Answers on Economics – Flashcard Flashcards

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An increase in the market demand for gasoline in the present, all else equal, could be caused by
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a rise in peoples' income.
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Which of these has the MOST effect on elasticity of supply?
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time to adjust
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What type of competition does this firm's promotion BEST reflect?
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non-price competition
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Which of these would MOST LIKELY cause an increase in the price of an item?
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an increase in the cost of raw materials for that item
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According to this graph, what would the approximate equilibrium price be for widgets?
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$1.75
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Of the terms listed below, which is the BEST synonym for the word "profit"?
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"earnings"
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All of these would cause a shift to the left of the demand curve EXCEPT for
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increased money supply.
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This illustrates that one function of money is to be a
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medium of exchange.
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To have demand, what must you have
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the desire and the ability to pay for the item.
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A local business woman noticed that after she had paid all the costs of conducting her business that year a substantial amount of money remained. What could she conclude?
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Her business had made a profit.
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In doing this, Leroy has become a(n)
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entrepreneur.
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In a free enterprise system, what drives individuals to risk their savings in a business venture?
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the potential for profit
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What is the name of the point at which supply and demand intersect?
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equilibrium
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How might a minimum wage law impact the supply and demand of workers?
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It might result in a surplus of supply.
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If the price for widgets was set at $4.25
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producers would discover that the price should be lowered.
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Assuming that the graph follows the normal laws of economics, the line represents
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supply.
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The new oven in Mr. Brown's bakery allows him to produce bread more efficiently and more cheaply. What is the MOST LIKELY effect?
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the price drops and the quantity demanded increases
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Which of these is MOST LIKELY a result of apartment rent controls?
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a shortage of apartments
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One difference between a manager and an entrepreneur is that an entrepreneur is willing to
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take a financial risk.
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Successful attempts to make the internal combustion engine more efficient in the 19th century resulted in an increase in the demand for
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petroleum.
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scarsity
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the condition that results from society not having enough resources to produce all the things people would like to have.
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economics
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the study of how people try to satisfy what appears to be seemingl unlimited and competing wants through the careful use of relatively scarce resources.
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need
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a basic requirement for survival
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want
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a way of expressing a need
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factors of production
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resources required to produce the things we would like to have
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land
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natural resources not created by humans
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capital
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tools, equipment, machinery, and factories used in the production of goods and services
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financial capital
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the money used to buy the tools and equipment used in production
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labor
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people with all efforts, abilities, and skills
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entrepreneur
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a risk taker in search of profits who does something new with existing resources
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production
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the process of creating goods and services
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Gross Domestic Product
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the dollar value of all final goods and services
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economic products
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goods and services that are useful, relatively scarce, and transferable to others
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good
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an item that is economically useful or satisfies an economic want
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consumer good
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intended for final use of individuals
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capital good
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manufactured goods used to produce other goods and services
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service
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work that is performed for someone
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value
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refers to a worth that can be expressed in dollars and cents
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paradox of value
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situation were some necessities have little monetary value
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utility
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the capacity to be useful and provide satisfaction
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market
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location that allows buyers and sellers to exchange goods
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factor market
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the markets were productive resources are bought and sold
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product market
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the market where productive resources are bought and sold
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economic growth
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when a nations total output of goods and services increase over a period of time
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productivity
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the measure of the amount of output produced by a given amount of inputs in a specific period of time
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division of labor
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when work is arranged so individual workers do fewer tasks then before
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specialization
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when factors of production perform tasks that they can do relatively more efficient than others
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human capital
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the sum of the skills, abilities, health, and motivation of people
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economic interdependence
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rely on others
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trade-offs
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alternative choices when they make an economic decision
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opportunity cost
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the cost of the next best alternative use of money, time or resources when one choice is made rather than another
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production possibilities frontier
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a diagram representing various combinations of goods and services an economy can produce when all productive resources are fully employed
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cost-benefit analysis
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a way of thinking about a problem that compares a cost of an action to the benefits being recieved
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free economy enterprise
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when consumers and privetly owned businesses make the majority of the what, who for whom, and for whom decisions
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standard of living
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the equality of life based on the possession of the necessities and luxuries that make life easier
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economic system
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organized way of providing for the wants and needs of their people
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traditional economy
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the allocation of scarce resources , and nearly all other economic activity, stems from ritual, habit, or custom
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command economy
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when the central authority makes most of the what, how, and for whom decisions
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market economy
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people and firms act in their own best intrests to answer the what how and for whom
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security
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a federal program of disability and retirement benefits that coverts most working people
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inflation
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a rise in the general level of prices
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fixed income
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an income that does not increase even though prices go up
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capitolism
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where private citizens, many of whom are entrepreneurs, own the factors of production
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free interprise
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another term used to describe the American economy
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voluntary exchange
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the act of buyers and sellers freely and willingly engaging in market transactions
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private property rights
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the privilege that entitles people to won and control their possessions as they wish
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profit
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the extent to which persons or organizations are better off at the end of a period than they were at the beginning
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profit motive
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the driving force that encourages people and organizations to improve their material well-being
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competitions
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the struggle among sellers to attract consumers while lowering costs
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consumer sovereignty
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describes the role of the consumer as sovereign, or ruler, over the market
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mixed economy
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modified private enterprise economy
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unlimited liability
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when the owner is personally and and fully reponsible for all losses and debts of the buisiness
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inventory
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a stock of finished goods and parts in reserve
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limited life
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when the firm legally ceases to exis when the owner dies, quits , or sells the buisiness
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partnership
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ta business jointly owned by who or more persons
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limited partnership
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the limited partners have limited liaility
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bankruptcy
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a court-granted permission to an individual or business to cease or delay debt payments
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corporation
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a form of business organization recognized by law as a separate legal entity having all the rights of an individual
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charter
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a government document that gives permission to create a corporation
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stock
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ownership certificates in the firm
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stockholders
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share holders
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dividend
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a check representing a portion of the corporate earnings
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bond
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a written promise to repay theamound borrowed at a later date
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principal
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the amount borrowed
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interest
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the price paid for the use of another's money
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double taxation
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when stockholders are taxed once as corporate profit and again as personal income
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merger
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a combination of two or more businesses to form a single firm
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income statement
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a report showing a business's sale, expenses, and profits for a certain peiod
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net income
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the cost of any goods such as invention wages and salaries, interest payments and depreciation
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depreciation
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a non-cash charge the firm takes for the general wear and tear on its capital goods
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cash flow
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the sum of net income and non-cash charges such as depriciation or real measure of profits for the business
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horizontal merger
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when two or more firms that produce the same kind of product join forces
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verticle merger
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when firms involved in differnt steps of manufacturing or marketing join together
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conglomerate
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a firm that has at least four businesses
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multinational
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a corporation that has manufacturing or service operations in a number of different countries
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nonprofit organiztion
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a buisinesslike way to promote the collective interests of its members rather than to seek financial gain for its owners
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cooperative [co op]
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a nonprofit organization
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credit union
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a financial organization that accepts deposits from and makes to loans to employees of a particular company or government agency
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labor union
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a organization of workers formed to represent its members' interests in various employment matters
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collective bargaining
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when union participates ngotiate with management over issues such as pay, working hours, health car coverage, life insurance, vacations, and other job related matters
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professional association
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a group of people in a specialized occupation that works to improve the working conditions , skill levels, and public perceptions of the profession
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chamber of commerce
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promotes the welfare of its members and of the community
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Better Business Bureau
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a nonprofit organization sponsored by local businesses to provide general information on companies
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public utilities
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investor or municipal owned companies that offer important products to the public
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Which statement describes an opportunity cost that could result from the government regulating businesses?
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Government regulations can lead to an increase in production costs.
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What type of resource does the data in the chart represent?
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human
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Mr. Green is opening a new bakery. He has purchased an industrial oven which can accommodate twenty loaves of bread at a time. This oven represents which factor of production?
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capital
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How might the purchase decisions of consumers impact a market economy?
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By buying some products, but not others, consumers might determine what is produced.
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If a marginal analysis concludes that the productivity of a firm is at its optimal output, what would the firm have to do to increase revenue?
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increase the price of the product
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Which of these terms is the BEST synonym for the word "entrepreneur"?
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"business owner"
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The United States government is LEAST LIKELY involved in the nation's economy as a
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planner deciding what to produce.
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Which of these BEST represents capital investment for a company?
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buying new equipment
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How does the activity in this image represent specialization?
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This worker is completing one of many parts of a final product.
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In a mixed market economy, what MIGHT be considered a basic function of government?
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to correct market failures and redistribute income
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Before the opening of his sporting goods store, Mr. Stevens researches the types of sports equipment most likely to sell in his area. The knowledge gained in this research is an example of
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human capital.
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The process by which the Federal Reserve controls the supply, availability, and cost of money in order to keep the economy stable is
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monetary policy.
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Someone who creates a system to offer a product or service in order to obtain a profit is called
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an entrepreneur.
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How do private property rights encourage individuals to work, save, and invest?
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Individuals can keep the gains they earn.
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An essential part of a market economy is the expectation, in both producers and consumers, that they will be able to keep and use products freely. This is governed by an area of legislation known as
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property rights.
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Workers on an assembly line are an example of
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specialization.
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Increased education and training within a nation will most likely result in
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an increase in Gross Domestic Product (GDP).
