1. Which one of the following is a distinguishing feature of a command system?
A. Widespread dispersion of economic power
B. Central planning
C. Private ownership of all capital
D. Heavy reliance on markets
2. Which one of the following statements about the budget line is correct?
A. The budget line shows all possible combinations of two goods that can be purchased, given money income and the prices of the goods.
B. The budget line shows the minimum amount of two goods that a consumer can purchase with a given money income.
C. The budget line shows the amount of product A that a consumer is willing to give up to obtain one more unit of product B.
D. The budget line shows all possible combinations of two goods that yield the same level of utility to the consumer.
3. The U.S. Food Stamp program, which provides coupons that allow low-income individuals to buy food,is an illustration of
A. the stabilization function of government.
B. public provision of a suitable legal framework for the market system.
C. a government action designed to enhance competition.
D. the redistributional function of government.
4. Taxes on commodities or on purchases are known as _______ taxes.
A. personal income
C. sales and excise
D. corporate income
5. Which one of the following statements about the competitive market system is correct?
A. The competitive market system discourages innovation because firms want to get all the profits possible from existing machinery and equipment.
B. The competitive market system encourages innovation because government provides tax breaks and subsidies to those who develop new products or new productive techniques.
C. The competitive market system discourages innovation because it’s difficult to acquire additional capital in the form of newmachinery and equipment.
D. The competitive market system encourages innovation because successful innovators are rewarded with economic profits.
6. The coincidence-of-wants problem associated with barter refers to the fact that
A. buyers in resource markets and sellers in product markets can never engage in exchange.
B. money must be used as a medium of exchange, or trade will never occur.
C. specialization is restricted by the size or scope of a market.
D. for exchange to occur, each seller must have a product that some buyer wants.
7. Black markets are associated with _______ and the resulting product _______.
A. ceiling prices, surpluses
B. price floors, shortages
C. price floors, surpluses
D. ceiling prices, shortages
8. In terms of the circular flow diagram, businesses obtain revenue through the _______ market and make expenditures in the _______ market.
A. product; resource
B. resource; product
C. capital; product
D. product; financial
9. Which one of the following statements about a price floor is correct?
A. A price floor means that the government is imposing a maximum legal price that is typically below the equilibrium price.
B. A price floor means that sellers are artificially restricting supply to raise price.
C. A price floor means that the government is imposing a minimum legal price that is typically above the equilibrium price.
D. A price floor means that inflation is severe in this particular market.
10. Which one of the following is not an important source of revenue for the federal government?
A. Payroll taxes
B. Personal income taxes
C. Property taxes
D. Corporate income taxes
11. The law of increasing opportunity costs states that
A. if the prices of all the resources used to produce goods increase, the cost of producing any particular good will increase at the same rate.
B. if the sum of the costs of producing a particular good rises by a specified percent, the price of that good must rise by a greater relative amount.
C. if society wants to produce more of a particular good, it must sacrifice larger and larger amounts of other goods to do so.
D. the sum of the costs of producing a particular good can’t rise above the current market price of that good.
12. The introduction and use of the euro is expected to increase
A. poverty substantially in Euro Zone nations.
B. the rate of inflation slightly in the Euro Zone nations.
C. income inequality within the Euro Zone nations.
D. international trade among the Euro Zone nations.
13. When the price of a product increases, a consumer is able to buy less of it with a given money income.
This describes the _______ effect.
14. Which one of the following has been an outcome of the North American Free Trade Agreement (NAFTA)?
A. Increased trade among Canada, Mexico, and the United States
B. A lower standard of living in Canada, Mexico, and the United States
C. Lower wages in the United States and Canada
D. Lower wages and reduced employment in Mexico
15. Macroeconomics approaches the study of economics from the viewpoint of
A. individual firms.
B. governmental units.
C. the entire economy.
D. the operation of specific product and resource markets.
16. Which one of the following statements correctly describes the term laissez-faire?
B. Land and other natural resources should be publicly owned, but capital equipment should be privately owned.
C. Government action is necessary if the economy is to achieve full employment and full production.
D. Land and other natural resources should be privately owned, but capital should be publicly owned.
17. Income data that show how total income is distributed as wages, rents, interest, and profits describe the_______ distribution of income.
18. Money is not considered to be an economic resource because
A. money isn’t a free gift of nature.
B. idle money balances don’t earn interest income.
C. it isn’t scarce.
D. money, as such, isn’t productive.
19. If the equilibrium exchange rate changes so that it takes more dollars to buy a British pound, then
A. the British will buy fewer U.S. goods.
B. the dollar has depreciated in value.
C. Americans will import more British goods.
D. the dollar has appreciated in value.
20. The advantages of the corporate form of business include
A. the ability to raise financial capital by selling stocks and bonds.
B. the elimination of the principal-agent problem.
C. the fact that owners are subject to unlimited liability.
D. single taxation of corporate earnings.