Chapter 3 – Klein Economics Review

question

Mothers Against Drunk Driving (MADD) would be an example of a(n) ______ that tries to persuade government officials to vote for tougher penalties for driving while intoxicated.
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Interest Group
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It is in the ______ for the government to put expiration dates on perishable products.
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Public Interest
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A warning on a bottle of Benadryl that it may cause drowsiness would be an example of a(n)
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Public Disclosure Law
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Why has America been referred to as the land of opportunity?
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It provides anyone from any background the possibility of success through hard work.
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What basic principles are fundamental to American free enterprise?
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Open opportunity, private property rights, free contracts, voluntary exchange, profit motive, legal equality, and competition.
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In what two ways does the the Bill of Rights protect and guarantee individual’s freedom to engage in business activities?
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Recognize property rights and limits on taxation.
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Why do Americans want the government to intervene in their free enterprise economy?
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To protect the public interest.
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What is the purpose of free enterprise?
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To give consumers freedom of choice
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How does the information provided by the government influence consumer decisions?
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Consumers do not buy products revealed to be dangerous.
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What is considered a negative effect of government regulations?
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All of the answers (They stifle competition, they cut into company profits, they cause higher prices for consumers)
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The study of the economic behavior and decision making of small units such as individuals and businesses
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Microeconomics
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A period if macroeconomics expansion followed by a period of contraction
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Business Cycle
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The study of the behavior and decision making of entire economics
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Macroeconomics
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The process used to produce a good or service
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Technology
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The total value of all final goods and services produced in a particular economy in a year
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Gross Domestic Product (GDP)
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Business cycles occur in free enterprise systems because
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Economic decisions about factors such as prices, production, and consumption are determined by the market.
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Policymakers pursue all of the following goals to stabilize the economy EXCEPT
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Stable Productivity
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The federal government monitors and regulates Americans banks and other financial institutions
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To shield money from the damaging effects of economic downturns
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The government encourages an increased level of productivity by
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funding research and development projects at many levels
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Improved technology helps create a higher standard of living for future generations by
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providing additional goods and services
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The force that encourages people and organizations to improve their material well-being is called
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the profit motive
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The concept that everyone can compete in the marketplace is called
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open opportunity
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The concept of giving everyone the same legal rights is called
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legal equality
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The concept that people have the right and privilege to control their possessions as they wish is called
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private property rights
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The concept that people may decide what agreements they want to enter into is called
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free contract
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The concept that people may decide what and when they want to buy and sell is called
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voluntary exchange
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The rivalry among sellers to attract customers while lowering costs is called
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competition
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A private organization that tries to persuade public officials to act or vote according to group members’ interest is called
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an interest group
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Laws requiring companies to provide full information about their products are called
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public disclosure laws
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The concerns of the public as a whole are called
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public interest
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The study of the behavior and decision making or entire economics is called
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macroeconomics
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The study of the economic behavior and decision making of small units, such as individuals, families, and businesses is called
answer

microeconomics
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The total value of all final goods and services produced in a particular economy in a year is called
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Gross Domestic Product
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A period of macroeconomics expansion followed by a period of contraction is called
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the business cycle
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The work ethic is a commitment to the value of work and purposeful activity
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True
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Technology is the process used to produce a good or service
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True
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The part of the economy that involves the transactions of the government are called
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The public sector
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A shared good or service for which it would be impractical to make consumers pay individually and to exclude non payers is called
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A public good
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The part of the economy that involves the transactions of individuals and businesses is called
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the private sector
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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 is called
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a free rider
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A situation in which the market does not distribute resources efficiently is called
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a market failure
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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 is called
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an externality
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The poverty threshold is an income level above that which is needed to support families or households
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False
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Government aid to the poor are called
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welfare
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Direct payments of money to eligible poor people are called
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cash transfers
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Goods and services provided for free or at greatly reduced prices are called
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in-kind benefits
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A(n) ______ is a situation in which the market does not distribute resources efficiently
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market failure
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A(n) _____ is 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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externality
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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?
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Increasing the number of consumers would increase the cost to a private provider
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What part of the economy finances public goods?
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public sector
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If a teacher decides to have her students volunteer at a community nursing home after school, which of the following would be negative externality?
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A student would be unable to work at her part-time job on that afternoon
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Someone who would not choose to pay for a certain good or service, but who can still reap the benefits of it anyway if it is a public good is called
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a free rider
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The free-rider problem is that:
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People will not voluntarily pay for for something that they can obtain without paying
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Which of the following is an example of a public good?
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a fireworks display
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Negative externalities arise:
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when firms “use” resources without being compelled to pay for their full costs
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Goods and services provided for free or at greatly reduced prices
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In-kind benefits
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An income level below that which is needed to support a household
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Poverty Threshold
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Government aid to the poor
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Welfare
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Direct payments of money to eligible poor people
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Cash Transfers
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Level of economic well-being
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Standard of Living
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Various federal, state, and local government programs help to raise people’s standard of living because
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certain groups of people have fewer opportunities to be productive
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The most common in-kind benefits are
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food giveaways, food stamps, subsidized housing, and legal aid (on test)
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All of the following programs provide direct cash transfers EXCEPT
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Medicaid (on test)
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Health insurance for the elderly, the poor, and the disabled is provided by
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Medicare and medicaid under the Social Security Program
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Education programs make the economy more productive by
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adding to human capital and labor productivity

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