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ECON FINAL 100 B

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

 1. 
What incentive do manufacturers have to sell their products?
a.
pleasing the consumer
c.
popularity of the product
b.
putting others out of business
d.
making profits on sales
 

 2. 
Which of the following is an advantage of a sole proprietorship?
a.
It is the least-regulated form of business organization.
b.
No one is responsible if it fails.
c.
It is easy to get financing to start one.
d.
It is an easy way to make a lot of money.
 

 3. 
What effect does new technology usually have on an economy?
a.
It makes the economy stronger and more efficient.
b.
It reduces the available jobs.
c.
It slows an economy down for at least a while.
d.
It reduces the dependence of the economy on business.
 

 4. 
Which of the following does a government provide as part of a safety net for the people?
a.
general elections every four years
c.
regulation of commerce
b.
unemployment compensation
d.
a strong military defense
 

 5. 
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.
externality problem.
c.
free-rider problem.
b.
public good problem.
d.
public sector problem.
 

 6. 
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.
economy of scale
b.
market economy
d.
traditional economy
 

 7. 
A person who believed in the doctrine of laissez faire would disapprove of
a.
consumer sovereignty.
b.
government funding of education.
c.
self-interest as the motivating force in the free market.
d.
the invisible hand of the marketplace.
 

 8. 
To stabilize the economy, policymakers try to achieve three main outcomes: high employment, steady growth, and
a.
competition.
c.
technological advancement.
b.
consumer confidence.
d.
stable prices.
 

 9. 
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.
$5.15
c.
$5.47
b.
$5.07
d.
$5.71
 

 10. 
What is an important advantage of a free market?
a.
It protects the less fortunate.
b.
It is easy to regulate.
c.
It does not change unless the government directs it.
d.
It offers a wide variety of goods and services.
 

 11. 
The economy of China is in transition. What does this mean?
a.
The government rarely interferes in the free market and is highly receptive to foreign investment.
b.
Investments are determined by state control instead of by private decision.
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.
 

 12. 
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.
the business cycle
c.
microeconomics
b.
voluntary exchange
d.
the gross domestic product
 

 13. 
What is the product market?
a.
the market in which income is received for supplying land, labor, or capital
b.
the market in which households purchase the goods and services that firms produce
c.
the market in which payments are received for selling products to consumers
d.
the market in which firms purchase the factors of production from households
 

 14. 
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.
 

 15. 
Which of the following goals is difficult to achieve in a pure free market system?
a.
economic equity
c.
economic growth
b.
economic freedom
d.
economic efficiency
 

 16. 
What is the major difference between a corporation and other kinds of businesses?
a.
A corporation has a separate entity apart from that of the owners and workers.
b.
A corporation is much larger than other kinds of businesses.
c.
A corporation is not responsible for its debts if it fails.
d.
A corporation has officers who are responsible for the business.
 

 17. 
The government of a country must make a decision between increasing military spending and subsidizing wheat farmers. This kind of decision is a
a.
basic economic decision.
c.
guns or butter issue.
b.
decision at the margin.
d.
global trade-off.
 

 18. 
What is the most effective way for consumers to make their desires known to businesses?
a.
by the purchases they make
b.
by protesting and boycotting products
c.
by hiring lobbyists and joining consumer groups
d.
through mail and phone surveys
 

 19. 
Why does even a free market economy need some government intervention?
a.
so that the government has some control over factor resources
b.
to make sure that the government can fulfill its needs for military personnel
c.
to provide for things that the marketplace does not address
d.
to ensure that the government has the freedom to tax as necessary
 

 20. 
What is the term for the total value of all goods and services produced in a particular economy?
a.
open market value
c.
net worth
b.
gross domestic product
d.
standard of living
 

 21. 
What does the process of specialization do for an economy?
a.
It eliminates unemployment.
c.
It makes it easier to control.
b.
It fosters competition.
d.
It makes it more efficient.
 

 22. 
What best describes the role of government in a free enterprise system?
a.
Require companies to disclose information to consumers.
b.
Allow individuals to operate their businesses in ways they think will maximize their profits.
c.
Control business activities.
d.
Decide what companies will be formed and then allow the managers to run them.
 

 23. 
Collectives in the Soviet Union were inefficient producers of agricultural products. Why?
a.
Farm workers had guaranteed incomes, so they had few incentives to produce more or better crops.
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.
Most farmers were poor and had to pay for their own equipment, seeds, and fertilizer out of their own pockets.
 

 24. 
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
 

 25. 
Which of the following is NOT a key economic question?
a.
How should these goods and services be produced?
b.
How should it be ensured that goods and services are paid for?
c.
What goods and services should be produced?
d.
Who consumes these goods and services?
 

 26. 
Any resources that are made by humans and used to create other goods and services are called
a.
labor.
c.
production.
b.
services.
d.
capital.
 

