Economics Mid-term Answers – Flashcards
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After 12 years of faithful service, your family's car finally collapses beyond hope of repair and must be taken to the junkyard. Which economic term does this vehicle now best illustrate? A) a free good B) a nuisance good C) an economic good D) a scarce good
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B) a nuisance good
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The economic cost of a good or service is... A) the price charged for it. B) the cumulative cost of making and marketing it. C) the regret a consumer feels after choosing it. D) the value people place on it.
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D) the value people place on it.
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The family must quickly leave its home due to a fire. On her way out the door, the mother grabs the family photo albums but leaves several expensive paintings behind. What economic concept do her actions best illustrates? A) intrinsic value B) utility C) insatiability D) subjective value
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D) subjective value
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Conservation of natural resources primarily shows a grasp of which economic concept? A) scarcity B) public good C) utility D) microeconomics
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A) scarcity
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Suppose you have $20. You will receive 6 utils if you spend the money on a new shirt and 10 utils if you purchase a new album. What was your net utility be if you finally decide to buy an album? A) 10 utils B) 6 utils C) 4 utils D) -4 utils
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C) 4 utils
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Your family decides to take a trip to Europe this summer instead of next because airline rates are currently low. What economic concept do the lower airline rates illustrate in your family's decision-making process? A) opportunity cost B) opportunity benefit C) hidden cost D) intrinsic value
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B) opportunity benefit
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What principle does Henry Hazlitt remind readers of in his story about the broken window? A) scarcity B) stewardship C) hidden costs D) intrinsic value
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C) hidden costs
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Which of the following statements is an example of positive economics? A) the unemployment rate is 6%. B) unemployment is worse than inflation. C) the major economic goal of our nation should be a lower level of unemployment. D) we need to pray every day that God will protect us from unemployment.
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A) the unemployment rate is 6%.
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What approach to economics study focuses on value judgments? A) microeconomics B) positive economics C) macroeconomics D) normative economics
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D) normative economics
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According to the Austrian economist Carl Menger, what determines the value of an object? A) the labor of the producer B) the quality of the raw materials C) the utility for the user D) the public good accomplished
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C) the utility for the user
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What is the difference between macroeconomics and microeconomics? Give an example of each.
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Microeconomics deals with the choices made by individual units; Ex: Looking at one tree instead of the whole forest/ worm's eye view Macroeconomics deals with large-scale economic choices; Ex: Looking at the forest as a whole instead of just one tree/ bird's eye view
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What is the chief advantage of the line graph over the schedule? A) it is less complicated. B) it better illustrates results. C) it is more scientific. D) it contains more data.
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D) it contains more data.
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On a PPC graph, any point on the graph line represents... A) production efficiency. B) wasted resources. C) production variables. D) minimum costs.
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A) production efficiency.
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What are the two basic elements of the circular flow model? A) banks and households B) household and business firms C) business firms and stock markets D) stock markets and banks
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B) households and business firms
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Which of the following would an economist not consider an example of land? A) wheat B) petroleum C) sheep D) machinery
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D) machinery
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Which of the following is not an example of capital? A) a business loan B) a house C) a tractor D) a hammer
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B) a house
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What is the most important factor of production? A) capital B) interest C) entrepreneurship D) profit
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C) entrepreneurship
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From whom do businesses ultimately receive the factors of production? A) households B) stockholders C) banks D) the government
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A) households
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Which of the following does not qualify as a possible factor cost? A) author royalties B) sales taxes C) medical benefits D) interest payments
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B) sales taxes
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Which of the following is a transfer payment? A) Department of Defense purchases B) the wages of postal workers C) income tax withholdings D) governmental unemployment payments
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D) governmental unemployment payments
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What is an example of dissaving? A) taking out a mortgage B) opening a checking account C) making a deposit in a savings account D) making a payment on the loan
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A) taking out a mortgage
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What is the "heart" of the economy that circulates money? A) the government B) the financial market C) the public sector D) businesses
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B) the financial market
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Ludwig von Mises is well known for exploring the economic practice of... A) financial markets. B) governmental intervention. C) free markets. D) entrepreneurship.
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C) free markets
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What are the two primary uses for economic models?
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1) instruction 2) to assist the economist in predicting future events
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List and briefly to find the factors of production.
