ECON FINAL 100 A

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ECON FINAL 100 A

Matching

Identifying Key Terms
Match each term with the correct statement below.

a.	gross domestic product	f.	macroeconomics
b.	free rider	g.	poverty threshold
c.	public interest	h.	market failure
d.	private sector	i.	welfare
e.	in-kind benefits	j.	public disclosure laws

someone who would not choose to pay for a certain good or service, but who would get the benefits of it anyway if it were provided as a public good

the study of the behavior and decision making of entire economies

the part of the economy that involves the transactions of individuals and businesses

goods and services provided by the government for free or at greatly reduced prices

the concerns of the people as a whole

requirements for companies to provide full information about their products

the total value of all final goods and services produced in a particular economy

an income level below that which is needed to support families or households

Identifying Key Terms
Match each term with the correct statement below.

a.	market failure	f.	public disclosure laws
b.	cash transfers	g.	business cycle
c.	public policy	h.	interest group
d.	externality	i.	microeconomics
e.	welfare	j.	poverty threshold

a private organization that tries to persuade public officials to act or vote in a certain way

10.

an economic side effect of a good or service that generates benefits or costs to someone other than the person deciding how much to produce or consume

11.

the study of the economic behavior and decision making of small units such as families, individuals, or businesses

12.

government aid to the poor

13.

a situation in which goods are not fairly distributed

14.

a period of macroeconomic expansion followed by a period of contraction

15.

laws and standards on topics of public interest

16.

an income level below that which is needed to support families or households

Identifying Key Terms
Match each term with the correct statement below.

a.	standard of living	f.	communism
b.	privatize	g.	laissez faire
c.	economic system	h.	collective
d.	self-interest	i.	product market
e.	safety net	j.	factor payments

17.

one’s own personal gain

18.

the method used by society to produce and distribute goods and services

19.

the income people receive for supplying such things as land, labor, or capital

20.

a situation in which households purchase the goods and services that firms produce

21.

the doctrine that government generally should not intervene in the marketplace

22.

to sell a state-run firm to individuals

23.

a large Soviet farm leased from the state to groups of peasant farmers

24.

level of economic prosperity

Identifying Key Terms
Match each term with the correct statement below.

a.	free enterprise	f.	socialism
b.	continuum	g.	transition
c.	incentive	h.	traditional economy
d.	safety net	i.	authoritarian
e.	collective	j.	standard of living

25.

a period of change in an economy

26.

government programs that protect people experiencing unfavorable economic conditions

27.

an economic system that permits the conduct of business with minimal government intervention

28.

an expectation that encourages people to behave in a certain way

29.

a philosophy based on the belief that democratic means should be used to distribute wealth evenly throughout a society

30.

a range with no clear divisions

31.

an economic system that relies on habit, custom, or ritual to decide questions of consumption and production of goods and services

32.

requiring strict obedience to someone such as a dictator

Multiple Choice
Identify the choice that best completes the statement or answers the question.

33.

Automakers are required to comply with public disclosure laws. What is one example of a requirement of these laws?

a.	Car dealers must prominently display a sticker with the fuel efficiency in the car window.
b.	Salespeople must be willing to sell cars to anyone who can afford them, regardless of gender, race, or ethnicity.
c.	Automakers must test all car models regularly for crash-worthiness.
d.	Salespeople must provide information about their competitors’ cars, so customers can make informed decisions.

34.

Which of the following is NOT a weakness of centrally planned economies?

a.	Workers lack incentives to be innovative.
b.	Consumers’ needs are generally not met.
c.	Most workers lack job security.
d.	Individual freedoms are sacrificed for societal goals.

35.

What best describes the role of government in a free enterprise system?

a.	Decide what companies will be formed and then allow the managers to run them.
b.	Control business activities.
c.	Allow individuals to operate their businesses in ways they think will maximize their profits.
d.	Require companies to disclose information to consumers.

36.

What is an important advantage of a free market?

a.	It does not change unless the government directs it.
b.	It offers a wide variety of goods and services.
c.	It is easy to regulate.
d.	It protects the less fortunate.

37.

How could the Chinese economy be characterized?

a.	free market
b.	centrally planned
c.	mixed, but on the side of free market
d.	mixed, but on the side of centrally planned

38.

What might be a hardship for citizens of a centrally planned economy making a transition to a market-based system?

a.	Only poor quality goods would be available to consumers, because manufacturers focused on quantity, not quality.
b.	Workers would lose job security and guaranteed incomes.
c.	Farmers would have to grow the crops that the government instructed them to.
d.	Entrepreneurs would have fewer opportunities to start new businesses.