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An opportunity cost is
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the next-best alternative you give up in order to do something else.
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In a market economy, prices are established by
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consumers and labor unions.
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When a producer calculates profitability (revenue minus costs), all of these will contribute to higher profitability EXCEPT
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minimizing units sold.
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These facts show that Brazil has a
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mixed economy.
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Countries with a low standard of living, little industrial output, and a low Gross Domestic Product are referred to as
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developing countries.
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For a market economy to function well, it is MOST important that laws be passed to protect the right to
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property.
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Which point on the production possibilities curve could represent a situation in which there was a scarcity of materials needed to make products X and Y?
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C
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A measure of the amount of output produced by a given amount of inputs in a specific period of time is the definition of
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productivity.
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Under which economic system would factors of production MOST LIKELY be owned by the government?
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command economy
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What is the opportunity cost of saving money to purchase a car?
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the interest paid if you borrowed the money
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Which economic concept would MOST likely account for a move on the curve from point "A" to point "B"?
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Choice
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As one of the factors of production, capital can be defined as
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the equipment and factories needed to produce goods.
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What MIGHT be the purpose of government regulation of natural monopolies, or economies of scale?
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Government regulation might be used to facilitate competition.
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New e-commerce businesses, including companies like eBay, focus on voluntary exchange. Which generalization BEST describes this type of commerce?
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Decentralized decision-making results in buyers and sellers freely engaging in commerce.
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Bart has decided to buy some water balloons rather than get an extra milk at lunch. Choosing among economic alternatives is referred to as
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a trade-off.
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Which choice BEST expresses why widespread pirating of goods would be damaging to a market economy?
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Producers would be unwilling to produce new goods.
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In a command economy, how are the prices of goods and services determined?
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the central government
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Which scenario is the BEST example of how the government would act in a market economy?
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The government stops a factory from producing imitations of an expensive type of purse.
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In order to decrease fuel consumption in the US, the EPA (Environmental Protection Agency) has raised standards for fuel efficiency on cars sold here. One economic assumption made by the EPA is that, since our economic system is mostly market based,
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consumers will shop for more fuel-efficient cars.
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The study of how individuals, institutions, and society make optimal choices under the conditions of scarcity is
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economics.
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Which of these is an example of how the U.S. Constitution protects the free enterprise system?
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Congress is given the authority to grant patents and copyrights.
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When the amount of output produced by a given amount of inputs increases, the MOST LIKELY result is
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overall productivity rises.
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Communism and socialism are usually found in what type of economic system?
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command
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Which example of productive resources is matched correctly?
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capital and oil rig
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One advantage of a market economy is its ability to
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adjust to changes over time.
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The graph is a production possibilities chart. Which of these might cause the line to move to the right?
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improved technology in whoopee cushion production
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In markets both parties are better off when they engage in voluntary, non-fraudulent exchange. What is the role of government in promoting such exchange?
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The governments role is to create legislation to prevent fraud.
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All of these are characteristics of a ___ economy.
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market
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Which of these is NOT something whose construction would be determined by the government?
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A shopping mall
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Although specialization increases productivity, one disadvantage is
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loss of flexibility among workers.
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Sean and Sarah's situation is an example of
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voluntary exchange.
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If a government wanted to improve the productivity of its human resources it could
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expand funding and opportunities for vocational training.
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Which of these is a correct description of one of the ways in which a command economy differs from a market economy?
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In a command economy, individuals have less economic freedom.
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The opportunity cost of a move from point A to point B is
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the decreased production of good Y
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Because scarcity exists, any strategy for allocating scarce resources must address
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for whom to produce, how to produce, and what to produce.
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In many cases, goods produced overseas and shipped here can be sold more cheaply than the same goods produced here. One important reason for this is that
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workers' earnings are much lower in many foreign countries.
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Which of these BEST summarizes the opinion of the author regarding regulatory activities of the government?
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Regulatory measures often have results contrary to the original intention.
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How might consumer credit laws contribute to the empowerment of individuals?
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Seller and lender abuses are reduced under consumer credit laws.
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In a command economy, how is it determined what goods and services will be produced?
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Central government planning decides what will be produced.
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What do you think the owner's decision will be when considering marginal costs and benefits?
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The owner will not hire the worker because the marginal costs of $270 per week are greater than the marginal benefits of $250 per week.
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A firm conducted a market analysis and determined that a new worker should be hired. If the firm decided the price of the product will remain the same, what change should occur initially to maximize revenue?
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The firm should increase output.
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A company produces two products, X and Y. All of the points represent possible product output EXCEPT
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point D.
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In what way does specialization increase productivity?
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Specialization reduces the cost of production.
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"Marginal benefit" is MOST related to what economic concept?
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opportunity cost
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Freedom to own the factors of production, subsidized transportation services, and involuntary spending and investments are all examples of
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mixed economies.
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In this production possibilities graph, what MIGHT cause the line (frontier) to move to the left?
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shortage of needed raw materials
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Land, labor, capital, and entrepreneurship are the
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factors of production.
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What is the MOST LIKELY result of specialization in producing Products A and B?
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The increased output means the U.S. and Japan can trade excess units of Products A and B.
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The MOST LIKELY incentive for entrepreneurs to start a new business is
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to make a profit.
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Which statement reflects an accurate argument in favor of a command economy?
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It ensures continuous use of all available resources.
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Which of these is the BEST example of how the free enterprise system of the United States promotes individual initiative?
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Authors can have original works copyrighted.
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The term "consumer sovereignty" means
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consumer choices ultimately determine which goods and services are produced.
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Rationing is a system under which an agency such as the government decides everyone's "fair" share. Rationing has often been used during wartime. If people receive a set ration regardless of the amount of work completed, how would this affect peoples' incentive to work?
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People might feel less inclined to work
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How does a traditional economy differ from a capitalist economy?
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In a traditional system, economic decisions are based on custom.
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Workers concentrating their efforts on a limited number of tasks, thereby increasing productivity is called
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specialization.
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The LEAST LIKELY result of the passage of the Airline Deregulation Act of 1978 was
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a decreased average level of safety for passengers.
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In laissez-faire economics, what is the role of the government in the economy?
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to help maintain competition
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Acme Furniture Manufacturers has just purchased a large supply of exotic lumber that is ready for use in their new line of furniture. This purchase BEST represents which of the factors of production?
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capital
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Mr. Stevens owns a building in downtown Bentonville. He has considered opening a sporting goods store in the building but has also been approached by someone who would like to rent the space to open a gym. If Mr. Stevens decides to open his sporting goods store, what is the opportunity cost of this decision?
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the opportunity to rent it to another tenant
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According to the information from the U.S. Department of Labor, which factor has the GREATEST impact on raising labor productivity?
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education & skill
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What generalization about educational attainment and annual earnings can be made according to the graph?
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Investment in education can lead to higher annual earnings.
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An economy experiencing high levels of unemployment would most likely be producing at which point?
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point C
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The graph shows how many basketballs and how many whoopee cushions can be produced given a limited supply of resources. Such a graph is called a
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production possibilities graph.
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Which scenario is LEAST LIKELY to occur in a market economy?
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The government allows only two competitors to offer goods for sale on the country's highways.
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How can firms use marginal analysis to determine the price of a product?
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Marginal analysis can be used to determine at what price profit maximization occurs.
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These facts provide evidence that Canada has a
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mixed economy.
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Australia has one of the most advanced market economies in the world, meaning the majority of economic decisions are made by
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the producers and consumers of products.
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A government that operates a market economy MIGHT become involved in the economy
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to provide public goods and services to its citizens.
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In a society with a market economy, property rights are generally enforced by
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the courts.
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Which type of cost occurs when an individual pays for a piano lesson instead of going to a movie?
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opportunity cost
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Consumer sovereignty assumes that which fundamental statement in a market economy is true?
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Through purchase choices, buyers determine the production of goods.
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As developing nations industrialize and make use of capital resources, new challenges to the supply of the world's natural resources will no doubt appear because
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the rate of depletion will increase as developing countries begin to use more natural resources.
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In the mid-2000s problems with corporations such as Enron, Worldcom, and Tyco demonstrated renewed and growing public concern about
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unchecked business practices.
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Which statement is a PRIMARY characteristic of a capitalist system?
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private ownership of property
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In the United States, what independent federal agency works to preserve free enterprise by assisting entrepreneurs?
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Small Business Administration
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Firms use marginal analysis to determine prices by
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Businesses have greater access to resources.
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How might the development of the internet increase productivity?
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Businesses have greater access to resources.
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Lee's company of nine workers produces 150 units of a product with a marginal cost of $10 for the last unit. The product sells for $12 per unit. If Lee adds one additional worker, the marginal cost would be $13. In this case, Lee should
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keep the number of workers at nine.
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Why is the consumer considered "king" in a capitalist economy?
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consumers determine what products will be produced
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Some products (such as roads, sewer systems, and railroads) are not adequately supplied by the marketplace acting alone. Therefore, choices about building such things are made by
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governments.
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· ditch digger
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· computer programmer
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· international financier
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ALL of these are examples of
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human resources.
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In capitalist economies, prices are
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determined by supply and demand.
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Firms use marginal analysis to determine production output levels by
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studying the effect on revenue of small changes to the number of items produced.
