Matching
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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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1.
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level of
economic prosperity
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2.
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the income
people receive for supplying such things as land, labor, or capital
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3.
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a situation
in which households purchase the goods and services that firms produce
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4.
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ones
own personal gain
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5.
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the doctrine
that government generally should not intervene in the marketplace
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6.
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to sell a
state-run firm to individuals
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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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7.
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physical
objects that can be exchanged
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8.
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use of fewer
resources than the economy is capable of using
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9.
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actions or
activities that one person performs for another
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10.
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paid effort
that people devote to a task
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11.
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limited
quantities of resources to meet unlimited needs or desires
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a. | opportunity
cost | d. | scarce
goods | b. | scarcity | e. | utility maximization | c. | free
goods | | | | |
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12.
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That
condition in which there is not enough of a good for everyone to have all that is wanted for a price
of $0 is ______.
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13.
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What
one must give up to get that which one wants is _____.
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14.
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This
is what economists call it when a person compares two or more alternatives and chooses that
alternative with the lowest opportunity cost. Getting the most usefulness from a scarce
resource.
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15.
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As in economics class are ____.
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16.
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Tumbleweeds in the field in West Texas are
________.
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Short Answer
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17.
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According to
Figure 2.1, what does the lower line of monetary flow, marked 2, show?
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Interpreting a Circular Flow Diagram
Circular Flow
Diagram of a Market Economy | |
Figure
2.1
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18.
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What does
the upper half of Figure 2.1, marked 1, represent?
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Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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19.
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If
the Department of Defense hires only volunteers, the armed forces will be staffed predominantly by
people who a. | are
incompetent. | d. | have no better
opportunities available. | b. | want to serve more than they want to make
money. | e. | care principally
about money. | c. | are patriotic. | | | | |
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20.
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The purpose
of a production possibilities graph is to a. | make it possible to increase an economys
output. | b. | keep an economy from having nonproductive
workers. | c. | show alternative ways to use an economys
resources. | d. | enable a country to mobilize to win a war. | | |
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21.
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Wealthy people are more likely than poor people to use airplanes rather than busses
for interurban travel because a. | they can better afford to use a higher-cost mode of
transportation. | c. | they are more
likely to ignore the relative costs of busses and airplanes. | b. | traveling by
airplane usually costs them less than traveling by bus. | d. | their demand for transportation is more
elastic. | | | | |
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22.
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What is the
opportunity cost of a decision? a. | the series of alternative decisions that could have been
made | b. | the most desirable
alternative given up for the decision | c. | the best possible way the question could have been
decided | d. | the different ways that a different person might have made the
decision | | |
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23.
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What is the
product market? a. | the market in which
firms purchase the factors of production from households | b. | the market in which
income is received for supplying land, labor, or capital | c. | the market in which
households purchase the goods and services that firms produce | d. | the market in which
payments are received for selling products to consumers | | |
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24.
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Imagine you decide to purchase a soccer ball for $35.00. Which of the following is an
opportunity cost of your decision? a. | the time spent making the purchase and the tax paid on the
ball | c. | something else
you wanted that could have been bought for $35.00 | b. | $35.00 in
cash | d. | the time spent
deciding to spend your money on a soccer ball | | | | |
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25.
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Blaming the scarcity of Corvettes in the student parking lot on their price is like
blaming the heat outside on the thermometer. This is true because
____________. a. | Its silly
to think that high prices discourage consumption. | c. | Corvettes are naturally scarce | b. | Prices reflect
scarcity rather than cause it. | d. | GM doesnt
make enough Corvettes or thermometers. | | | | |
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26.
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What
is the opportunity cost of buying one Big Mac? a. | four french fries | c. | two french fries | b. | one french
fries | d. | three french
fries | | | | |
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27.
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What
is the fundamental error in the suggestion that prices be based on costs rather than on supply and
demand? a. | Supply and
demand determine costs. | d. | This would be
less efficient than basing prices on supply and demand. | b. | People cannot be
compelled to base prices on costs. | e. | Costs, unlike supply and demand, are based on subjective
factors. | c. | People should be free to set whatever prices they
prefer. | | | | |
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28.
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A
countrys production possibilities increase because the available workers become more skilled at
using a computer. This is an example of growth caused by a. | global
resources | c. | production
opportunity | b. | technology | d. | physical capital | | | | |
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29.
