Principles of Economics 2e Chapters 1-8 Test Bank

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Principles of Economics 2e Chapters 1-8 Test Bank In countries like _____________ the command economy predominates. A. China and Vietnam B. Cuba and North Korea C. South Africa and Kenya D. G... ermany and France - ANSWER B. Cuba and North Korea . In which of the following countries will the national government have the greatest influence with respect to the nation's economy? A. China B. Cuba C. Canada D. Chile - ANSWER B. Cuba . In a command economy, the __________ either makes most economic decisions itself or at least strongly influences how the decisions are made. A. government B. market C. firm D. business sector - ANSWER A. government Because of their relatively small national economies, which of the following is most likely considered to be the most important factor for Belgium, Korea, and Canada to take full advantage of specialization? A. division of labor B. international trade C. economies of scale D. command economy - ANSWER B. international trade . In a discussion of economics, which of the following would exert the most influence on an individual firm's decision to hire workers? A. wage levels B. the macroeconomy C. the firm's income D. household income - ANSWER B. the macroeconomy . In a _______________________, most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers. A. market-oriented economy B. macroeconomy C. microeconomy D. command economy - ANSWER A. market-oriented economy Which of the following best denotes the reason for the existence of substantial black markets? A. a market-oriented economy B. a command economy C. government laws and rules D. the microeconomy - ANSWER B. a command economy . Which of the following is generally accepted as a valid criticism of the production of useful goods and services? A. government involvement B. the black market C. environmental pollution D. economic freedom - ANSWER C. environmental pollution In the first chapter of The Wealth of Nations, Smith introduces the idea of the __________, which means the way in which the work required to produce a good or service is divided into a number of tasks that are performed by different workers. A. division of labor B. interconnected economy C. task economy D. modern economy - ANSWER A. division of labor If macroeconomics looks at the economy as a whole, it focuses on which of the following? A. households B. business firms C. unemployed people D. the division of labor - ANSWER C. unemployed people In the ____________, households work and receive payment from firms. A. financial investment market B. financial capital market C. labor market D. savings market - ANSWER C. labor market In the ______________, households receive goods and services and pay firms for them. A. labor market B. financial capital market C. goods and services market D. savings market - ANSWER C. goods and services market Which of the following best describes a monetary policy tool? A. interest rates B. taxes C. household savings D. government spending - ANSWER A. interest rates . Which of the following best describes a fiscal policy tool? A. government spending B. bank lending C. financial capital markets D. household spending - ANSWER A. government spending The two main tools of macroeconomic policy include monetary policy, and fiscal policy, which involves __________ spending. A. business B. government C. household D. capital market - ANSWER B. government When nations desire a healthy macroeconomy, they typically focus on three goals, one of these being: A. balanced budget B. prudent monetary policy C. low inflation D. assuring competition between firms v - ANSWER C. low inflation The basic difference between macroeconomics and microeconomics is: A. microeconomics concentrates on individual markets while macroeconomics focuses primarily on international trade. B. microeconomics concentrates on the behaviour of individual consumers while macroeconomics focuses on the behaviour of firms. C. microeconomics concentrates on the behaviour of individual consumers and firms while macroeconomics focuses on the performance of the entire economy. D. microeconomics explores the causes of inflation while macroeconomics focuses on the causes of unemployment. - ANSWER C. microeconomics concentrates on the behaviour of individual consumers and firms while macroeconomics focuses on the performance of the entire economy. Which of the following is most likely a topic of discussion in macroeconomics? A. an increase in the price of a hamburger B. a decrease in the production of DVD players by a consumer electronics company C. an increase in the wage rate paid to automobile workers D. a decrease in the unemployment rate - ANSWER D. a decrease in the unemployment rate Which of the following statements most likely lies within the realm of microeconomics? A. Unemployment rises during a recession and falls during an expansion. B. An increase in government spending will increase the aggregate demand for goods and services in the economy. C. A rapid acceleration of the supply of money may create inflation. D. An increase in labor costs will increase the additional cost of producing another bus. - ANSWER D. An increase in labor costs will increase the additional cost of producing another bus. . Macroeconomic topics do not usually include: A. the profit maximizing decisions of an individual manufacturer. B. the rate of inflation. C. the rate of unemployment. D. economic growth. - ANSWER A. the profit maximizing decisions of an individual manufacturer. Specialization: A. leads to greater self-sufficiency. B. can lead to an increase in overall production. C. allows workers to develop skills by working on a large number of tasks D. is always the result of an inefficient use of resources - ANSWER B. can lead to an increase in overall production. In a market-oriented economy, the amount of a good that is produced is primarily decided by the interaction of: A. all consumers. B. buyers and sellers. C. producers and input suppliers. D. producers and government planning committees. - ANSWER B. buyers and sellers. Which of the following statements most likely lies within the realm of macroeconomics? A. An increase in the price of automobiles will lead to a decrease in the quantity of automobiles demanded. B. Due to process innovations in computer chip manufacturing, the market supply of computers increased. C. Due to an economic recession, manufacturing firms began implementing layoffs of their workforces. D. Anticipating that the benefits would outweigh costs involved, an undergraduate student purchases the course textbook. - ANSWER C. Due to an economic recession, manufacturing firms began implementing layoffs of their workforces. Which of the following lies primarily within the realm of macroeconomics? A. a study of the demand for gasoline B. a study of how tax cuts