Econ Exam 1 MMHS

What term describes physical objects such as a wok or chop sticks?

Goods

What term describes the effort that a person devotes to a task, for which the person is paid?

Labor

What is the difference between a shortage and scarcity?

Shortages can be temporary or long-term; scarcity always exists

What term implies that there are limited quantities of resources to meet unlimited wants?

Scarcity

What is an example of using physical capital to save time and money?

Building extra space in a factory to simplify production

What term describes a person who opens a Phở ca dao restaurant and employs others?

Entrepreneur

What are the three factors of production?

Land, labor, capital

To what part of an industry does a worker's education contribute?

Human capital

What term describes the study of how people make decisions to satisfy their needs and wants?

Economics

What term describes a situation that occurs when a producer cannot offer a particular good or service at the current price?

Shortage

If a restaurant owner decides to serve only phở in his restaurant, what economic term describes the absence of hamburgers, French fries, and shakes?

Trade-off

What term describes a phrase that refers to the trade-offs that nations face when choosing whether to produce more or less military or consumer goods?

Guns and butter

When should one decide not to do or use one additional unit of some resource?

When a decision-making grid deems it necessary

Why does every decision involve trade-offs?

Everyone's resources are limited

A decision-making grid is a visual way of doing what?

Examining trade offs and opportunity costs

What term describes a person who makes a decision to use one more or one less unit of something, such as time or workers?

Thinking on the margin

What term describes the most attractive alternative that is given up when a decision is made?

Opportunity cost

If a person has just enough money to buy one DVD and chooses DVD #1 instead of DVD #2, what economic term describes DVD #2?

Opportunity cost

In what situation would making a decision at the margin be possible?

All answers are correct

What term describes any alternative that is given up when a decision is made?

Trade-off

What term describes an economy that is using all its resources to produce the maximum output of goods and services?

Efficiency

What term describes the line on a production possibilities graph that shows the maximum possible output?

Production possibilities frontier

What do economists create when they collect data on a country's technological level and the resources it has available?

Production possibilities curve

What term describes an economy that is producing the maximum amount of goods and services?

Efficient

What term describes that shifting the factors of production to produce a different item requires increasingly more resources to produce more of the new items?

Law of increasing costs

According to the law of increasing costs, what happens as production shifts from one item to another?

More and more resources are necessary to increase production of the second item

What term describes a graph that shows alternative ways to use an economy's resources?

Production possibilities curve

What term describes the alternative that is given up because of a decision?

Cost

What would increasing the number of laborers in an economy do?

Increase the production possibilities curve

What term describes an economy that is not using all its resources to gain the maximum possible production?

Under utilization

Which of the following is not one of the three key economic questions that are addressed to deal with limited economic resources?

All answers are correct

What type of economy makes economic decisions based on exchange or trade?

Market economy

Which type of economy is characterized by a government making the economic decisions alone?

Command economy or centrally planned economy

To improve its standard of living, a nation's economy must do what?

Grow through innovation

Most modern economies have what type of economy which is characterized by limited governmental involvement?

Mixed economy

Respectively, what term describes the income people receive for supplying factors of production and what term describes a system to protect people experiencing unfavorable economic conditions?

Factor payments, safety net

How does each society determine who will consume what is produced?

It is a result of varying factor payments

What term describes the method used by a society to produce and distribute goods and services?

Economic system

What type of economy relies on habit, custom, or ritual to answer the three economic questions?

Traditional economy

How are traditional economies characterized?

Small, close communities that avoid change and new technology

How will consumers react to the incentive of a higher price on a good or service?

The negative incentive will cause consumers to purchase less of the good or services if it is lower quality

In a free market economy, who owns the factors of production?

Private households and firms

What "invisible hand" regulates the free market economy?

Competition and self-interests

Respectively, what term describes an expectation that encourages people to behave in a certain way and what term describes the power of consumers to decide what gets produced?

Incentive, consumer sovereignty

Why do people need to buy and sell products or services?

No one is self-sufficient

In what type of economic system would individuals answer the three key economic questions of what to produce, how to produce it, and who consumes that which is produced?

Free market

Why are free market economies able to attain economic growth?

Competition encourages innovation, which causes growth

Which of the following is not an advantage of a free market economy?

Economic equity

Respectively, what term describes an arrangement that allows for exchange among buyers and sellers and what term is the concentration of the productive efforts of individuals and firms on a limited number of activities?

Market, specialization

Respectively, what household purchase the goods and services that firms produce and what firms purchase the factors of production from households?

Product Market, Factor Market

What term describes a large capital investment to produce items used in other industries?

Heavy industry

What term describes a large farm leased by the Soviet government to groups of peasant farmers?

Collective

What term describes a political system characterized by a centrally planned economy with all economic and political power resting in the hands of the central government?

Communism

What is a disadvantage of a centrally planned economy?

