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The key concept that serves as the basis for whats to study in macroeconomics:

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d. scarcity

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opportunity cost is best defined as:

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c. the value of the best forgone alternative

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when a state government chooses to build more roads, the required resources are no longer available for spending on public education, this dilemma illustrates the concept of:

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d. opportunity costs

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the observation that people compare the marginal benefits with the marginal costs n making such decisions as how to spend time, which products to buy, whether or not to work, and which goods to produce and sell, is most closely associated with

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the economic perspective

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Which expression is another way of saying "marginal cost"?

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additional cost

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Henry wants to buy a book. The economic perspective suggests that Henry will buy the book if

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The marginal benefit of the book is greater than its marginal cost

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The process of developing hypotheses, testing them against facts, and using the results to construct theories is called:

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The scientific method

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Another description for ceteris paribus is:

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Other things equal

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Economists have difficulty applying the scientific method because:

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Controlled laboratory experiments are impossible or often infeasible

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Macroeconomics focuses on:

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total output and the general level of prices in the economy

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A U.S. senator states: "The minimum wage should be raised to give people a decent living wage." This quote is an example of:

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A normative economic statement

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A schedule or curve that shows the various combinations of two products a consumer can purchase with a specific amount of money income is:

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A budget line

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Assume that a consumer purchases only two products and there is a decrease in the consumer's income. The prices of the two products stay the same. The change in income will result in a

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Shift of the budget line inward to the left

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The individual who brings together economic resources and assumes the risk of business ventures in a capitalist economy is called the:

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Entrepreneur

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The production possibilities curve represents:

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The maximum combinations of products that can be produced with fixed resources and technology

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The maximum combinations of products that can be produced with fixed resources and technology

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Attainable, but the economy is inefficient

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A point on the production possibilities curve is:

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Attainable and resources are fully employed

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A point outside the production possibilities curve is:

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Unattainable because of limited resources

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The production possibilities curve bows outward from the origin because

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Opportunity costs increase as the production of a good increases

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The production possibilities curve bows outward from the origin because:

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Opportunity costs increase as the production of a good increases

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If economic resources are perfectly interchangeable between the two products shown on a production possibilities graph:

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The production possibilities curve would be a straight line

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Economic growth may be represented by a:

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Rightward shift of the production possibilities curve

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A person observes that as consumer prices fall, economic growth increases. The person concludes that falling consumer prices leads to economic growth. This would be an example of:

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Confusing correlation and causationWhich of the following statements is correct?

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If you benefited from a decrease in the price of gasoline, the whole economy must have benefited. This statement is an example of

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The fallacy of composition

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The market system is often also known as:

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capitalism

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One element of the command system is

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Central planning

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Which statement best describes the market system?

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Entrepreneurs direct production activities, and market prices allocate goods and services

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Which would not be characteristic of a capitalist economy?

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Government ownership of most factors of production

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Laissez-faire capitalism is characterized by:

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Very limited government role in the economy

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Which of the following statements is correct?

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Freedom of choice and enterprise are essential elements of the market system

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How do workers typically express self-interest?

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By seeking jobs with the best combination of wages and benefits

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Consumers express self-interest when they:

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Seek the lowest price for a product

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Competition is more likely to exist when

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There is easy entry into and exit out of industries

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Competition denotes a condition where:

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The diffusion of economic power limits its potential abuse

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All of the following statements describe a market economy except:

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Government prescribes the desired prices for goods and services

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A required element of specialization is:

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Exchange and trade

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Which is one of the five fundamental questions that need to be dealt with in any economic system

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What goods and services will be produced?

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he term consumer sovereignty means that

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What is produced is ultimately determined by what consumers buy

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In a market system, which production techniques will be used by firms to produce their output?

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those that would allow firms to maximize their profits

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With an increase in profits in a particular industry, we would expect

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Firms to enter the industry

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As new firms enter an expanding industry:

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Economic profits tend to decline

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Which of the following does not illustrate the idea of creative destruction?

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A firm has to destroy some of the expired products in its inventory

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The "invisible hand" concept used to describe the guiding function of prices was developed by:

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Adam Smith

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The major "success indicator" for business managers in command economies like the Soviet Union and China in the past was

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The quantity of output

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in the circular flow model, households:

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Buy products and sell resources

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The circular flow model:

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Illustrates the interdependence of businesses and consumers

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The simple circular flow model shows that workers and capital-owners offer their services to firms through the:

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Resource markets

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The money income of households consists of the sum of:

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Wages plus rents plus interest plus profits

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All markets involve the following elements, except:

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goverment

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n the labor markets,

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Job applicants are the "sellers" while employers are the "buyers

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Other things being equal, the law of demand suggests that as:

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The price of 3-D TVs decreases, the quantity demanded will increase

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Which of the following is a determinant of demand?

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Income

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If product Y is an inferior good, a decrease in consumer incomes will:

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Shift the demand curve for product Y to the right

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Suppose that goods A and B are close substitutes. If the price of good A falls, then we would expect an:

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ncrease in the quantity of A demanded and a decrease in the demand for B

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If the price of ground beef increases, the demand for hamburger buns is predicted to:

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Decrease

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A decrease in demand is shown graphically as a:

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Shift of the demand curve to the left

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If the price of a product decreases, we would expect:

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Quantity supplied to decrease

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Suppose that a more efficient way to produce a good is discovered, thus lowering production costs for the good. This will cause a(n)

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Increase in supply, or a rightward shift of the supply curve

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Which of the following will not cause the supply curve to shift?

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A change in the price of the good

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There is a shortage in a market for a product when:

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Quantity demanded is greater than quantity supplied

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The market system automatically corrects a surplus condition in a competitive market by:

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Reducing the price of the commodity in question while increasing the quantity demanded

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f an economy is being "productively efficient," then that means the economy is:

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Using the least costly production techniques

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allocative efficiency means that:

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Resources are being devoted to the production of products most desired by society

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A decrease in supply, holding demand constant, will cause:

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Higher prices and a smaller quantity sold

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Which of the following is a correct statement?

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Price floors create surpluses

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