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Karen
loves butter and thinks that margarine tastes like soap. Jay cant tell the
difference. The opportunity cost of buying margarine is higher for
____________. a. | Karen | c. | Jay, unless he
pays more for butter | b. | Neither. Theyll both pay the same
price. | d. | Jay | | | | |
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30.
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What is the
struggle among various producers for the consumers business called? a. | incentive | c. | socialism | b. | self-regulation | d. | competition | | | | |
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31.
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The
opportunity cost of attending college might best be described as _____________. a. | the minimum wage
rate | c. | the
highest-valued alternative use of a students time | b. | the
lowest-valued alternative use of a students time | d. | the value that the student attaches to not
working | | | | |
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32.
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Which of the
following was a free market philosopher? a. | Vladimir Lenin | c. | Friedrich Engles | b. | Karl
Marx | d. | Adam
Smith | | | | |
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33.
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Which of the
following is NOT a key economic question? a. | How should it be ensured that goods and services are paid
for? | b. | What goods and services
should be produced? | c. | Who consumes these goods and services? | d. | How should these goods
and services be produced? | | |
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34.
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The
cost to a cab driver of taking the day off increases when a. | there are lots
of other cabs out on the streets. | d. | the weather is so pleasant everyone prefers to
walk. | b. | more cabs enter the business. | e. | the price of gasoline rises. | c. | it
rains. | | | | |
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35.
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An efficient
economy is one that a. | has very few people who do not work for a
living. | b. | uses its resources to make the most goods and
services. | c. | makes the best use of all its goods and
services. | d. | makes the least costly use of its resources. | | |
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36.
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In what kind
of an economy does the government make all the decisions? a. | centrally
planned | c. | socialist | b. | free enterprise | d. | laissez faire | | | | |
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37.
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Which of the
following is characteristic of a traditional economy? a. | They have a high
standard of living. | b. | Children tend to have the same jobs as their parents
did. | c. | Communities tend to be
fast-growing. | d. | They are usually based on light industrial
production. | | |
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38.
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Why
is the graph of a production possibilities frontier a curved line? a. | Utopia is better
at butter than guns | c. | Opportunity
costs are constant. | b. | Utopia is better at guns than
butter. | d. | Opportunity
costs vary. | | | | |
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39.
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Why does
even a free market economy need some government intervention? a. | so that the government
has some control over factor resources | b. | to provide for things that the marketplace does not
address | c. | to ensure that the government has the freedom to tax as
necessary | d. | to make sure that the government can fulfill its needs for military
personnel | | |
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40.
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Why
do multinational corporations typically pay vastly different wage rates for the same work in
different countries? a. | Supply and demand determine wage rates in some countries but
not in others. | c. | Unions exist in
some countries but not in others. | b. | The cost of living is much lower in some countries than in
others. | d. | Prospective
employees have much better alternative opportunities in some countries than in
others. | | | | |
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41.
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The law of
increasing costs means that when an economy increases the production of one item a. | the production costs
will increase also. | b. | the opportunity cost goes up. | c. | the actual cost of
making the item goes down. | d. | the actual cost goes up but the opportunity cost goes
down. | | |
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42.
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What is a
factory building an example of? a. | human capital | c. | an economic trade-off | b. | physical
capital | d. | technology | | | | |
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43.
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The
opportunity-cost theory suggests that the cost to an airline of letting its employees fly at no
charge a. | is
zero. | c. | is greater
around the Christmas holidays. | b. | depends upon the alternatives available to the
employees. | d. | will depend upon
the value employees place upon travel. | | | | |
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44.
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What is an
important advantage of a free market? a. | It protects the less fortunate. | b. | It does not change
unless the government directs it. | c. | It offers a wide variety of goods and
services. | d. | It is easy to regulate. | | |
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45.
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Soybeans and field corn can be grown in the same field. If the price which
farmers get for field corn goes up, then one would expect there to be ________ soybeans
grown.
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46.
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The
resources used to make all goods and services are the a. | production
possibilities. | c. | production
trade-offs. | b. | factors of production. | d. | opportunity costs. | | | | |
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47.
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Any
resources that are made by humans and used to create other goods and services are
called a. | production. | c. | services. | b. | capital. | d. | labor. | | | | |
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48.
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At
which point on the frontier is the production of extra guns
cheapest?
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