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The market mechanism
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uses prices as a means of communication between consumers and producers
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Economic growth is represented by
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An outward shift of the production possibilities curve.
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In economics, capital refers to:
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Goods that can be used to produce other goods.
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Because the economy is so complex, it is impossible to construct a theory about how it works
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True
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Economic growth always takes the form of
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An expansion of production possibilities.
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The essential signal of the market mechanism is: Income.
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Price
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Opportunity cost may be defined as the:
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The value of goods or services that are forgone in order to obtain something else.
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Scarcity means
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The desire for goods exceeds our capacity to produce them.
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The essential feature of the market mechanism is:
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Government taxation of profits.
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Which of the following is an example of labor as a factor of production?
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The skills and abilities of workers.
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Ceteris paribus which of the following is likely to cause an outward shift of the production possibilities curve?
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Investment in telecommunications networks.
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Which of the following is associated with microeconomics?
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An increase in sales for a chain of pet supply stores.
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The production possibilities curve shifts outward in response to:
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Improved technology or more resources or both.
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Entrepreneurship refers to:
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Ability to see market opportunities and the will to take risk.
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Which of the following is NOT a reason why the U.S. government intervenes in the economy?
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To make a profit for the government.
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Adam Smith was a proponent of the doctrine of laissez faire.
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True
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Sole proprietorships:
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Are owned by one individual.
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Per capita GDP measures the distribution of income within a country.
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False
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Over the last century in the United States there has been an increase in _______ as a percentage of total output.
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Services
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Ceteris paribus, economic growth involves an:
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Expansion of production possibilities.
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GDP can be found by:
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Adding the monetary value of all final goods and services produced during a given period of time.
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The dumping of chemicals into a lake, which contaminates the drinking water, is an example of:
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An externality.
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The United States has invested heavily in human capital by promoting education and skill training.
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True
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Currently, the U.S. economy is best described as:
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A service economy.
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The government has an impact on the HOW to produce question when it does all of the following EXCEPT:
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Follows a policy of laissez faire.
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Productivity measures:
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Output per worker.
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If the United States imports more than it exports, this implies that the country uses more goods and services than it produces.
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True
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The term externalities refers to:
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Some costs and benefits of a market activity borne by a third party.
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Factor mobility refers to:
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How easily factors of production can be reallocated.
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GDP is a measure of the market value of final goods and services produced within a nation's borders in a given period.
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True
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In the United States, net exports account for two-thirds of GDP.
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False
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Which of the following is included in investment, according to economists?
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Production of plant and machinery.
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To compare the standard of living of one country to another, economists use:
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Per capita GDP.
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Income transfers include all of the following EXCEPT:
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Wages.
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In periods of rising prices, real GDP will always rise more rapidly than nominal GDP.
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False
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The output of cell phones can be added to the output of refrigerators in order to compute GDP by:
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Multiplying the output of each by the corresponding prices and adding these dollar values.
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Producers:
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Purchase factors of production from the factor market.
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If demand is constant, a decrease in the supply of gasoline will cause the equilibrium price:
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To rise and quantity to fall.
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According to the law of demand, a change in _______ causes a movement along the demand curve.
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The price of the good
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An increase in the supply of frozen yogurt will take place when:
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The cost of producing frozen yogurt decreases.
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A market in which finished goods and services are exchanged is a:
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Product market.
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Ceteris paribus means:
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Holding everything else constant.
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A movement along the supply curve is the same as a:
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Change in the quantity supplied.
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Producers do not participate in the factor market.
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False
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Ceteris paribus, which of the following will cause the supply of paper to decrease?
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The price of lumber, an ingredient in paper production, increases.
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When a price ceiling is set for a market, the quantity demanded will be:
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Greater than the equilibrium quantity, and price will be less than the equilibrium price.
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According to the law of demand:
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Price and quantity demanded are inversely related.
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Economists make a distinction between changes in quantity demanded and changes in demand:
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To distinguish a movement along a demand curve from a shift of the demand curve.
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When a price floor is established above the equilibrium price, the market will adjust by way of:
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A greater quantity supplied
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Ceteris paribus, _______ can change without shifting the demand curve for jackets.
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The price of jackets
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If demand is constant, a leftward shift in the supply curve will result in:
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A decrease in equilibrium quantity and a higher equilibrium price.
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Ceteris paribus, which of the following will cause the demand for peanut butter to decrease?
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Many people learn that they are allergic to peanut butter.
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Economic interactions with others are necessary because:
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Resources are limited.
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Surpluses are the same thing as excess:
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Supply caused by price floors.
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The market demand curve is calculated by:
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Summing the quantities demanded from individual demand curves.
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Which of the following is relatively inelastic with respect to demand?
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A good with few substitutes.
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