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According to the FTC, how does the ECOA empower individuals?
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Credit cannot be denied based on unrelated factors.
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What fundamental question relates most directly to consumer sovereignty?
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Who will get the goods and services?
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A small company must determine all the possible combinations of goods and services it can produce, given its limited resources and current available technology. What resource should they develop to investigate these options?
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production possibilities curve
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Which of these is something whose construction MOST LIKELY would be determined by the government?
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An airport
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If businesses use the internet to find less expensive resources, what will be the impact on productivity?
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Productivity will increase as the price of resources decreases.
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Scarcity is the basic economic condition that results from society not having enough resources to produce all the things people would like to have. A society's economic system determines
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the way a society allocates its scarce resources to produce goods and services.
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All of these are reasons that the government usually decides the amount of public goods (roads, sewers, etc.) that are produced, EXCEPT
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Individuals are less likely to make informed decisions.
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In which country would you MOST expect to find state-controlled industry, the greatest amount of restrictions on private business ownership, and the majority of the population working for the government?
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Cuba
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What effect might high worker productivity have on determining the earnings of workers?
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The more productive workers are, it might increase their earnings.
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Which nation's economy could best be described as a command economy, where the government determines guidelines for economic development and sets goals for economic production?
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China
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What is the primary purpose of job specialization?
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increased efficiency and productivity
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In this type of economic system, the government controls all aspects of the economy and makes all decisions about what goods will be produced, who will produce them, and how they will be produced.
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command
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In which kind of economy are prices determined by supply and demand and by government actions?
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Mixed
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A production possibilities curve deals with which of these concepts?
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opportunity costs
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How do private property rights contribute to a capitalist system?
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Individuals are free to own the resources used to produce goods.
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In a market economy, these functions are generally the responsibility of which group?
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Government
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Suppose the government passed a law, taxing manufacturers according to the amount of pollutants they released into the environment. This law would be an example of which regulatory function of the government?
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regulate negative externalities
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Investment in education, training, and skill development has been linked to
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increasing earnings for workers.
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In 1776 with An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith challenged the prevailing belief in mercantilist policies. The characteristic of capitalism that buyers and sellers will freely and willingly exchange in market transaction is called
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voluntary exchange.
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In a free enterprise system, what motivates individuals to start a business?
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the desire to earn a profit
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Productivity may BEST be defined as
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the ratio of outputs to inputs.
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Mr. Simpson has decided to start a new company to produce bobble-head dolls. He has hired a contractor to build his factory and a manager to run the company for him. Mr. Simpson PRIMARILY represents which factor of production?
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entrepreneurship
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What would most likely be a consumer good lumber, iron ore, chainsaw, a bale of cotton?
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Chainsaw
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Where do individuals sell their labor on flow chart
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Factor market
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Where do businesses sell the goods and services they produce on the flow chart
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Product Market
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What is the primary purpose of the chart
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It shows how households and businesses interact in a market economy
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Where do individuals spend the income they earn
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Product markets
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*firms produce and sell identical products
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*have a relatively small market share
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*consumers are aware of the products and there prices
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*there are few barriers to entry into the market
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Perfect competition
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Which market structure has the largest number of suppliers
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Perfect competition
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Mr. Simpson is liable for all the debts of his company. What type of business organization is this
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Sole proprietorship
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Owner has unlimited liability&responsible for all debt
answer
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Columbia tires and pacific tire together control 75% of the tire market in the country. What type of market structure?
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Oligopoly
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When a few firms dominate an entire industry
answer
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A corporation is least likely to have which advantage
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Establishment of price ceilings
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If a drug company is granted a patent on a new medication what result is possible
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A monopoly in the production of that medication
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The market demand curve for a firm operating under perfect competition is
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Perfectly horizontal
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In a business organization, the splitting of management and ownership into two distinct functions is an example
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Corporation
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An unincorporated business owned by a single person, which may or may not have employees is an example of
answer
Sole proprietorship; it's an unincorporated business owned by a single person like your cousins lawn mowing business
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Jorge and Fred have a product they would like to sell, they decide to share the risk and profits by forming an unincorporated business. What have they formed?
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Partnership because they share the risk and profits
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Many city governments grant operating licenses to a specific cable television company. This license to be the only cable provider is called an?
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Monopoly
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Best economic definition of pure competition
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The market is not dominated by either buyer or sellers
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Many companies sell different types of cell phones. Some consumers prefer to use a specific brand because of it's different kind of features this is an example of
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Monpolistic cpmpetition
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One of the best measures of success for businesses and their entrepreneurs is
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Profit
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Money can be easily converted into goods or services this is an example of which function of money
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Medium of exchange
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According to a recent census which business organization is the most common in the us even though it is relatively insignificant in total sales
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Individual proprietorship
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For business and entrepreneurs, which of these is generally considered the best measure of success; net profit, total revenue, marginal cash, marginal revenue
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Net profit
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A picture of coke and Pepsi what market structure
answer
Oligopoly; a business in which the products In a market are supplied by only a few dominant producers
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A college student chooses cellular service based on the availability of a specific type of phone
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Monopolistic competition; many consumers and producers in a given market and the consumer believes that there are non price diffrenece a so he chooses the one with better service
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Money that individuals receive from businesses return to business in
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Product market
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But productive resources from resource markets
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Businesses
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Producers sell goods and services to consumers
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Product market
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Businesses sell goods and services on
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Product markets
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Resource markets are least likely to sell; land, capital, labor, goods and services
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Goods and services
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What is meant by the statement "money is a medium of exchange"
answer
Money can be traded for goods and services
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Rappers lil cheez offers to write in exchange to appear in a show of mrs t this is an example of
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Bartering; an exchange of goods and services for other goods and services
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In the most basic type of economic system, the trading of goods and services occurs without the use of money. This is called?
answer
Bartering
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Households earn income from the factor market and businesses earn revenue from the product market
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...
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Which type of market typically produces the highest level of output at the lowest price to consumers
answer
Perfect competition
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I'm what type of market are firms considered price takers because they take the price in the market and have no control over setting the price
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Perfect competition
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It is often more efficient and cheap for consumers if resources like electricity and natural gas are produced and delivered by very few competitions. Such natural monopolies are examples of
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Economies of scale
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The primary reason that natural monopolies are allowed to exist in areas such as energy production is
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It is more efficient for society to allow one company to be in control
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Which choice does not describe a basic function of money; a medium of exchange, a measure of value, a store value, traded item
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Traded item
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A farmer sells a truck load of grain for 1000$ he then takes the cash to the credit union and buys a certificate of deposit to be used in case his later harvest isn't profitable what function of money is this
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Store of value
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Marketing slogan best illustrates price comp
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Low price guarantee
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Today only buy and item get free shipping what competition
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Non price comp
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How can firms engage in non price comp
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Coupons and convenient locations
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Best describes a benefit of a natural monopolies like utilities
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Natural monopolies can provide services in areas not served by other firms
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Which markets compete in non price comp
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Monopolistic comp and oligopoly
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Which market has no comp
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Monopoly
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Why is there no competition in monopolies
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No close substitutes
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Which market model is there a very large number of firms offering same goods and helps lower costs and prices
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Perfect comp
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What industry comes the closest to being purely competitive
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Wheat
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A type of business organization where the business is recognized as a legal entity with the right to sell stock
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Corporation
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This is a market where a few large suppliers control supply of a product
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Oligopoly
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A non profit cooperative that accepts deposits makes loans and provides financial services
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Credit union
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Capital
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This is the equipment and factories used in the production of goods and services
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Currency
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The paper money and coins that make up the money supply of a nation
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Entrepreneur
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A person who takes the risk of a new business enterprise
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Gross domestic product
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The total value of all the goods and services produced within a country in a given year
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Specialization
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This is when each worker performs a specific task in production
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Free trade
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This the practice of goods being traded between countries without any (or with reduced) tariffs that might slow down trade
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Tariff
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This is a tax on imported goods and is usually designed to protect domestic production on similar goods
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Labor
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This is one of the three main factors of production. It is the measure of the work done by people
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Balance of trade
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This is the difference in the monetary value of exports and imports for a country
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Trade
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This is the voluntary exchange of goods and or services
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Trade barrier
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This is a restriction to regulate international commerce
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Quota
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This is a type of protectionist trade restriction that sets a physical limit on the quantity of a good that can be imported into a country in a given period of time
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Command economy
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Decisions are centralized, production is controlled by gov, prices are regulated
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Market economy
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Decisions are made by individuals, production is controlled by private firms, prices are determined by supply and demand
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Mixed economy
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Brazil traded with the us more than it does with any other country. Industrially the private sector has made Brazil one of the most advanced countries In Latin America, with massive investment taking place since 1996, still over 1 million people live in state owned housing and millions more are covered by gov operated health care. These facts show that Brazil has what economy?
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Both parties gain as a result if voluntary exchange
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When an individual specializes to produce one good and then acquires additional desired goods from other specialists,
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To make a profit
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The most likely incentive for entrepreneurs to start a new business is
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Opportunity cost
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Marginal benefit: a gain from an increase or loss from a decrease in the consumption of a good or service. Marginal benefit is most related to what economic concept?