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1) Land- refers to all natural resources used in the production of the goods or services 2) Labor- refers to all human effort used in making the goods or services 3) Financial Market- refers to the goods/tools used in making the good 4) Entrepreneurship- refers to the combination of natural resources, human effort, and real capital in unique ways to make a new and useful good or service
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If a customer's first new car gives him a marginal utility of 25 utils, what is the most likely marginal utility that a second identical car would give him? A) 15 utils B) 25 utils C) 40 utils D) 50 utils
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A) 15 utils
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Graphing a set of data that supports William Stanley Jevons's principal results in a... A) demand curve. B) subjective value curve. C) marginal utility curve. D) supply curve.
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C) marginal utility curve.
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Which of the following is not one of the functions of prices? A) transmitting information B) providing incentives C) redistributing income D) increasing utility
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D) increasing utility
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Which of the following will most likely persuade a dairy farmer to purchase more cows? A) the price of grain B) the price of milk C) current real estate markets D) current interest rates
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B) the price of milk
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Which of the following usually comes first? A) increased production of cocoa B) increased consumption of chocolate C) increased manufacture of chocolate D) increased orders for chocolate
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B) increased consumption of chocolate
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What time do economists use to describe the act of buying? A) supply B) price C) util D) demand
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D) demand
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When many people lose their jobs during a depression, what usually happens to the demand curves for normal goods? A) they shift to the right and then to the left. B) they remain unchanged. C) they shift to the left. D) they shift to the right.
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C) they shift to the left.
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A drop in income would have the least effect on the demand for... A) candy bars. B) bread. C) steaks. D) automobiles.
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B) bread.
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What is the typical description of a fad item's demand curve? A) remained stable B) shift back-and-forth C) shift left, then shift right D) shift right, then shift left
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D) shift right, then shift left
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The local grocery announces an upcoming sale on ground beef. What economic scenario will likely be the immediate result of this announcement? A) a change in the quantity demanded B) an increase in demand C) a decrease in demand D) a switch to substitute goods
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C) a decrease in demand
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Edits first spring sale, your local plant nursery offers rosebushes for 40% off the regular price. The store sells 300 rosebushes, twice the usual number for the month. What has occurred? A) a change in quantity demanded B) a fad item C) a switch to substitute goods D) an increase in demand
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A) a change in quantity demanded
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What is the principle of diminishing marginal utility?
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It states that people tend to receive less and less additional satisfaction from any good or service as they obtain more and more of it during a specific period of time
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What is the law of demand?
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If the price is high, demand is low; if the price is low, demand is high; inverse relationship
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What is the most significant reason for the rapid drop in the prices of cellular phones and laptop computers since they were first introduced? A) increase in demand B) increase in the price of substitute goods C) changing tastes and preferences D) improvements in technology
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D) improvements in technology
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In proposing a new product for her company, a business woman puts together a chart detailing how much of the product the company could offer to make and sell at various prices. What has she created? A) a demand curve B) a supply schedule C) a marginal utility schedule D) a price floor
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B) a supply schedule
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To raise money for a trip, a youth group makes and sells cookies for $2.00 per dozen. If the cost of the supplies doubles from 50¢ to $1.00 per dozen, what will most likely happen to the cookie supply if the teens must still charge $2.00 per dozen? A) it will decrease slightly. B) it will increase slightly. C) it will be cut to zero. D) it will remain the same.
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A) it will decrease slightly.
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If the government forces milk to be sold above the market equilibrium price, what results? A) shortage B) surplus C) supply D) price ceilings
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B) surplus
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What term describes the amount of a product the company is willing to provide at various prices? A) demand B) product ceiling C) supply D) equilibrium point
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C) supply
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The morning news reports three new studies revealing that eating donuts has enormous health benefits. By noon Daisy's Donuts is out of stock. The next day, the manager of Daisy's doubles the batches and raises the prices. Supplies last just until closing time. What economic concept has been most clearly illustrated? A) a shortage B) a price floor C) an increase in supply D) the change in quantity supplied
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D) the change in quantity supplied
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Economist Alfred Marshall is best known for the... A) law of demand and supply. B) surplus/shortage paradox. C) market equilibrium theory. D) supply and demand model.