39.

What incentive do manufacturers have to sell their products?

a.	pleasing the consumer	c.	popularity of the product
b.	making profits on sales	d.	putting others out of business

40.

Assume that the poverty threshold for a single parent with one child is $11,869 per year. Catrina is a single mother who works 40 hours per week. What hourly wage does she need to earn in order to rise above the poverty threshold?

a.	$5.07	c.	$5.15
b.	$5.71	d.	$5.47

41.

What is the struggle among various producers for the consumer’s business called?

a.	competition	c.	socialism
b.	incentive	d.	self-regulation

42.

A person who consumes a good or service but does not pay for it is called which of the following?

a.	a free rider	c.	a volunteer user
b.	an entrepreneur	d.	a private consumer

43.

What is the term for the total value of all goods and services produced in a particular economy?

a.	gross domestic product	c.	open market value
b.	standard of living	d.	net worth

44.

Each payday, some of your pay is withheld as payroll deductions for Social Security. What happens to the money that is withheld?

a.	It is redistributed as cash transfers to workers who are injured on the job.
b.	It is used to provide medical benefits to Americans over 65.
c.	It is redistributed as cash transfers to elderly and disabled people.
d.	It is put into an account under your name to earn interest until you retire.

45.

You will still be able to get public broadcasting whether or not you contribute to their fundraising campaign. You decide not to contribute. This is an example of the

a.	public sector problem.	c.	free-rider problem.
b.	externality problem.	d.	public good problem.

46.

A person who believed in the doctrine of laissez faire would disapprove of

a.	consumer sovereignty.
b.	self-interest as the motivating force in the free market.
c.	government funding of education.
d.	the invisible hand of the marketplace.

47.

What does the Temporary Assistance for Needy Families program provide?

a.	cash to the states to help run their welfare programs
b.	retirement income for the elderly
c.	cash to workers injured on the job
d.	compensation to all who lose jobs

48.

You read an article in a news magazine that explains how the economy expanded for several years, then went into a period of contraction. What was the subject of this article?

a.	voluntary exchange	c.	the business cycle
b.	the gross domestic product	d.	microeconomics

49.

You are an entrepreneur with an innovative idea for a new business. In which kind of economy would you have the most opportunity to try to achieve success?

a.	command economy	c.	traditional economy
b.	market economy	d.	economy of scale

50.

The U.S. Constitution guarantees certain rights that allow people to engage in business activities. Which of the following does the U.S. Constitution NOT guarantee?

a.	the right to make binding contracts
b.	the recognition and protection of private property rights
c.	a limitation on the kinds of taxes that Congress can impose
d.	the protection against monopolies and oligopolies

51.

Households pay firms for goods and services. Firms supply households with goods and services. The purchase and supply of goods and services takes place in the

a.	factor market.	c.	traditional market.
b.	product market.	d.	after market.

52.

What incentive motivates a manufacturer to sell a product?

a.	pleasing the consumer	c.	making profits on sales
b.	putting others out of business	d.	popularity of the product

53.

How would the economy of Canada be likely to be characterized?

a.	free market
b.	mixed, but on the side of free market
c.	centrally planned
d.	mixed, but on the side of centrally planned

54.

What protections does OSHA give to people in the United States?

a.	protection for certain key industries such as logging
b.	regulations about clean environment
c.	regulations on workplace safety and information about hazards in the workplace
d.	consumer protection in buying foods

55.

What effect does new technology usually have on an economy?

a.	It reduces the available jobs.
b.	It makes the economy stronger and more efficient.
c.	It slows an economy down for at least a while.
d.	It reduces the dependence of the economy on business.

56.

Which of the following goals is difficult to achieve in a pure free market system?

a.	economic equity	c.	economic freedom
b.	economic efficiency	d.	economic growth

57.

Which of the following is NOT characteristic of a centrally planned economy?

a.	Each person is assigned a job.
b.	The central government owns all land and capital.
c.	Each collective or factory sets its own goals.
d.	The central government makes all economic decisions.

58.

Which of the following is NOT a key economic question?

a.	What goods and services should be produced?
b.	How should these goods and services be produced?
c.	How should it be ensured that goods and services are paid for?
d.	Who consumes these goods and services?

59.

In what kind of an economy does the government make all the decisions?

a.	centrally planned	c.	laissez faire
b.	free enterprise	d.	socialist

60.

Why is legal equality important to the free enterprise system?

a.	Requiring all lawyers to obtain the same education will ensure that all business clients receive competent legal representation.
b.	Guaranteeing all people the same legal rights will maximize the use of human capital.
c.	Protecting legal equality makes sure that all people may decide what legal agreements they want to enter into.
d.	Ensuring that all businesses have the same legal rights will create healthy competition in the marketplace.