 27. 
What is a positive externality?
a.
an economic side effect that generates unexpected benefits
b.
a way to generate trade that will benefit people who are from other countries
c.
an extra payment to welfare recipients
d.
a cash flow that will benefit both the government and the businesses who interact with it
 

 28. 
How could the Chinese economy be characterized?
a.
mixed, but on the side of centrally planned
b.
free market
c.
centrally planned
d.
mixed, but on the side of free market
 

 29. 
Who was the leader that introduced communism and central planning to the former Soviet Union?
a.
Friedrich Engels
c.
Karl Marx
b.
Joseph Stalin
d.
Vladimir Lenin
 

 30. 
How would the economy of Canada be likely to be characterized?
a.
centrally planned
b.
free market
c.
mixed, but on the side of free market
d.
mixed, but on the side of centrally planned
 

 31. 
What protections does OSHA give to people in the United States?
a.
protection for certain key industries such as logging
b.
regulations on workplace safety and information about hazards in the workplace
c.
regulations about clean environment
d.
consumer protection in buying foods
 

 32. 
In what kind of an economy does the government make all the decisions?
a.
centrally planned
c.
socialist
b.
laissez faire
d.
free enterprise
 

 33. 
Which of the following is NOT characteristic of a centrally planned economy?
a.
The central government owns all land and capital.
b.
Each person is assigned a job.
c.
Each collective or factory sets its own goals.
d.
The central government makes all economic decisions.
 

 34. 
What is one benefit provided by Social Security?
a.
compensation for all who lose jobs
b.
cash transfers to workers injured on the job
c.
medical care for the indigent
d.
retirement income for the elderly
 

 35. 
Which of the following is a condition that most people would NOT expect the safety net of the government to provide for?
a.
natural disasters
c.
low income
b.
joblessness
d.
injuries
 

 36. 
In which of the following lists of mixed economies does the market system dominate?
a.
Russia, Peru, France, Canada
b.
United States, United Kingdom, Singapore, Hong Kong
c.
Cuba, Greece, China, United States
d.
France, Canada, South Africa, United Kingdom
 

 37. 
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.
traditional market.
c.
factor market.
b.
after market.
d.
product market.
 

 38. 
Why do markets exist?
a.
Markets provide self-sufficient people with public places for the exchange of ideas.
b.
Markets ensure that government does not intervene in the production of goods and services.
c.
Markets allow people to buy what they need to consume and sell the specialized goods and services they produce.
d.
Markets ensure economic equity for all people.
 

 39. 
Which of the following is the best example of a public good?
a.
shopping mall
c.
highway system
b.
country club
d.
movie theater
 

 40. 
Which of the following is characteristic of a traditional economy?
a.
Children tend to have the same jobs as their parents did.
b.
They are usually based on light industrial production.
c.
Communities tend to be fast-growing.
d.
They have a high standard of living.
 

 41. 
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.
public policy group
c.
free enterprise group
b.
interest group
d.
market research group
 

 42. 
Which of the following is NOT a weakness of centrally planned economies?
a.
Individual freedoms are sacrificed for societal goals.
b.
Most workers lack job security.
c.
Consumers’ needs are generally not met.
d.
Workers lack incentives to be innovative.
 

 43. 
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.
state-run welfare programs
c.
lifetime limit of benefits
b.
work incentives
d.
direct cash payments to recipients
 

 44. 
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.
Automakers must test all car models regularly for crash-worthiness.
c.
Salespeople must be willing to sell cars to anyone who can afford them, regardless of gender, race, or ethnicity.
d.
Salespeople must provide information about their competitors’ cars, so customers can make informed decisions.
 

 45. 
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 protection against monopolies and oligopolies
b.
a limitation on the kinds of taxes that Congress can impose
c.
the recognition and protection of private property rights
d.
the right to make binding contracts
 

 46. 
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.
traditional economy
c.
centrally planned economy
b.
false economy
d.
command economy
 

 47. 
Why is legal equality important to the free enterprise system?
a.
Ensuring that all businesses have the same legal rights will create healthy competition in the marketplace.
b.
Protecting legal equality makes sure that all people may decide what legal agreements they want to enter into.
c.
Guaranteeing all people the same legal rights will maximize the use of human capital.
d.
Requiring all lawyers to obtain the same education will ensure that all business clients receive competent legal representation.
 

 48. 
What is the purpose of competition?
a.
to cause buyers to have to be careful about spending their money
b.
to act as a motivating force behind the free market
c.
to cause producers to attempt to put each other out of business
d.
to act as a regulating force in the marketplace
 

 49. 
What is one of the most important advantages of a free market?
a.
It is easy to regulate.
c.
It encourages growth.
b.
It can change rapidly.
d.
It protects the less fortunate.
 