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Buying new equipment
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Which of these best represents capital investment for a company
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Decentralized decision making results in buyers and sellers freely engaging in commerce
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New e commerce businesses, including companies like eBay, focus on voluntary exchange. Which generalization best describes this type if commerce?
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A way to measure the economy's performance is to measure categories of national...
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income. Economists use GDP and national income to show the performance of the economy
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Which of these ULTIMATELY controls the money supply in the United States?
answer
Federal Reserve ultimately controls the money supply in the United States.
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What is one way the government CANNOT influence income redistribution?
answer
Open Market Policy is a monetary policy of the Federal Reserve, and is therefore not a function of the government's fiscal policy for income redistribution
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In a free-enterprise economy, the LEAST LIKELY effect of economic growth would be...
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increase in poverty levels
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The economy is experiencing negative GDP growth and high unemployment. Which fiscal policy action should the government implement in an attempt to fix this problem?
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increase spending
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Inflation is expected to be high for the foreseeable future, you expect to have stable employment, and you would like to borrow money to buy a house. All else equal, a savvy economics student would
answer
borrow the money, knowing that the payments would be made with increasingly cheaper dollars.
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State governments often decide to place a "sin tax" on specific products or goods, like alcohol and tobacco. Which rationale is LEAST LIKELY to encourage governments to adopt a "sin tax"?
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While it is true that "sin taxes" disproportionally affect lower income groups, this is not a reason that governments would want to adopt them.
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In which situation might GDP (gross domestic product) NOT be an accurate indicator of the health of a country's economy?
answer
The country has suffered a disaster and is receiving financial aid from overseas. In this situation, the availability of money for purchasing goods and services may not accurately reflect economic growth in the country.
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What would MOST LIKELY happen if the Federal Reserve decided to increase the reserve requirement in banks?
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The amount of money circulating in the economy would decrease.
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In the graph, the year with the highest unemployment rate is 1983. What was the approximate unemployment rate in that year?
answer
10.2%
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Under which economic system would factors of production MOST LIKELY be owned by the government?
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command economy. Committees and departments decide what will be made, how it will be made, how much it will cost, and all of the other decisions that are usually made by private firms in a market economy.
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How does this map relate to the distribution of natural resources for countries such as South Africa?
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South Africa is rich in gold, and they need to learn to mine gold effectively in order to trade for other resources from other African countries.
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An opportunity cost is
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the next-best alternative you give up in order to do something else.
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In a market economy, prices are established by
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the interaction of supply and demand
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Increased education and training within a nation will most likely result in
answer
an increase in Gross Domestic Product (GDP)
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As one of the factors of production, capital can be defined as
answer
the equipment and factories needed to produce goods
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Which statement describes an opportunity cost that could result from the government regulating businesses?
answer
Government regulations can lead to an increase in production costs.
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Mr. Green is opening a new bakery. He has purchased an industrial oven which can accommodate twenty loaves of bread at a time. This oven represents which factor of production?
answer
capital
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In order to decrease fuel consumption in the US, the EPA (Environmental Protection Agency) has raised standards for fuel efficiency on cars sold here. One economic assumption made by the EPA is that, since our economic system is mostly market based,
answer
The EPA can assume that consumers will shop for more fuel-efficient cars, which means that the car makers will have a market for the newer, more efficient, vehicles.
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Which of these terms is the BEST synonym for the word "entrepreneur"?
answer
"business owner", a person who undertakes the responsibility of owning a business.
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If the government decided to subsidize the production of bobble-head dolls
answer
the supply curve will shift to the right. A government subsidy will reduce production costs. Because of this, suppliers would be willing to produce more items.
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In the product market,
answer
producers sell goods and services to consumers.
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What would be the situation if the price was moved from p2 to p3?
answer
there would be a shortage of widgets
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Demand for orange juice increases at the same time that the supply decreases. Which of these could explain that scenario?
answer
Consumers hear of the benefits of vitamin C contained in oranges, while citrus farmers suffer from a severe frost.
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− Cost of inputs increases
answer
question
− Number of sellers decreases
answer
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These changes would MOST LIKELY have which impact on the market?
answer
supply would decrease
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What is the name of the point at which supply and demand intersect?
answer
equilibrium
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Which of these is MOST LIKELY a result of apartment rent controls?
answer
shortage of apartments
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One of the BEST measures of success for businesses and their entrepreneurs is
answer
profit
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The diagram shows the circular flow of goods and resources. What is the primary purpose of this chart?
answer
It shows how households and businesses interact in a market economy.
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Which type of market typically produces the highest level of output at the lowest price to consumers?
answer
perfect competition
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Which effect of high inflation might make it difficult for students to pay for college?
answer
High interest rates
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In this passage, what would make Gary's transaction non-beneficial?
answer
if the car had actually been in a wreck
question
Who benefits the MOST during periods of unexpected inflation?
answer
banks who are collecting on loans with adjustable interest rates. Adjustable rate loans have an interest rate that will rise with inflation; therefore, the banks collecting those loans will be able to keep the interest rate rising with the rate of inflation.
question
The Federal Reserve institutes a tight monetary policy in order to reign in inflation. What is a likely consequence of such action?
answer
The unemployment rate will rise Tight monetary policies aim to fight inflation. These policies restrict the amount of money in circulation. A consequence of not having as much money available would mean that some businesses would not have access to loans that would help them pay workers.
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Andre creates a budget for himself. He would like to buy a new video game each month, but doesn't have enough money to do so in his current budget. Which parts of Andre's budget could he increase to have enough money for the new video game each month?
answer
income
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In the business cycle model, a recession is MOST LIKELY
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a recession is MOST LIKELY a period during which the real GDP decreases for two quarters in a row. A prolonged recession is called a "depression."
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Overall levels of income, employment, and prices are determined by the spending and production decisions of all of the following EXCEPT
answer
net imports. Overall levels of income, employment, and prices are determined by the spending and production decisions of all of the following EXCEPT net imports. Net exports are included with businesses, households, and government.
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The United States increases its imports from Europe. What will be the effects on relative value of the Dollar and the Euro on the currency exchange market?
answer
The relative value of the dollar will depreciate and the euro will appreciate. The US will demand more European products, will drive the demand of the euro up and the demand of the dollar down.
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Fiscal policy affects which two parts of aggregate demand directly?
answer
Government spending and consumption affect aggregate demand directly. Aggregate demand is the same as GDP. The components of GDP that are affected directly are government spending and consumption.
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When a person agrees to a regular, fixed payment of wages over a period of time, he/she agrees to earn a
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A salary is an income that is paid out regularly over an agreed-upon time. It differs from a wage in that a wage is usually given based on hours worked. Salaries are most always fixed, regardless of the amount of time the employee works.
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Which statement would MOST LIKELY be claimed by the author of this passage?
answer
Based on the discussion of high trade costs, the presence of numerous tariffs, and problems with customs procedures and duties it is clear that the author feels that man-made trade barriers are the biggest challenge facing Africa's international trade success.
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What would be reasonable monetary policy during a period of high inflation?
answer
reduce the money supply. put downward pressure on prices as investment and spending slows.
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The European Union was created specifically for what purpose?
answer
to encourage free trade. The elimination of trade barriers- such as quotas and tariffs- was key to making sure European nations could trade easily with on another.
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Which item is NOT a means to finance government spending?
answer
Government subsidies
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A technology company needs 10 workers experienced in a newly developed programming language. Plenty of applicants express interest in the job; however, only three have the necessary education and experience to complete the work. The remaining unemployed individuals are an example of ___ unemployment.
answer
structural unemployment because there is a mismatch between the good (qualified) workers looking for jobs and the vacancies available.
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How does the Federal Reserve achieve these goals?
answer
Raising and lowering short-term interest rates is one of the monetary policies that the Federal Reserve can use to help stimulate the economy. Taxation and government spending are fiscal policies that the government can use. Minimum wage is a price floor to raise the standard of living.
question
The federal government decides to offset a $50 billion decline in business spending. The government could spend $50 billion directly on projects, or it could reduce tax rates by the same amount. Whether the action taken by the federal government is direct or indirect, the result is MOST LIKELY
answer
a higher federal deficit.
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Taxes are a form of government revenue. Which of these is a tax source?
answer
personal income is a tax source.
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Input costs (Rising costs and technology)
answer
question
Subsidies
answer
question
Taxes and Regulations
answer
question
Future expectation of prices
answer
question
These would change WHAT part of the market?
answer
supply
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question
An increase in the market demand for gasoline in the present, all else equal, could be caused by
answer
a rise in peoples' income.
question
Which of these has the MOST effect on elasticity of supply?
answer
time to adjust
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What type of competition does this firm's promotion BEST reflect?
answer
non-price competition
question
Which of these would MOST LIKELY cause an increase in the price of an item?
answer
an increase in the cost of raw materials for that item
question
According to this graph, what would the approximate equilibrium price be for widgets?
answer
$1.75
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Of the terms listed below, which is the BEST synonym for the word "profit"?
answer
"earnings"
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All of these would cause a shift to the left of the demand curve EXCEPT for
answer
increased money supply.
question
This illustrates that one function of money is to be a
answer
medium of exchange.
question
To have demand, what must you have
answer
the desire and the ability to pay for the item.
question
A local business woman noticed that after she had paid all the costs of conducting her business that year a substantial amount of money remained. What could she conclude?
answer
Her business had made a profit.