All answers are correct

Why might a socialist society have a less rigid command economy than a communist society?

In a socialist society, various political systems may be combined with public control of the economy

Which political system believes in violent revolution and requires strict obedience to an authority, such as a dictator?

Communism

How did collectives in the Soviet Union avoid the competition that drives a free market economy?

There were no incentives for competition because the government determined prices, wages, and products

What term describes a social philosophy based on the belief that democratic means should be used to evenly distribute wealth throughout a society?

Socialism

What type of economy operates in direct contrast to free market systems by opposing private property, free market pricing, competition and consumer choice?

Command or centrally planned economy

Why might Soviet economic planners have favored heavy industry over the makers of consumer goods?

The products of heavy industry provide material for many other industries

Since there are no current economic systems that rely exclusively on central planning or the individual initiative of the free market, how are most economies comprised?

Mixed economy

What term describes an economic system characterized by private or corporate ownership of capital goods?

Free enterprise

How is government intervention in a modern economy useful?

Governments are more able to meet some needs and wants and all members of society have an opportunity participate

What term describes a range with no clear divisions that has a pure centrally planned economy to the left and a pure free market economy to the right?

Continuum of mixed economies

In most mixed economics, the government does not?

Own all the property and confiscate all economic output

The United States government has a free enterprise economy, but it still intervenes in what instances?

Keep order and provide vital services, and promote the general welfare

What term describes a period of change in which an economy moves away from a centrally planned economy toward a market-based system?

Transition

What early free market term describes a doctrine that permits the conduct of business with minimal government intervention?

Laissez faire

What term describes selling state-run firms to individuals, which are then allowed to compete with one another in the marketplace?

Privatize

The United States’ mixed economy is based on what?

Based on the principles of the Free market, but allows some government intervention

The United States Constitution guarantees what important right that allows people to engage in business activities?

All answers are correct

The result of free enterprise's economic rights is extensive what which is the rivalry among sellers to attract customers while lowering costs?

Competition

The United States free enterprise economy includes what key economic rights?

All answers are correct

What term describes restrictive laws that require companies to provide full information about their products in order to protect the public's well-being?

Public disclosure laws

Why do Americans want the government to intervene in their free enterprise economy?

To protect the public interest

How does information provided by the government influence consumer decisions?

Consumers do not buy products revealed to be dangerous

What is considered a negative effect of government regulations?

All answers are correct

What is the purpose of free enterprise?

To give consumers freedom of choice

What term describes the role of consumers to persuade public officials to vote according to the beliefs of private organizations?

Interest group

Respectively, what term describes the concept that everyone can compete in the marketplace and what term describes the concept that people may decide what and when to buy and sell?

Open opportunity, voluntary exchange

How does the government encourage an increased level of productivity?

Hiring more workers to reduce unemployment

Why do business cycles occur in free enterprise systems?

Because economic decisions about factors such as prices, productions, and consumption are determined by the market

What allows the United States economy to operate more efficiently and productively, increasing GDP and giving U.S. businesses a competitive advantage in the world?

Technology

What term describes the study of an entire economy and examines the major trends for the economy as a whole?

Macroeconomics

What term describes a period of macroeconomic expansion followed by a period of contraction that may last many years?

Business cycle

Americans have a high standard of living and have shifted the production possibilities frontier outward via a good work ethic and what which allows an economy to produce more output from the same quantity resources?

Technology

What term describes the total value of all final goods and services produced in a particular economy in a year?

Gross domestic product (GDP)

In order to promote economic strength, policymakers pursue what outcome to stabilize the economy?

All answer are correct

What term describes the study of the economic behavior and decision making of small units, such as individuals and businesses?

Microeconomics

How does improved technology help create a higher standard of living for future generations?

Providing additional goods and services

What term describes a situation in which the market does not distribute resources efficiently?

Market failure

If an investor decides to flip a foreclosed house, what would be a positive externality?

All answers are correct

What term describes someone who would not choose to pay for a certain good or service, but would reap the benefits of it anyway if it was provided as a public good?

Free rider

Respectively, what term describes the part of the economy that involves the transactions of the government and what term describes the part of the economy that involves the transactions of individuals and businesses?

Public sector, private sector

What term describes an economic side effect of a good or service that generates unintended benefits or costs to someone other than the person deciding how much to produce or consume?

Externality

What is the government's role in controlling externalities in the American economy?

Government tries to encourage positive externalties and limit externalities

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

Whether the benefits to society are greater than the total cost

How do public goods limit a free market economy?

They allow government, and not consumers, to make economic decisions

What term describes a shared good or service for which it would be impractical to make consumers pay individually and to exclude non-payers?

Public good

If Mr. Biggsteinbergskiopolos decides to have his students volunteer at a community nursing home after school, what would be a negative externality?

A student would have less time to complete any homework