 50. 
Which of the following is NOT an example of a public good?
a.
shopping malls
c.
national parks
b.
municipal libraries
d.
highways
 

 51. 
The resources used to make all goods and services are the
a.
opportunity costs.
c.
production possibilities.
b.
factors of production.
d.
production trade-offs.
 

 52. 
Why does the government protect inventors and authors by offering them patents and copyrights?
a.
to strengthen American culture
c.
to regulate the business cycle
b.
to encourage free trade
d.
to promote innovation
 

 53. 
Why does the government use its powers to make sure that businesses disclose so much information to the public?
a.
to make it easier for consumers to save money
b.
to make it hard for businesses to make an excess profit
c.
to make buyers more knowledgeable and safer
d.
to make it easy for businesses to have good information
 

 54. 
Which of the following is a critical rule for determining whether something is a public good?
a.
The benefit to each individual who uses the facility is greater than the cost.
b.
The total cost is small for each individual taxpayer.
c.
The total benefits to society are greater than the total cost.
d.
The benefits of the facility are greater for the society than for the individuals using it.
 

 55. 
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.
socialist.
c.
capitalist.
b.
communist.
d.
authoritarian.
 

 56. 
Which of the following was a free market philosopher?
a.
Karl Marx
c.
Vladimir Lenin
b.
Adam Smith
d.
Friedrich Engels
 

 57. 
What is the function of an economic system?
a.
to make sure people are paid for their labor
b.
to give all producers the same access to consumers
c.
to produce and distribute goods and services
d.
to make sure all people have equal access to goods
 

 58. 
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 used to provide medical benefits to Americans over 65.
b.
It is put into an account under your name to earn interest until you retire.
c.
It is redistributed as cash transfers to elderly and disabled people.
d.
It is redistributed as cash transfers to workers who are injured on the job.
 

 59. 
What is the struggle among various producers for the consumer’s business called?
a.
competition
c.
socialism
b.
incentive
d.
self-regulation
 

 60. 
A person who consumes a good or service but does not pay for it is called which of the following?
a.
a private consumer
c.
a free rider
b.
a volunteer user
d.
an entrepreneur
 

 61. 
What is the motivating force behind the free market?
a.
self-interest
c.
competition
b.
specialization
d.
the invisible hand
 

 62. 
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
 

 63. 
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.
Many regulations promote too much competition, driving down prices.
c.
Certain regulations result in rapid business growth, which some companies find difficult to handle.
d.
All of the above
 

 64. 
An externality is
a.
the amount a consumer pays to consume an additional amount of any particular good.
b.
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.
c.
the total cost to society of producing an additional unit of a good or service.
d.
a situation in which the market, on its own, does not distribute resources efficiently.
 

 65. 
Jeff and Margaret qualify for Section 8 housing, a subsidized housing program from the federal government. What kind of benefit are they receiving?
a.
faith-based initiative
c.
in-kind benefit
b.
cash transfer
d.
Social Security benefit
 

 66. 
What might be a hardship for citizens of a centrally planned economy making a transition to a market-based system?
a.
Entrepreneurs would have fewer opportunities to start new businesses.
b.
Workers would lose job security and guaranteed incomes.
c.
Farmers would have to grow the crops that the government instructed them to.
d.
Only poor quality goods would be available to consumers, because manufacturers focused on quantity, not quality.
 

 67. 
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.
traditional economy
c.
weak economy
b.
centrally planned economy
d.
market economy
 

 68. 
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.
market failure.
c.
free-rider problem.
b.
negative externality.
d.
positive externality.
 

Matching
 
 
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
 

 69. 

 level of economic prosperity
 

 70. 

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

 71. 

 one’s own personal gain
 

 72. 

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

 73. 

 to sell a state-run firm to individuals
 

 74. 

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

 75. 

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

 76. 

 the doctrine that government generally should not intervene in the marketplace
 
 
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
 

 77. 

 laws and standards on topics of public interest
 

 78. 

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

 79. 

 a situation in which goods are not fairly distributed
 

 80. 

 a period of macroeconomic expansion followed by a period of contraction
 

 81. 

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

 82. 

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

 83. 

 government aid to the poor
 

 84. 

 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
 
 
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
 

 85. 

 government programs that protect people experiencing unfavorable economic conditions
 

 86. 

 requiring strict obedience to someone such as a dictator
 

 87. 

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

 88. 

 a period of change in an economy
 

 89. 

 a range with no clear divisions
 

 90. 

 an expectation that encourages people to behave in a certain way
 

 91. 

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

 92. 

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

 93. 

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

 94. 

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

 95. 

 requirements for companies to provide full information about their products
 

 96. 

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

 97. 

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

 98. 

 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
 

 99. 

 the study of the behavior and decision making of entire economies
 

 100. 

 the concerns of the people as a whole
 



 
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