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In doing this, Leroy has become a(n)
answer
entrepreneur.
question
In a free enterprise system, what drives individuals to risk their savings in a business venture?
answer
the potential for profit
question
What is the name of the point at which supply and demand intersect?
answer
equilibrium
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How might a minimum wage law impact the supply and demand of workers?
answer
It might result in a surplus of supply.
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If the price for widgets was set at $4.25
answer
producers would discover that the price should be lowered.
question
Assuming that the graph follows the normal laws of economics, the line represents
answer
supply.
question
The new oven in Mr. Brown's bakery allows him to produce bread more efficiently and more cheaply. What is the MOST LIKELY effect?
answer
the price drops and the quantity demanded increases
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Which of these is MOST LIKELY a result of apartment rent controls?
answer
a shortage of apartments
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One difference between a manager and an entrepreneur is that an entrepreneur is willing to
answer
take a financial risk.
question
Successful attempts to make the internal combustion engine more efficient in the 19th century resulted in an increase in the demand for
answer
petroleum.
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scarsity
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the condition that results from society not having enough resources to produce all the things people would like to have.
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economics
answer
the study of how people try to satisfy what appears to be seemingl unlimited and competing wants through the careful use of relatively scarce resources.
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need
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a basic requirement for survival
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want
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a way of expressing a need
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factors of production
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resources required to produce the things we would like to have
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land
answer
natural resources not created by humans
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capital
answer
tools, equipment, machinery, and factories used in the production of goods and services
question
financial capital
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the money used to buy the tools and equipment used in production
question
labor
answer
people with all efforts, abilities, and skills
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entrepreneur
answer
a risk taker in search of profits who does something new with existing resources
question
production
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the process of creating goods and services
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Gross Domestic Product
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the dollar value of all final goods and services
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economic products
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goods and services that are useful, relatively scarce, and transferable to others
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good
answer
an item that is economically useful or satisfies an economic want
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consumer good
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intended for final use of individuals
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capital good
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manufactured goods used to produce other goods and services
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service
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work that is performed for someone
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value
answer
refers to a worth that can be expressed in dollars and cents
question
paradox of value
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situation were some necessities have little monetary value
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utility
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the capacity to be useful and provide satisfaction
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market
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location that allows buyers and sellers to exchange goods
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factor market
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the markets were productive resources are bought and sold
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product market
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the market where productive resources are bought and sold
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economic growth
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when a nations total output of goods and services increase over a period of time
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productivity
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the measure of the amount of output produced by a given amount of inputs in a specific period of time
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division of labor
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when work is arranged so individual workers do fewer tasks then before
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specialization
answer
when factors of production perform tasks that they can do relatively more efficient than others
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human capital
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the sum of the skills, abilities, health, and motivation of people
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economic interdependence
answer
rely on others
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trade-offs
answer
alternative choices when they make an economic decision
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opportunity cost
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the cost of the next best alternative use of money, time or resources when one choice is made rather than another
question
production possibilities frontier
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a diagram representing various combinations of goods and services an economy can produce when all productive resources are fully employed
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cost-benefit analysis
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a way of thinking about a problem that compares a cost of an action to the benefits being recieved
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free economy enterprise
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when consumers and privetly owned businesses make the majority of the what, who for whom, and for whom decisions
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standard of living
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the equality of life based on the possession of the necessities and luxuries that make life easier
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economic system
answer
organized way of providing for the wants and needs of their people
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traditional economy
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the allocation of scarce resources , and nearly all other economic activity, stems from ritual, habit, or custom
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command economy
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when the central authority makes most of the what, how, and for whom decisions
question
market economy
answer
people and firms act in their own best intrests to answer the what how and for whom
question
security
answer
a federal program of disability and retirement benefits that coverts most working people
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inflation
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a rise in the general level of prices
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fixed income
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an income that does not increase even though prices go up
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capitolism
answer
where private citizens, many of whom are entrepreneurs, own the factors of production
question
free interprise
answer
another term used to describe the American economy
question
voluntary exchange
answer
the act of buyers and sellers freely and willingly engaging in market transactions
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private property rights
answer
the privilege that entitles people to won and control their possessions as they wish
question
profit
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the extent to which persons or organizations are better off at the end of a period than they were at the beginning
question
profit motive
answer
the driving force that encourages people and organizations to improve their material well-being
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competitions
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the struggle among sellers to attract consumers while lowering costs
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consumer sovereignty
answer
describes the role of the consumer as sovereign, or ruler, over the market
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mixed economy
answer
modified private enterprise economy
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unlimited liability
answer
when the owner is personally and and fully reponsible for all losses and debts of the buisiness
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inventory
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a stock of finished goods and parts in reserve
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limited life
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when the firm legally ceases to exis when the owner dies, quits , or sells the buisiness
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partnership
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ta business jointly owned by who or more persons
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limited partnership
answer
the limited partners have limited liaility
question
bankruptcy
answer
a court-granted permission to an individual or business to cease or delay debt payments
question
corporation
answer
a form of business organization recognized by law as a separate legal entity having all the rights of an individual
question
charter
answer
a government document that gives permission to create a corporation
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stock
answer
ownership certificates in the firm
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stockholders
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share holders
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dividend
answer
a check representing a portion of the corporate earnings
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bond
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a written promise to repay theamound borrowed at a later date
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principal
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the amount borrowed
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interest
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the price paid for the use of another's money
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double taxation
answer
when stockholders are taxed once as corporate profit and again as personal income
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merger
answer
a combination of two or more businesses to form a single firm
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income statement
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a report showing a business's sale, expenses, and profits for a certain peiod
question
net income
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the cost of any goods such as invention wages and salaries, interest payments and depreciation
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depreciation
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a non-cash charge the firm takes for the general wear and tear on its capital goods
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cash flow
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the sum of net income and non-cash charges such as depriciation or real measure of profits for the business
question
horizontal merger
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when two or more firms that produce the same kind of product join forces
question
verticle merger
answer
when firms involved in differnt steps of manufacturing or marketing join together
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conglomerate
answer
a firm that has at least four businesses
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multinational
answer
a corporation that has manufacturing or service operations in a number of different countries
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nonprofit organiztion
answer
a buisinesslike way to promote the collective interests of its members rather than to seek financial gain for its owners
question
cooperative [co op]
answer
a nonprofit organization
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credit union
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a financial organization that accepts deposits from and makes to loans to employees of a particular company or government agency
question
labor union
answer
a organization of workers formed to represent its members' interests in various employment matters
question
collective bargaining
answer
when union participates ngotiate with management over issues such as pay, working hours, health car coverage, life insurance, vacations, and other job related matters
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professional association
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a group of people in a specialized occupation that works to improve the working conditions , skill levels, and public perceptions of the profession
question
chamber of commerce
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promotes the welfare of its members and of the community
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Better Business Bureau
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a nonprofit organization sponsored by local businesses to provide general information on companies
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public utilities
answer
investor or municipal owned companies that offer important products to the public
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Which statement describes an opportunity cost that could result from the government regulating businesses?
answer
Government regulations can lead to an increase in production costs.
question
What type of resource does the data in the chart represent?
answer
human
question
Mr. Green is opening a new bakery. He has purchased an industrial oven which can accommodate twenty loaves of bread at a time. This oven represents which factor of production?
answer
capital
question
How might the purchase decisions of consumers impact a market economy?
answer
By buying some products, but not others, consumers might determine what is produced.
question
If a marginal analysis concludes that the productivity of a firm is at its optimal output, what would the firm have to do to increase revenue?
answer
increase the price of the product
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Which of these terms is the BEST synonym for the word "entrepreneur"?
answer
"business owner"
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The United States government is LEAST LIKELY involved in the nation's economy as a
answer
planner deciding what to produce.
question
Which of these BEST represents capital investment for a company?
answer
buying new equipment
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How does the activity in this image represent specialization?
answer
This worker is completing one of many parts of a final product.
question
In a mixed market economy, what MIGHT be considered a basic function of government?
answer
to correct market failures and redistribute income
question
Before the opening of his sporting goods store, Mr. Stevens researches the types of sports equipment most likely to sell in his area. The knowledge gained in this research is an example of
answer
human capital.
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The process by which the Federal Reserve controls the supply, availability, and cost of money in order to keep the economy stable is
answer
monetary policy.
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Someone who creates a system to offer a product or service in order to obtain a profit is called
answer
an entrepreneur.
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How do private property rights encourage individuals to work, save, and invest?
answer
Individuals can keep the gains they earn.
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An essential part of a market economy is the expectation, in both producers and consumers, that they will be able to keep and use products freely. This is governed by an area of legislation known as
answer
property rights.
question
Workers on an assembly line are an example of
answer
specialization.
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Increased education and training within a nation will most likely result in
answer
an increase in Gross Domestic Product (GDP).
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An opportunity cost is
answer
the next-best alternative you give up in order to do something else.
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In a market economy, prices are established by
answer
consumers and labor unions.
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When a producer calculates profitability (revenue minus costs), all of these will contribute to higher profitability EXCEPT
answer
minimizing units sold.
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These facts show that Brazil has a
answer
mixed economy.
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Countries with a low standard of living, little industrial output, and a low Gross Domestic Product are referred to as
answer
developing countries.