stimulate aggregate production C. an analysis of supply and demand conditions in the electricity market D. a study of the impact of "mad cow" disease on the price of beef worldwide - ANSWER B. a study of how tax cuts stimulate aggregate production Macroeconomics: A. is concerned with the expansion of a small business into a large corporation. B. is narrower in scope than microeconomics. C. analyzes mergers and acquisitions between firms. D. is concerned with the expansion and contraction of the overall economy. - ANSWER D. is concerned with the expansion and contraction of the overall economy. The basic difference between macroeconomics and microeconomics is that: A. microeconomics looks at the forest (aggregate markets) while macroeconomics looks at the trees (individual markets). B. macroeconomics is concerned with groups of individuals while microeconomics is concerned with single countries. C. microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets). D. macroeconomics is concerned with generalization while microeconomics is concerned with specialization. - ANSWER C. microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets). The circular flow diagram of economic activity is a model of the: A. flow of goods, services, and payments between households and firms. B. influence of government on business behaviour. C. role of unions and government in the economy. D. interaction among taxes, prices, and profits. - ANSWER A. flow of goods, services, and payments between households and firms. Which of the following best characterizes the circular flow of income? A. Businesses buy resources from the government, and households buy goods and services from businesses. B. Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses. C. The government purchases resources from businesses and households and then sells goods and services to businesses and households. D. Households buy factors of production from businesses, and businesses buy goods and services from households. - ANSWER B. Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses. In the circular flow diagram model: A. households receive income from businesses in exchange for providing inputs and use that income to buy goods and services from businesses. B. businesses receive revenues from households in exchange for providing goods and services and use those revenues to buy inputs from households. C. households receive revenue for selling goods and services to businesses, and use that revenue to buy inputs from businesses. D. Both (a) and (b) are correct. - ANSWER D. Both (a) and (b) are correct. Regardless of whether you are looking through the microeconomics microscope or the macroeconomics telescope, the fundamental subject material of the interconnected __________ doesn't change. A. market B. economy C. production D. firm - ANSWER B. economy . _____________ - a term referring to the fact that for many goods, as the level of production increases, the average cost of producing each individual unit declines. A. Skill B. Specialization C. Economies of scale D. Division of labor - ANSWER C. Economies of scale Economic models like the _____________________ are not physical models, but instead are diagrams or graphs or even mathematical equations that represent economic patterns or theories. A. financial capital market B. circular flow diagram C. financial investment market D. Specialization Model - ANSWER B. circular flow diagram Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________s, which describe how the world should be. A. normative statement B. budget constraint C. trade-off D. opportunity cost - ANSWER A. normative statement Attending college is a case where the ________________ exceeds the monetary cost. A. budget constraint B. marginal analysis C. opportunity cost D. marginal utility - ANSWER C. opportunity cost As depicted in _________________________________, it is necessary to give up some of one good to gain more of the other good. A. the production possibilities frontier B. allocative efficiency C. scarcity D. utility - ANSWER A. the production possibilities frontier Why is there scarcity? A. Because the opportunity set determines this. B. Because theory dictates it. C. Because our unlimited wants exceed our limited resources D. Because human wants are limited. - ANSWER C. Because our unlimited wants exceed our limited resources Scarcity exists because of: A. the market mechanism. B. specialization and division of labor. C. the allocation of goods by prices D. unlimited wants and limited resources. - ANSWER D. unlimited wants and limited resources. Scarcity implies that: A. consumers would be willing to purchase the same quantity of a good at a higher price. B. it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available. C. at the current market price, consumers are willing to purchase more of a good than suppliers are willing to produce. D. consumers are too poor to afford the goods and services available. - ANSWER B. it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available Gomer decides to spend an hour playing basketball rather than studying. His opportunity cost is: A. nothing, because he enjoys playing basketball more than studying. B. the increase in skill he obtains from playing basketball for that hour. C. the benefit to his grades from studying for an hour D. nothing, because he had a free pass into the sports complex to play basketball. - ANSWER C. the benefit to his grades from studying for an hour "If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is: A. $0 B. $4 C. $40 D. $44 - ANSWER D. $44 The opportunity cost of attending university is likely to include all except which of the following? A. the cost of haircuts received during the school term B. the income you forgo in order to attend classes C. tuition fees D. the cost of required textbooks - ANSWER A. the cost of haircuts received during the school term . The opportunity cost of an action: A. can be determined by considering both the benefits that flow from as well as the monetary costs incurred as a result of the action. B. can be determined by adding up the bills incurred as a result of the action. C. can be objectively determined only by economists. D. is a subjective valuation that can be determined only by the individual who chooses the action. - ANSWER D. is a subjective valuation that can be determined only by the individual who chooses the action. The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good. A. personal preference B. utility level C. budget constraint D. opportunity set - ANSWER C. budget constraint Most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good. A. utility B. marginal analysis C. the budget constraint D. consumption - ANSWER B. marginal analysis Marginal thinking is best demonstrated by: A. choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time. [Show More]

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