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42.
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land, labor, and
capital
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43.
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temporary lack of one or more
goods
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44.
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the basic economic condition
of all goods and services
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Identifying Key
Terms
Match each
term with the correct statement below. a. | standard of living | f. | communism | b. | privatize | g. | laissez faire | c. | economic system | h. | collective | d. | self-interest | i. | product market | e. | safety net | j. | factor payments |
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45.
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the doctrine that government
generally should not intervene in the marketplace
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46.
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the income people receive for
supplying such things as land, labor, or capital
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47.
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to sell a state-run firm to
individuals
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48.
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a large Soviet farm leased
from the state to groups of peasant farmers
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49.
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one’s own personal
gain
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50.
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the method used by society to
produce and distribute goods and services
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51.
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level of economic
prosperity
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52.
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a situation in which
households purchase the goods and services that firms produce
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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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53.
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the part of the economy that
involves the transactions of individuals and businesses
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54.
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an income level below that
which is needed to support families or households
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55.
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the study of the behavior and
decision making of entire economies
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56.
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goods and services provided by
the government for free or at greatly reduced prices
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57.
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the total value of all final
goods and services produced in a particular economy
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58.
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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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59.
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requirements for companies to
provide full information about their products
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60.
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the concerns of the people as
a whole
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Identifying Key
Terms
Match each
term with the correct statement below. a. | efficiency | g. | shortage | b. | goods | h. | opportunity
cost | c. | trade-off | i. | underutilization | d. | production possibilities graph | j. | labor | e. | scarcity | k. | factors of production | f. | services |
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61.
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paid effort that people devote
to a task
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62.
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representation of alternative
ways to use an economy’s resources
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63.
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use of fewer resources than
the economy is capable of using
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64.
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actions or activities that one
person performs for another
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65.
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use of resources in a way that
maximizes output of goods and services
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66.
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limited quantities of
resources to meet unlimited needs or desires
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67.
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physical objects that can be
exchanged
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68.
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most desirable alternative
given up when people choose one course of action over another
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