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For a market economy to function well, it is MOST important that laws be passed to protect the right to
answer
property.
question
Which point on the production possibilities curve could represent a situation in which there was a scarcity of materials needed to make products X and Y?
answer
C
question
A measure of the amount of output produced by a given amount of inputs in a specific period of time is the definition of
answer
productivity.
question
Under which economic system would factors of production MOST LIKELY be owned by the government?
answer
command economy
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What is the opportunity cost of saving money to purchase a car?
answer
the interest paid if you borrowed the money
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Which economic concept would MOST likely account for a move on the curve from point "A" to point "B"?
answer
Choice
question
As one of the factors of production, capital can be defined as
answer
the equipment and factories needed to produce goods.
question
What MIGHT be the purpose of government regulation of natural monopolies, or economies of scale?
answer
Government regulation might be used to facilitate competition.
question
New e-commerce businesses, including companies like eBay, focus on voluntary exchange. Which generalization BEST describes this type of commerce?
answer
Decentralized decision-making results in buyers and sellers freely engaging in commerce.
question
Bart has decided to buy some water balloons rather than get an extra milk at lunch. Choosing among economic alternatives is referred to as
answer
a trade-off.
question
Which choice BEST expresses why widespread pirating of goods would be damaging to a market economy?
answer
Producers would be unwilling to produce new goods.
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In a command economy, how are the prices of goods and services determined?
answer
the central government
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Which scenario is the BEST example of how the government would act in a market economy?
answer
The government stops a factory from producing imitations of an expensive type of purse.
question
In order to decrease fuel consumption in the US, the EPA (Environmental Protection Agency) has raised standards for fuel efficiency on cars sold here. One economic assumption made by the EPA is that, since our economic system is mostly market based,
answer
consumers will shop for more fuel-efficient cars.
question
The study of how individuals, institutions, and society make optimal choices under the conditions of scarcity is
answer
economics.
question
Which of these is an example of how the U.S. Constitution protects the free enterprise system?
answer
Congress is given the authority to grant patents and copyrights.
question
When the amount of output produced by a given amount of inputs increases, the MOST LIKELY result is
answer
overall productivity rises.
question
Communism and socialism are usually found in what type of economic system?
answer
command
question
Which example of productive resources is matched correctly?
answer
capital and oil rig
question
One advantage of a market economy is its ability to
answer
adjust to changes over time.
question
The graph is a production possibilities chart. Which of these might cause the line to move to the right?
answer
improved technology in whoopee cushion production
question
In markets both parties are better off when they engage in voluntary, non-fraudulent exchange. What is the role of government in promoting such exchange?
answer
The governments role is to create legislation to prevent fraud.
question
All of these are characteristics of a ___ economy.
answer
market
question
Which of these is NOT something whose construction would be determined by the government?
answer
A shopping mall
question
Although specialization increases productivity, one disadvantage is
answer
loss of flexibility among workers.
question
Sean and Sarah's situation is an example of
answer
voluntary exchange.
question
If a government wanted to improve the productivity of its human resources it could
answer
expand funding and opportunities for vocational training.
question
Which of these is a correct description of one of the ways in which a command economy differs from a market economy?
answer
In a command economy, individuals have less economic freedom.
question
The opportunity cost of a move from point A to point B is
answer
the decreased production of good Y
question
Because scarcity exists, any strategy for allocating scarce resources must address
answer
for whom to produce, how to produce, and what to produce.
question
In many cases, goods produced overseas and shipped here can be sold more cheaply than the same goods produced here. One important reason for this is that
answer
workers' earnings are much lower in many foreign countries.
question
Which of these BEST summarizes the opinion of the author regarding regulatory activities of the government?
answer
Regulatory measures often have results contrary to the original intention.
question
How might consumer credit laws contribute to the empowerment of individuals?
answer
Seller and lender abuses are reduced under consumer credit laws.
question
In a command economy, how is it determined what goods and services will be produced?
answer
Central government planning decides what will be produced.
question
What do you think the owner's decision will be when considering marginal costs and benefits?
answer
The owner will not hire the worker because the marginal costs of $270 per week are greater than the marginal benefits of $250 per week.
question
A firm conducted a market analysis and determined that a new worker should be hired. If the firm decided the price of the product will remain the same, what change should occur initially to maximize revenue?
answer
The firm should increase output.
question
A company produces two products, X and Y. All of the points represent possible product output EXCEPT
answer
point D.
question
In what way does specialization increase productivity?
answer
Specialization reduces the cost of production.
question
"Marginal benefit" is MOST related to what economic concept?
answer
opportunity cost
question
Freedom to own the factors of production, subsidized transportation services, and involuntary spending and investments are all examples of
answer
mixed economies.
question
In this production possibilities graph, what MIGHT cause the line (frontier) to move to the left?
answer
shortage of needed raw materials
question
Land, labor, capital, and entrepreneurship are the
answer
factors of production.
question
What is the MOST LIKELY result of specialization in producing Products A and B?
answer
The increased output means the U.S. and Japan can trade excess units of Products A and B.
question
The MOST LIKELY incentive for entrepreneurs to start a new business is
answer
to make a profit.
question
Which statement reflects an accurate argument in favor of a command economy?
answer
It ensures continuous use of all available resources.
question
Which of these is the BEST example of how the free enterprise system of the United States promotes individual initiative?
answer
Authors can have original works copyrighted.
question
The term "consumer sovereignty" means
answer
consumer choices ultimately determine which goods and services are produced.
question
Rationing is a system under which an agency such as the government decides everyone's "fair" share. Rationing has often been used during wartime. If people receive a set ration regardless of the amount of work completed, how would this affect peoples' incentive to work?
answer
People might feel less inclined to work
question
How does a traditional economy differ from a capitalist economy?
answer
In a traditional system, economic decisions are based on custom.
question
Workers concentrating their efforts on a limited number of tasks, thereby increasing productivity is called
answer
specialization.
question
The LEAST LIKELY result of the passage of the Airline Deregulation Act of 1978 was
answer
a decreased average level of safety for passengers.
question
In laissez-faire economics, what is the role of the government in the economy?
answer
to help maintain competition
question
Acme Furniture Manufacturers has just purchased a large supply of exotic lumber that is ready for use in their new line of furniture. This purchase BEST represents which of the factors of production?
answer
capital
question
Mr. Stevens owns a building in downtown Bentonville. He has considered opening a sporting goods store in the building but has also been approached by someone who would like to rent the space to open a gym. If Mr. Stevens decides to open his sporting goods store, what is the opportunity cost of this decision?
answer
the opportunity to rent it to another tenant
question
According to the information from the U.S. Department of Labor, which factor has the GREATEST impact on raising labor productivity?
answer
education & skill
question
What generalization about educational attainment and annual earnings can be made according to the graph?
answer
Investment in education can lead to higher annual earnings.
question
An economy experiencing high levels of unemployment would most likely be producing at which point?
answer
point C
question
The graph shows how many basketballs and how many whoopee cushions can be produced given a limited supply of resources. Such a graph is called a
answer
production possibilities graph.
question
Which scenario is LEAST LIKELY to occur in a market economy?
answer
The government allows only two competitors to offer goods for sale on the country's highways.
question
How can firms use marginal analysis to determine the price of a product?
answer
Marginal analysis can be used to determine at what price profit maximization occurs.
question
These facts provide evidence that Canada has a
answer
mixed economy.
question
Australia has one of the most advanced market economies in the world, meaning the majority of economic decisions are made by
answer
the producers and consumers of products.
question
A government that operates a market economy MIGHT become involved in the economy
answer
to provide public goods and services to its citizens.
question
In a society with a market economy, property rights are generally enforced by
answer
the courts.
question
Which type of cost occurs when an individual pays for a piano lesson instead of going to a movie?
answer
opportunity cost
question
Consumer sovereignty assumes that which fundamental statement in a market economy is true?
answer
Through purchase choices, buyers determine the production of goods.
question
As developing nations industrialize and make use of capital resources, new challenges to the supply of the world's natural resources will no doubt appear because
answer
the rate of depletion will increase as developing countries begin to use more natural resources.
question
In the mid-2000s problems with corporations such as Enron, Worldcom, and Tyco demonstrated renewed and growing public concern about
answer
unchecked business practices.
question
Which statement is a PRIMARY characteristic of a capitalist system?
answer
private ownership of property
question
In the United States, what independent federal agency works to preserve free enterprise by assisting entrepreneurs?
answer
Small Business Administration
question
Firms use marginal analysis to determine prices by
answer
Businesses have greater access to resources.
question
How might the development of the internet increase productivity?
answer
Businesses have greater access to resources.
question
Lee's company of nine workers produces 150 units of a product with a marginal cost of $10 for the last unit. The product sells for $12 per unit. If Lee adds one additional worker, the marginal cost would be $13. In this case, Lee should
answer
keep the number of workers at nine.
question
Why is the consumer considered "king" in a capitalist economy?
answer
consumers determine what products will be produced
question
Some products (such as roads, sewer systems, and railroads) are not adequately supplied by the marketplace acting alone. Therefore, choices about building such things are made by
answer
governments.
question
· ditch digger
answer
question
· computer programmer
answer
question
· international financier
answer
question
ALL of these are examples of
answer
human resources.
question
In capitalist economies, prices are
answer
determined by supply and demand.
