ECO 202: Chapter 1 Quiz

Which of the following statements most likely ties within the realm of microeconomics?

a) Unemployment rises during a recession and falls during an expansion.

b) An increase in government spending will increase the aggregate demands for goods and services in the economy.

c) A rapid acceleration of the supply of money may create inflation.

d) An increase in labor costs will increase the additional cost of producing another bus.

d) An increase in labor costs will increase the additional cost of producing another bus.

The basic difference between macroeconomics and microeconomics is that:

a) microeconomics looks at the forest (aggregate markets) while macroeconomics looks at the trees (individual markets).

b) macroeconomics is concerned with groups of individuals while microeconomics is concerned with single countries.

c) microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets).

d) macroeconomics is concerned with generalization while microeconomics is concerned with specialization.

c) microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets).

Which of the following best characterizes the circular flow of income?

a) Businesses buy resources from the government, and households buy goods and services from businesses.

b) Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses.

c) The government purchases resources from businesses and households and then sells goods and services to businesses and households.

d) Households buy factors of production from businesses, and businesses buy goods and services from households.

b) Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses.

In which of the following countries will the national government have the greatest influence with respect to the nation’s economy?

a) China

b) Cuba

c) Canada

d) Chile

b) Cuba

In a command economy, the BLANK either makes most economic decisions itself or at least strongly influences how the decisions are made.

a) government

b) market

c) firm

d) business sector

a) government

Which of the following is generally accepted as a valid criticism of the pridction of useful goods and services?

a) government involvement

b) the black market

c) environmental pollution

d) economic freedom

c) environmental pollution

The circular flow diagram of economic activity is a model of the:

a) flow of goods, services, and payments between households and firms.

b) influence of government on business behavior.

c) role of unions and government in the economy.

d) interaction among taxes, prices, and profits.

a) flow of goods, services, and payments between households and firms.

Because of their relatively small national economies, which of the following is most likely considered to be the most important factor for Belgium, Korea, and Canada to take full advantage of specialization?

a) division of labour

b) international trade

c) economies of scale m

d) command economy

b) international trade

In a BLANK, most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers.

a) market-oriented economy

b) macroeconomy

c) microeconomy

d) command economy

a) market-oriented economy

Economic models like the BLANK are not physical models, but instead are diagrams or graphs or even mathematical equations that represent economic patterns or theories.

a) financial capital market

b) circular flow diagram

c) financial investment market

d) specialization model

b) circular flow diagram

In a market-oriented economy, the amount of a good that is produced is primarily decided by the interaction of:

a) all consumers.

b) buyers and sellers.

c) producers and input suppliers.

d) producers and government planning committees.

b) buyers and sellers.

Regardless of whether you are looking through microeconomics microscope of macroeconomics telescope, the fundamental subject material of the interconnected BLANK doesn’t change.

a) market

b) economy

c) production

d) firm

b) economy

Specialization:

a) leads to greater self-sufficiency.

b) can lead to an increase in overall production.

c) allows workers to develop skills by working on a large number of tasks.

d) is always the result of an inefficient use of resources.

b) can lead to an increase in overall production.

In the first chapter of The Wealth of Nations, Smith introduces the idea of the BLANK, which means the way in which the work required to produce a good or service is divided into a number of tasks that are performed by different workers.

a) division of labor

b) interconnected economy

c) task economy

d) modern economy

a) division of labor

Choose ALL the correct answers to this question:

In the circular flow diagram model:

a) households receive income from businesses in exchange for providing inputs and use that income to buy goods and services from businesses.

b) businesses receive revenues from households in exchange for providing goods and services and use those revenues to buy inputs from households.

c) households receive revenue for selling goods and services to businesses, and use that revenue to buy inputs from businesses.

d) businesses receive payments from households for the exchange in inputs to production and households receive payments from businesses in exchange for goods and services.

a) households receive income from businesses in exchange for providing inputs and use that income to buy goods and services from businesses.

b) businesses receive revenues from households in exchange for providing goods and services and use those revenues to buy inputs from households.

In the BLANK, households work and receive payment from firms.

a) financial investment market

b) financial capital market

c) labor market

d) savings market

c) labor market

BLANK - a term referring to the fact that for many goods, as the level of production increases, the average cost of producing each individual unit declines.

a) Skill

b) Specialization

c) Economies of Scale

d) Division of Labor

c) Economies of Scale