61.

Why does even a free market economy need some government intervention?

a.	to ensure that the government has the freedom to tax as necessary
b.	to provide for things that the marketplace does not address
c.	to make sure that the government can fulfill its needs for military personnel
d.	so that the government has some control over factor resources

62.

What is a positive externality?

a.	an extra payment to welfare recipients
b.	a way to generate trade that will benefit people who are from other countries
c.	a cash flow that will benefit both the government and the businesses who interact with it
d.	an economic side effect that generates unexpected benefits

63.

In 1996, a new federal welfare program called Temporary Assistance for Needy Families (TANF) began assisting poor families. Which of the following was NOT a provision of TANF?

a.	direct cash payments to recipients	c.	work incentives
b.	lifetime limit of benefits	d.	state-run welfare programs

64.

An externality is

a.	the amount a consumer pays to consume an additional amount of any particular good.
b.	the total cost to society of producing an additional unit of a good or service.
c.	an economic side effect of a good or service that generates benefits or costs to someone other than the person deciding how much to produce or consume.
d.	a situation in which the market, on its own, does not distribute resources efficiently.

65.

The economy of China is in transition. What does this mean?

a.	Investments are determined by state control instead of by private decision.
b.	The government rarely interferes in the free market and is highly receptive to foreign investment.
c.	Individual firms are in the process of being sold to the state.
d.	The economy is moving from central planning toward a market-based system.

66.

What is one of the most important advantages of a free market?

a.	It is easy to regulate.	c.	It can change rapidly.
b.	It encourages growth.	d.	It protects the less fortunate.

67.

Who was the leader that introduced communism and central planning to the former Soviet Union?

a.	Karl Marx	c.	Vladimir Lenin
b.	Friedrich Engels	d.	Joseph Stalin

68.

Any resources that are made by humans and used to create other goods and services are called

a.	labor.	c.	services.
b.	capital.	d.	production.

69.

What is the product market?

a.	the market in which households purchase the goods and services that firms produce
b.	the market in which payments are received for selling products to consumers
c.	the market in which firms purchase the factors of production from households
d.	the market in which income is received for supplying land, labor, or capital

70.

Which of the following is an advantage of a sole proprietorship?

a.	It is the least-regulated form of business organization.
b.	It is an easy way to make a lot of money.
c.	No one is responsible if it fails.
d.	It is easy to get financing to start one.

71.

Which of the following is the best example of a public good?

a.	movie theater	c.	country club
b.	shopping mall	d.	highway system

72.

What is the most effective way for consumers to make their desires known to businesses?

a.	through mail and phone surveys
b.	by the purchases they make
c.	by hiring lobbyists and joining consumer groups
d.	by protesting and boycotting products

73.

To stabilize the economy, policymakers try to achieve three main outcomes: high employment, steady growth, and

a.	consumer confidence.	c.	stable prices.
b.	competition.	d.	technological advancement.

74.

The government of a country must make a decision between increasing military spending and subsidizing wheat farmers. This kind of decision is a

a.	guns or butter issue.	c.	decision at the margin.
b.	basic economic decision.	d.	global trade-off.

75.

What is the purpose of competition?

a.	to cause buyers to have to be careful about spending their money
b.	to cause producers to attempt to put each other out of business
c.	to act as a motivating force behind the free market
d.	to act as a regulating force in the marketplace

76.

Why do markets exist?

a.	Markets ensure economic equity for all people.
b.	Markets provide self-sufficient people with public places for the exchange of ideas.
c.	Markets ensure that government does not intervene in the production of goods and services.
d.	Markets allow people to buy what they need to consume and sell the specialized goods and services they produce.

77.

What is one benefit provided by Social Security?

a.	retirement income for the elderly
b.	cash transfers to workers injured on the job
c.	medical care for the indigent
d.	compensation for all who lose jobs

78.

Collectives in the Soviet Union were inefficient producers of agricultural products. Why?

a.	Most farmers were poor and had to pay for their own equipment, seeds, and fertilizer out of their own pockets.
b.	The farms were too small to produce substantial crops.
c.	Soviet central planners ignored the farms in favor of factories producing consumer goods.
d.	Farm workers had guaranteed incomes, so they had few incentives to produce more or better crops.

79.

Which of the following does a government provide as part of a safety net for the people?

a.	regulation of commerce	c.	general elections every four years
b.	unemployment compensation	d.	a strong military defense

80.