question
Firms use marginal analysis to determine production output levels by
answer
studying the effect on revenue of small changes to the number of items produced.
question
According to the FTC, how does the ECOA empower individuals?
answer
Credit cannot be denied based on unrelated factors.
question
What fundamental question relates most directly to consumer sovereignty?
answer
Who will get the goods and services?
question
A small company must determine all the possible combinations of goods and services it can produce, given its limited resources and current available technology. What resource should they develop to investigate these options?
answer
production possibilities curve
question
Which of these is something whose construction MOST LIKELY would be determined by the government?
answer
An airport
question
If businesses use the internet to find less expensive resources, what will be the impact on productivity?
answer
Productivity will increase as the price of resources decreases.
question
Scarcity is the basic economic condition that results from society not having enough resources to produce all the things people would like to have. A society's economic system determines
answer
the way a society allocates its scarce resources to produce goods and services.
question
All of these are reasons that the government usually decides the amount of public goods (roads, sewers, etc.) that are produced, EXCEPT
answer
Individuals are less likely to make informed decisions.
question
In which country would you MOST expect to find state-controlled industry, the greatest amount of restrictions on private business ownership, and the majority of the population working for the government?
answer
Cuba
question
What effect might high worker productivity have on determining the earnings of workers?
answer
The more productive workers are, it might increase their earnings.
question
Which nation's economy could best be described as a command economy, where the government determines guidelines for economic development and sets goals for economic production?
answer
China
question
What is the primary purpose of job specialization?
answer
increased efficiency and productivity
question
In this type of economic system, the government controls all aspects of the economy and makes all decisions about what goods will be produced, who will produce them, and how they will be produced.
answer
command
question
In which kind of economy are prices determined by supply and demand and by government actions?
answer
Mixed
question
A production possibilities curve deals with which of these concepts?
answer
opportunity costs
question
How do private property rights contribute to a capitalist system?
answer
Individuals are free to own the resources used to produce goods.
question
In a market economy, these functions are generally the responsibility of which group?
answer
Government
question
Suppose the government passed a law, taxing manufacturers according to the amount of pollutants they released into the environment. This law would be an example of which regulatory function of the government?
answer
regulate negative externalities
question
Investment in education, training, and skill development has been linked to
answer
increasing earnings for workers.
question
In 1776 with An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith challenged the prevailing belief in mercantilist policies. The characteristic of capitalism that buyers and sellers will freely and willingly exchange in market transaction is called
answer
voluntary exchange.
question
In a free enterprise system, what motivates individuals to start a business?
answer
the desire to earn a profit
question
Productivity may BEST be defined as
answer
the ratio of outputs to inputs.
question
Mr. Simpson has decided to start a new company to produce bobble-head dolls. He has hired a contractor to build his factory and a manager to run the company for him. Mr. Simpson PRIMARILY represents which factor of production?
answer
entrepreneurship
question
What would most likely be a consumer good lumber, iron ore, chainsaw, a bale of cotton?
answer
Chainsaw
question
Where do individuals sell their labor on flow chart
answer
Factor market
question
Where do businesses sell the goods and services they produce on the flow chart
answer
Product Market
question
What is the primary purpose of the chart
answer
It shows how households and businesses interact in a market economy
question
Where do individuals spend the income they earn
answer
Product markets
question
*firms produce and sell identical products
answer
question
*have a relatively small market share
answer
question
*consumers are aware of the products and there prices
answer
question
*there are few barriers to entry into the market
answer
Perfect competition
question
Which market structure has the largest number of suppliers
answer
Perfect competition
question
Mr. Simpson is liable for all the debts of his company. What type of business organization is this
answer
Sole proprietorship
question
Owner has unlimited liability&responsible for all debt
answer
question
Columbia tires and pacific tire together control 75% of the tire market in the country. What type of market structure?
answer
Oligopoly
question
When a few firms dominate an entire industry
answer
question
A corporation is least likely to have which advantage
answer
Establishment of price ceilings
question
If a drug company is granted a patent on a new medication what result is possible
answer
A monopoly in the production of that medication
question
The market demand curve for a firm operating under perfect competition is
answer
Perfectly horizontal
question
In a business organization, the splitting of management and ownership into two distinct functions is an example
answer
Corporation
question
An unincorporated business owned by a single person, which may or may not have employees is an example of
answer
Sole proprietorship; it's an unincorporated business owned by a single person like your cousins lawn mowing business
question
Jorge and Fred have a product they would like to sell, they decide to share the risk and profits by forming an unincorporated business. What have they formed?
answer
Partnership because they share the risk and profits
question
Many city governments grant operating licenses to a specific cable television company. This license to be the only cable provider is called an?
answer
Monopoly
question
Best economic definition of pure competition
answer
The market is not dominated by either buyer or sellers
question
Many companies sell different types of cell phones. Some consumers prefer to use a specific brand because of it's different kind of features this is an example of
answer
Monpolistic cpmpetition
question
One of the best measures of success for businesses and their entrepreneurs is
answer
Profit
question
Money can be easily converted into goods or services this is an example of which function of money
answer
Medium of exchange
question
According to a recent census which business organization is the most common in the us even though it is relatively insignificant in total sales
answer
Individual proprietorship
question
For business and entrepreneurs, which of these is generally considered the best measure of success; net profit, total revenue, marginal cash, marginal revenue
answer
Net profit
question
A picture of coke and Pepsi what market structure
answer
Oligopoly; a business in which the products In a market are supplied by only a few dominant producers
question
A college student chooses cellular service based on the availability of a specific type of phone
answer
Monopolistic competition; many consumers and producers in a given market and the consumer believes that there are non price diffrenece a so he chooses the one with better service
question
Money that individuals receive from businesses return to business in
answer
Product market
question
But productive resources from resource markets
answer
Businesses
question
Producers sell goods and services to consumers
answer
Product market
question
Businesses sell goods and services on
answer
Product markets
question
Resource markets are least likely to sell; land, capital, labor, goods and services
answer
Goods and services
question
What is meant by the statement "money is a medium of exchange"
answer
Money can be traded for goods and services
question
Rappers lil cheez offers to write in exchange to appear in a show of mrs t this is an example of
answer
Bartering; an exchange of goods and services for other goods and services
question
In the most basic type of economic system, the trading of goods and services occurs without the use of money. This is called?
answer
Bartering
question
Households earn income from the factor market and businesses earn revenue from the product market
answer
...
question
Which type of market typically produces the highest level of output at the lowest price to consumers
answer
Perfect competition
question
I'm what type of market are firms considered price takers because they take the price in the market and have no control over setting the price
answer
Perfect competition
question
It is often more efficient and cheap for consumers if resources like electricity and natural gas are produced and delivered by very few competitions. Such natural monopolies are examples of
answer
Economies of scale
question
The primary reason that natural monopolies are allowed to exist in areas such as energy production is
answer
It is more efficient for society to allow one company to be in control
question
Which choice does not describe a basic function of money; a medium of exchange, a measure of value, a store value, traded item
answer
Traded item
question
A farmer sells a truck load of grain for 1000$ he then takes the cash to the credit union and buys a certificate of deposit to be used in case his later harvest isn't profitable what function of money is this
answer
Store of value
question
Marketing slogan best illustrates price comp
answer
Low price guarantee
question
Today only buy and item get free shipping what competition
answer
Non price comp
question
How can firms engage in non price comp
answer
Coupons and convenient locations
question
Best describes a benefit of a natural monopolies like utilities
answer
Natural monopolies can provide services in areas not served by other firms
question
Which markets compete in non price comp
answer
Monopolistic comp and oligopoly
question
Which market has no comp
answer
Monopoly
question
Why is there no competition in monopolies
answer
No close substitutes
question
Which market model is there a very large number of firms offering same goods and helps lower costs and prices
answer
Perfect comp
question
What industry comes the closest to being purely competitive
answer
Wheat
question
A type of business organization where the business is recognized as a legal entity with the right to sell stock
answer
Corporation
question
This is a market where a few large suppliers control supply of a product
answer
Oligopoly
question
A non profit cooperative that accepts deposits makes loans and provides financial services
answer
Credit union
question
Capital
answer
This is the equipment and factories used in the production of goods and services
question
Currency
answer
The paper money and coins that make up the money supply of a nation
question
Entrepreneur
answer
A person who takes the risk of a new business enterprise
question
Gross domestic product
answer
The total value of all the goods and services produced within a country in a given year
question
Specialization
answer
This is when each worker performs a specific task in production
question
Free trade
answer
This the practice of goods being traded between countries without any (or with reduced) tariffs that might slow down trade
question
Tariff
answer
This is a tax on imported goods and is usually designed to protect domestic production on similar goods
question
Labor
answer
This is one of the three main factors of production. It is the measure of the work done by people
question
Balance of trade
answer
This is the difference in the monetary value of exports and imports for a country
question
Trade
answer
This is the voluntary exchange of goods and or services
question
Trade barrier
answer
This is a restriction to regulate international commerce
question
Quota
answer
This is a type of protectionist trade restriction that sets a physical limit on the quantity of a good that can be imported into a country in a given period of time
question
Command economy
answer
Decisions are centralized, production is controlled by gov, prices are regulated
question
Market economy
answer
Decisions are made by individuals, production is controlled by private firms, prices are determined by supply and demand
question
Mixed economy
answer
Brazil traded with the us more than it does with any other country. Industrially the private sector has made Brazil one of the most advanced countries In Latin America, with massive investment taking place since 1996, still over 1 million people live in state owned housing and millions more are covered by gov operated health care. These facts show that Brazil has what economy?