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D) supply and demand model
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From the standpoint of the supplier, what is the best solution to a surplus? A) cutting production B) increasing demand C) cutting prices D) increasing the price floor
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B) increasing demand
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Which of the following is not a demand solution to a surplus? A) lowering the price of the product B) driving competitors out of business C) persuading the government to buy the surplus D) advertising to increase consumer preference for the product
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A) lowering the price of the product
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What is the demand solution to a shortage? A) raising prices B) increasing production C) discouraging demand D) setting a price ceiling
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C) discouraging demand
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If the government forces homes to be rented below the market equilibrium price, what results? A) surplus B) shortage C) decrease in demand D) price floors
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B) shortage
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What is the law of supply?
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If the price is high, supply is high; if the price is low, supply is low; direct relationship
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Which of the following is the primary economic concern of the society? A) how to balance the public budget B) how to best achieve its economic goals C) how to sustain economic growth D) how to acquire more economic resources
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B) how to best achieve its economic goals
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Which of the following does not immediately result from fluctuations between inflation and deflation? A) people cannot make economic forecasts. B) a "wait and see" attitude prevails. C) society's economic output slows. D) unemployment rates rise.
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D) unemployment rates rise.
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Which of the following best qualifies as a period of intensive growth? A) America's westward expansion B) European colonialism C) the Industrial Revolution D) the Louisiana Purchase
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C) the Industrial Revolution
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What is meant by the consumer goods/capital goods trade-off? A) the same business cannot produce both capital goods and consumer goods. B) businesses that produce consumer goods cause the production of capital goods to decrease, and vice versa. C) every business must sell its capital goods for consumer goods, and vice versa. D) nations should trade both consumer goods and capital goods internationally.
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B) businesses that produce consumer goods cause the production of capital goods to decrease, and vice versa.
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Which of the following is a consumer good? A) an automobile B) a tractor C) a printing press D) a welding machine
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A) an automobile
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Which of the following is a capital good? A) a book B) a house C) medicine D) a plow
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D) a plow
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What is the market solution to the output question? A) individual firms determined the labor intensive/capital intensive ratio. B) each individual decides the consumer goods/capital goods trade off. C) governmental leaders make only emergency decisions in the consumer goods/capital goods trade-off. D) governmental committees make all major decisions concerning the labor intensive/capital-intensive ratio.
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B) each individual decides the consumer goods/capital goods trade off.
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What is the central function performed by the market interest rate? A) it reflects consumer confidence in the economy. B) it forces producers to give in to demand and consumers to profit from supply. C) it allows financial markets to profit from economic downturns. D) it regulates the flow of money from households to businesses via financial markets.
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D) it regulates the flow of money from households to businesses via financial markets.
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From what source do firms get the funds to purchase more real capital? A) company profits B) budget cuts C) consumer savings D) fundraisers
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C) consumer savings
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What is the command solution to the input question? A) policymakers choose the labor/capital ratio. B) governmental leaders decide the consumer goods/capital goods trade off. C) the interest rate decides the consumer goods/capital goods trade off. D) individual firms choose the labor/capital ratio.
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A) policymakers choose the labor/capital ratio.
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The primary goal that drives the market solution to the input question is... A) satisfying consumer demand. B) increasing employment levels. C) lowering production costs. D) decreasing economic risk.
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C) lowering production costs
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What viewpoint states that each person in the nation has a right to part of the nations wealth simply by being part of the human race? A) libertarian fairness B) economic Darwinism C) egalitarian fairness D) Keynesian economics
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C) egalitarian fairness
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The public provision of further training or education for the unemployed while they search for jobs is often known as... A) safety-net egalitarianism. B) workforce. C) economic leveling. D) welfare.
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B) workforce.
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Who is the Father of Communism? A) Alfred Marshall B) Milton Friedman C) Adam Smith D) Karl Marx
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D) Karl Marx
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Which of the following is not true of communism as a philosophy? A) it regards class conflict as unsolvable. B) it can easily be exploited by ambitious men. C) it seeks to perfect society by human effort. D) it was initially widely rejected in Europe.
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A) it regards class conflict as unsolvable.
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What are the four primary economic objectives of a society?
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1) healthy growth of the economy 2) fair income distribution 3) lower unemployment 4) stable price levels
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