Suppose there is a family in which all the boys are expected to become farmers when they are adults, just as their fathers and grandfathers did. In which kind of economy do they participate?

a.	centrally planned economy	c.	false economy
b.	traditional economy	d.	command economy

81.

The resources used to make all goods and services are the

a.	factors of production.	c.	production possibilities.
b.	opportunity costs.	d.	production trade-offs.

82.

Which of the following is a condition that most people would NOT expect the safety net of the government to provide for?

a.	joblessness	c.	low income
b.	natural disasters	d.	injuries

83.

Which of the following is NOT an example of a public good?

a.	municipal libraries	c.	national parks
b.	shopping malls	d.	highways

84.

A large telephone company has hired lobbyists to try to persuade lawmakers to reduce governmental regulation over the telecommunications industry. Why might the company do this?

a.	Some regulations are costly to implement and cut into profits.
b.	Certain regulations result in rapid business growth, which some companies find difficult to handle.
c.	Many regulations promote too much competition, driving down prices.
d.	All of the above

85.

Jeff and Margaret qualify for Section 8 housing, a subsidized housing program from the federal government. What kind of benefit are they receiving?

a.	in-kind benefit	c.	faith-based initiative
b.	cash transfer	d.	Social Security benefit

86.

In which of the following lists of mixed economies does the market system dominate?

a.	Cuba, Greece, China, United States
b.	Russia, Peru, France, Canada
c.	United States, United Kingdom, Singapore, Hong Kong
d.	France, Canada, South Africa, United Kingdom

87.

A government prints and distributes posters to inspire workers to increase their productivity. In which kind of economy does this most likely take place?

a.	centrally planned economy	c.	market economy
b.	weak economy	d.	traditional economy

88.

Which of the following is characteristic of a traditional economy?

a.	They have a high standard of living.
b.	Children tend to have the same jobs as their parents did.
c.	Communities tend to be fast-growing.
d.	They are usually based on light industrial production.

89.

What is the major difference between a corporation and other kinds of businesses?

a.	A corporation is not responsible for its debts if it fails.
b.	A corporation is much larger than other kinds of businesses.
c.	A corporation has a separate entity apart from that of the owners and workers.
d.	A corporation has officers who are responsible for the business.

90.

What does the process of specialization do for an economy?

a.	It makes it easier to control.	c.	It makes it more efficient.
b.	It fosters competition.	d.	It eliminates unemployment.

91.

Why does the government protect inventors and authors by offering them patents and copyrights?

a.	to regulate the business cycle	c.	to encourage free trade
b.	to strengthen American culture	d.	to promote innovation

92.

A person believes that real equality can only exist when political equality is coupled with economic equality. This person believes that democratic means should be used to distribute wealth evenly throughout society. This person is a

a.	communist.	c.	socialist.
b.	capitalist.	d.	authoritarian.

93.

Which of the following is a private organization that attempts to influence public officials to act or vote in ways that will benefit the group’s members?

a.	market research group	c.	free enterprise group
b.	public policy group	d.	interest group

94.

What is the function of an economic system?

a.	to make sure all people have equal access to goods
b.	to produce and distribute goods and services
c.	to make sure people are paid for their labor
d.	to give all producers the same access to consumers

95.

Which of the following is a critical rule for determining whether something is a public good?

a.	The total benefits to society are greater than the total cost.
b.	The total cost is small for each individual taxpayer.
c.	The benefit to each individual who uses the facility is greater than the cost.
d.	The benefits of the facility are greater for the society than for the individuals using it.

96.

Which of the following was a free market philosopher?

a.	Friedrich Engels	c.	Vladimir Lenin
b.	Adam Smith	d.	Karl Marx

97.

Why does the government use its powers to make sure that businesses disclose so much information to the public?

a.	to make it easy for businesses to have good information
b.	to make it hard for businesses to make an excess profit
c.	to make it easier for consumers to save money
d.	to make buyers more knowledgeable and safer

98.

What is the motivating force behind the free market?

a.	the invisible hand	c.	competition
b.	specialization	d.	self-interest

99.

A new runway has opened up at the airport, and the flight path goes directly over your apartment. The noise of the airplanes is a

a.	positive externality.	c.	market failure.
b.	free-rider problem.	d.	negative externality.

100.

What is the difference between a business cycle and the day-to-day ups and downs of the market?

a.	A business cycle is a major, prolonged fluctuation rather than a day-to-day movement.
b.	The day-to-day ups and downs of the market can be much more extreme than a business cycle.
c.	The day-to-day fluctuations are more likely to have an impact on people’s finances.
d.	A business cycle is usually more restricted, whereas market fluctuations are worldwide.