question
Both parties gain as a result if voluntary exchange
answer
When an individual specializes to produce one good and then acquires additional desired goods from other specialists,
question
To make a profit
answer
The most likely incentive for entrepreneurs to start a new business is
question
Opportunity cost
answer
Marginal benefit: a gain from an increase or loss from a decrease in the consumption of a good or service. Marginal benefit is most related to what economic concept?
question
Buying new equipment
answer
Which of these best represents capital investment for a company
question
Decentralized decision making results in buyers and sellers freely engaging in commerce
answer
New e commerce businesses, including companies like eBay, focus on voluntary exchange. Which generalization best describes this type if commerce?
question
A way to measure the economy's performance is to measure categories of national...
answer
income. Economists use GDP and national income to show the performance of the economy
question
Which of these ULTIMATELY controls the money supply in the United States?
answer
Federal Reserve ultimately controls the money supply in the United States.
question
What is one way the government CANNOT influence income redistribution?
answer
Open Market Policy is a monetary policy of the Federal Reserve, and is therefore not a function of the government's fiscal policy for income redistribution
question
In a free-enterprise economy, the LEAST LIKELY effect of economic growth would be...
answer
increase in poverty levels
question
The economy is experiencing negative GDP growth and high unemployment. Which fiscal policy action should the government implement in an attempt to fix this problem?
answer
increase spending
question
Inflation is expected to be high for the foreseeable future, you expect to have stable employment, and you would like to borrow money to buy a house. All else equal, a savvy economics student would
answer
borrow the money, knowing that the payments would be made with increasingly cheaper dollars.
question
State governments often decide to place a "sin tax" on specific products or goods, like alcohol and tobacco. Which rationale is LEAST LIKELY to encourage governments to adopt a "sin tax"?
answer
While it is true that "sin taxes" disproportionally affect lower income groups, this is not a reason that governments would want to adopt them.
question
In which situation might GDP (gross domestic product) NOT be an accurate indicator of the health of a country's economy?
answer
The country has suffered a disaster and is receiving financial aid from overseas. In this situation, the availability of money for purchasing goods and services may not accurately reflect economic growth in the country.
question
What would MOST LIKELY happen if the Federal Reserve decided to increase the reserve requirement in banks?
answer
The amount of money circulating in the economy would decrease.
question
In the graph, the year with the highest unemployment rate is 1983. What was the approximate unemployment rate in that year?
answer
10.2%
question
Under which economic system would factors of production MOST LIKELY be owned by the government?
answer
command economy. Committees and departments decide what will be made, how it will be made, how much it will cost, and all of the other decisions that are usually made by private firms in a market economy.
question
How does this map relate to the distribution of natural resources for countries such as South Africa?
answer
South Africa is rich in gold, and they need to learn to mine gold effectively in order to trade for other resources from other African countries.
question
An opportunity cost is
answer
the next-best alternative you give up in order to do something else.
question
In a market economy, prices are established by
answer
the interaction of supply and demand
question
Increased education and training within a nation will most likely result in
answer
an increase in Gross Domestic Product (GDP)
question
As one of the factors of production, capital can be defined as
answer
the equipment and factories needed to produce goods
question
Which statement describes an opportunity cost that could result from the government regulating businesses?
answer
Government regulations can lead to an increase in production costs.
question
Mr. Green is opening a new bakery. He has purchased an industrial oven which can accommodate twenty loaves of bread at a time. This oven represents which factor of production?
answer
capital
question
In order to decrease fuel consumption in the US, the EPA (Environmental Protection Agency) has raised standards for fuel efficiency on cars sold here. One economic assumption made by the EPA is that, since our economic system is mostly market based,
answer
The EPA can assume that consumers will shop for more fuel-efficient cars, which means that the car makers will have a market for the newer, more efficient, vehicles.
question
Which of these terms is the BEST synonym for the word "entrepreneur"?
answer
"business owner", a person who undertakes the responsibility of owning a business.
question
If the government decided to subsidize the production of bobble-head dolls
answer
the supply curve will shift to the right. A government subsidy will reduce production costs. Because of this, suppliers would be willing to produce more items.
question
In the product market,
answer
producers sell goods and services to consumers.
question
What would be the situation if the price was moved from p2 to p3?
answer
there would be a shortage of widgets
question
Demand for orange juice increases at the same time that the supply decreases. Which of these could explain that scenario?
answer
Consumers hear of the benefits of vitamin C contained in oranges, while citrus farmers suffer from a severe frost.
question
− Cost of inputs increases
answer
question
− Number of sellers decreases
answer
question
These changes would MOST LIKELY have which impact on the market?
answer
supply would decrease
question
What is the name of the point at which supply and demand intersect?
answer
equilibrium
question
Which of these is MOST LIKELY a result of apartment rent controls?
answer
shortage of apartments
question
One of the BEST measures of success for businesses and their entrepreneurs is
answer
profit
question
The diagram shows the circular flow of goods and resources. What is the primary purpose of this chart?
answer
It shows how households and businesses interact in a market economy.
question
Which type of market typically produces the highest level of output at the lowest price to consumers?
answer
perfect competition
question
Which effect of high inflation might make it difficult for students to pay for college?
answer
High interest rates
question
In this passage, what would make Gary's transaction non-beneficial?
answer
if the car had actually been in a wreck
question
Who benefits the MOST during periods of unexpected inflation?
answer
banks who are collecting on loans with adjustable interest rates. Adjustable rate loans have an interest rate that will rise with inflation; therefore, the banks collecting those loans will be able to keep the interest rate rising with the rate of inflation.
question
The Federal Reserve institutes a tight monetary policy in order to reign in inflation. What is a likely consequence of such action?
answer
The unemployment rate will rise Tight monetary policies aim to fight inflation. These policies restrict the amount of money in circulation. A consequence of not having as much money available would mean that some businesses would not have access to loans that would help them pay workers.
question
Andre creates a budget for himself. He would like to buy a new video game each month, but doesn't have enough money to do so in his current budget. Which parts of Andre's budget could he increase to have enough money for the new video game each month?
answer
income
question
In the business cycle model, a recession is MOST LIKELY
answer
a recession is MOST LIKELY a period during which the real GDP decreases for two quarters in a row. A prolonged recession is called a "depression."
question
Overall levels of income, employment, and prices are determined by the spending and production decisions of all of the following EXCEPT
answer
net imports. Overall levels of income, employment, and prices are determined by the spending and production decisions of all of the following EXCEPT net imports. Net exports are included with businesses, households, and government.
question
The United States increases its imports from Europe. What will be the effects on relative value of the Dollar and the Euro on the currency exchange market?
answer
The relative value of the dollar will depreciate and the euro will appreciate. The US will demand more European products, will drive the demand of the euro up and the demand of the dollar down.
question
Fiscal policy affects which two parts of aggregate demand directly?
answer
Government spending and consumption affect aggregate demand directly. Aggregate demand is the same as GDP. The components of GDP that are affected directly are government spending and consumption.
question
When a person agrees to a regular, fixed payment of wages over a period of time, he/she agrees to earn a
answer
A salary is an income that is paid out regularly over an agreed-upon time. It differs from a wage in that a wage is usually given based on hours worked. Salaries are most always fixed, regardless of the amount of time the employee works.
question
Which statement would MOST LIKELY be claimed by the author of this passage?
answer
Based on the discussion of high trade costs, the presence of numerous tariffs, and problems with customs procedures and duties it is clear that the author feels that man-made trade barriers are the biggest challenge facing Africa's international trade success.
question
What would be reasonable monetary policy during a period of high inflation?
answer
reduce the money supply. put downward pressure on prices as investment and spending slows.
question
The European Union was created specifically for what purpose?
answer
to encourage free trade. The elimination of trade barriers- such as quotas and tariffs- was key to making sure European nations could trade easily with on another.
question
Which item is NOT a means to finance government spending?
answer
Government subsidies
question
A technology company needs 10 workers experienced in a newly developed programming language. Plenty of applicants express interest in the job; however, only three have the necessary education and experience to complete the work. The remaining unemployed individuals are an example of ___ unemployment.
answer
structural unemployment because there is a mismatch between the good (qualified) workers looking for jobs and the vacancies available.
question
How does the Federal Reserve achieve these goals?
answer
Raising and lowering short-term interest rates is one of the monetary policies that the Federal Reserve can use to help stimulate the economy. Taxation and government spending are fiscal policies that the government can use. Minimum wage is a price floor to raise the standard of living.
question
The federal government decides to offset a $50 billion decline in business spending. The government could spend $50 billion directly on projects, or it could reduce tax rates by the same amount. Whether the action taken by the federal government is direct or indirect, the result is MOST LIKELY
answer
a higher federal deficit.
question
Taxes are a form of government revenue. Which of these is a tax source?
answer
personal income is a tax source.
question
Input costs (Rising costs and technology)
answer
question
Subsidies
answer
question
Taxes and Regulations
answer
question
Future expectation of prices
answer
question
These would change WHAT part of the market?
answer
supply
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