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Suppose Congress passed a bill funding research into alternative sources of energy. What best describes this government action?

promoting innovation and invention to help maintain technological advantage

Which of the following is an explanation of what Adam Smith called the "invisible hand" of the marketplace?

Self-interest, competition, and incentives promote smoothly running markets.

A government hiring freeze would directly impact what aspect of the circular flow model of a mixed economy?

factor market

What is a disadvantage of central planning?

lack of economic efficiency

The profit motive drives business owners to

make sure their firm is operating at its highest level of efficiency.

A basketball coach is performing a cost/benefit analysis in order to determine if more

hours of practice would help the team score more points. The coach’s action is an

example of

marginal thinking

Point b on the graph above represents

an underutilization of resources.

If a student volunteers at a food pantry on Fridays after school, which of the following might be a negative externality?

The student's parents have to drive him or her to the food pantry.

What might be the economic benefit of the government providing a public good rather than the private sector?

greater efficiency in providing the good

An opportunity cost is

the best alternative that is given up when a decision is made.

An entrepreneur can BEST be characterized as someone who

takes risks in order to acquire profits.

The due process clauses of the Constitution

protect Americans' private property rights.

Which of the following courses of action makes the MOST sense in today’s world for

manual laborers who have been replaced by robots?

Seek training in the latest technology related to a type of work they enjoy

Which of the following is typical of a centrally planned economy?

government control

A sales clerk represents which factor of production?

Labor

A city has been struggling with slow economic growth and high unemployment. City leaders decide

to invest in new roads, improve public transportation, and offer incentives to businesses that open

in the area.

More businesses open and hire workers, increasing the production of goods and

services.

How do self-interest and competition affect free markets?

They work together to regulate supply, demand, and prices.

The phrase “guns or b*tter” expresses the idea that

government decisions involve trade-offs between military and domestic needs.

In a free market system, the concept of consumer sovereignty means that

consumers have the power to decide through their actions what goods and services get

produced.

In 1991, for a short time, Iraq invaded Kuwait and seized its oil fields. During that time,

what impact, if any, did the invasion have on Iraq’s production possibilities frontier?

The production possibilities frontier shifted to the right.

A country has limited resources and must decide whether to use its resources to produce more

healthcare services, military equipment, or consumer goods. Once it chooses what to produce, it

must also decide which production methods to use and who will receive the goods and services.

What to produce, how to produce, and for whom to produce

Which of the following describes the benefits of specialization in a free market?

Specialization leads to efficient use of capital, land, and labor.

Which of the following best describes a mixed economy?

An economy that combines elements of both capitalism and government control

What does a Production Possibilities Frontier (PPF) show?

The maximum combinations of two goods an economy can produce using its resources

efficiently

Why are entrepreneurs important to the economy?

They promote economic growth.

Why is there scarcity even in an affluent country like the United States?

Resources are limited but wants are unlimited.

Which of the following is a key characteristic of a free market economy?

Prices are largely determined by supply and demand.

Government involvement in a modern economy is generally defended because

governments are more able than firms to meet some needs and wants of society.

An economy that maximizes its scarce resources and can deliver the right goods in the right

quantity to the right people at the right price has achieved which economic goal?

efficiency

Which of the following is a benefit that a business is likely to attain from purchasing new

equipment?

Increased productivity

Which basic economic goal is most easily achieved in a traditional economy?

equity

Market failure occurs whenever

free markets fail to distribute resources efficiently.

How is gross domestic product used to monitor the business cycle?

GDP indicates whether the nation's economy is expanding or contracting.

Which of the following is a characteristic of a centrally planned economy?

The government makes major decisions about what to produce and how resources are

used.

Sarah has $20 and can either spend it on a movie with her friends or buy a new video game. She chooses to buy the video game.

The movie with her friends

How does innovation promote economic growth?

by introducing new goods and services that create new markets

Which of the following represents a difference between socialism and communism?

Socialism may allow some free market practices; communism does not.

Which of the following BEST illustrates the involvement of the U.S. government in the marketplace today?

The government requires manufacturers to issue warnings that come with new microwave ovens.

Because of scarcity, every decision involves a

trade-off.

What are the three basic economic questions all societies must answer?

What goods and services should be produced, how should they be produced, and who will consume them?

What are economists referring to when they say “choosing is refusing”?

Opportunity cost

Key advantages of free market economic systems include

economic efficiency, economic freedom, economic growth, and variety of goods.

Which situation best demonstrates how competition in the free enterprise system can benefit consumers?

Several companies compete by improving quality and lowering prices to attract

customers.

How were the Soviet Union and communist China similar?

Both suffered from severe economic problems as a result of central planning.

The distribution of income received in the form of rent, wages, or interest is the main factor that determines

who consumes goods and services.

If the economy were in the contracting phase of the business cycle, how might that affect your ability to find work?

It might be more difficult to find work because businesses would be less likely to hire new employees.

Which is an example of why the U.S. government makes transfer payments?

to support retired people

What is critical in determining whether something is produced as a public good?

whether the benefits to society are greater than the total cost

What is the main economic benefit of public disclosure laws?

They ensure that consumers can make informed buying decisions.

How do patents act as an incentive to technological innovation?

by protecting a patent holder's right to profit from his or her creativity

Why would a federal government decision to increase spending be a matter of macroeconomic policy?

Macroeconomics concerns the overall performance of the economy.

Which of these is an example of restrictions that government places on the use of business property?

zoning laws

If Capeland switches from producing 0 watermelons to producing 18 million tons of watermelons, what does it give up?

6 million pairs of shoes

What are the three factors of production?

Land, labor, capital

What distinguishes an authoritarian government from a democratic one?

It requires strict obedience from its citizens.

A country has two main products: hats and grapes. The country decides to start making

more and more hats and fewer and fewer grapes. Why does the opportunity cost of

making hats increase as more and more hats are produced?

The best resources for producing grapes are least suited to making hats.

A skilled carpenter hammering a nail falls under what factor of production?

Labor

Which of the following explains why a city fireworks display on the Fourth of July is provided as a

public good?

Nonpayers cannot be prevented from seeing the fireworks.

Private property ownership and some government regulation of the economy are basic characteristics of which economic system?

mixed economy