Download 2013 Semester Exam Review Part 1

The reason people must choose which
goods to buy and consume is:
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-specialization
Scarcity
An abundance of free resources
People engaging in exchange
The reason people must choose which
goods to buy and consume is:
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-specialization
Scarcity
An abundance of free resources
People engaging in exchange
Decide the amount of each resource to produce.
Analyze how labor intensive it will be to produce.
Analyze how capital intensive it will be to produce.
• These statements are closely related to which
of the basic economic questions:
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What to produce.
For whom to produce
How to produce
What to sell
Decide the amount of each resource to produce.
Analyze how labor intensive it will be to produce.
Analyze how capital intensive it will be to produce.
• These statements are closely related to which
of the basic economic questions:
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What to produce.
For whom to produce
How to produce
What to sell
Entrepreneurs are people who• Put together land, labor, and capital to create
new businesses
• Help settle labor disputes
• Work on the floor of the stock exchange
• Produce all of a country’s guns and butter
Entrepreneurs are people who• Put together land, labor, and capital to create
new businesses
• Help settle labor disputes
• Work on the floor of the stock exchange
• Produce all of a country’s guns and butter
The circular flow model emphasizes:
• The relationship of buyers and sellers within a
market
• The government collection of taxes from firms
• The government purchases of goods from
producers
• Firms selling resources to households
The circular flow model emphasizes:
• The relationship of buyers and sellers within a
market
• The government collection of taxes from firms
• The government purchases of goods from
producers
• Firms selling resources to households
Imagine that households decide to increase their
spending. Based on the circular-flow model, how
would this event be reflected in the economy?
• It would increase revenue for firms and the
government
• It would increase current purchasing power
and cause expansion
• It would withdraw income, or current
purchasing power, from the system
• It would increase the amount of imports
purchased by consumers
Imagine that households decide to increase their
spending. Based on the circular-flow model, how
would this event be reflected in the economy?
• It would increase revenue for firms and the
government
• It would increase current purchasing power
and cause expansion
• It would withdraw income, or current
purchasing power, from the system
• It would increase the amount of imports
purchased by consumers
What does it mean that a company is going public?
• The company takes large loans from the
government
• The company holds a press conference to
release new products
• The company sells ownership shares,
otherwise known as stock, to the general
public.
• The company sells bonds to the general public
What does it mean that a company is going public?
• The company takes large loans from the
government
• The company holds a press conference to
release new products
• The company sells ownership shares,
otherwise known as stock, to the general
public.
• The company sells bonds to the general public
The U.S. free enterprise system encourages private
property ownership through-
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Restrictions on occupational choices
Limits on competition
Increased government regulation
Tax incentives for homeowners
The U.S. free enterprise system encourages private
property ownership through-
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Restrictions on occupational choices
Limits on competition
Increased government regulation
Tax incentives for homeowners
Opportunity costs arise in production because-
• Resources must be shifted away from
producing one good in order to produce
another
• Resources are unlimited
• Monetary costs of inputs usually outweigh
non-monetary costs
• Wants are limited in society
Opportunity costs arise in production because-
• Resources must be shifted away from
producing one good in order to produce
another
• Resources are unlimited
• Monetary costs of inputs usually outweigh
non-monetary costs
• Wants are limited in society
What are the three basic economic questions a
free market economy answers?
• What to produce, how much to produce,
when to produce
• What to produce, how to produce, how much
to produce
• What to produce, how to produce, and for
whom to produce
• How to produce, how much to produce, and
for whom to produce
What are the three basic economic questions a
free market economy answers?
• What to produce, how much to produce,
when to produce
• What to produce, how to produce, how much
to produce
• What to produce, how to produce, and for
whom to produce
• How to produce, how much to produce, and
for whom to produce
Which is a unique characteristic of corporations?
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Lack of special taxation
Limited life
Enjoys the legal rights of an individual
Subject to less regulations
Which is a unique characteristic of corporations?
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Lack of special taxation
Limited life
Enjoys the legal rights of an individual
Subject to less regulations
Manuel would like to invest his money so it can grow.
There are always risks. Which of the following is not a
risk he should consider?
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Risk of decline in value
Risk of lost purchasing power
Risk of liquidity
Risk of failure of default
Manuel would like to invest his money so it can grow.
There are always risks. Which of the following is not a
risk he should consider?
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Risk of decline in value
Risk of lost purchasing power
Risk of liquidity
Risk of failure of default
What is an important benefit of the U.S. free market
system?
• Government intervention in all industry
sectors
• Freedom of choice for consumers and
producers
• Freedom of choice for consumers and
borrowers
• Limited variety of goods and services
What is an important benefit of the U.S. free market
system?
• Government intervention in all industry
sectors
• Freedom of choice for consumers and
producers
• Freedom of choice for consumers and
borrowers
• Limited variety of goods and services
To say that a country has an absolute advantage
in the production of steel is to say that-
• Its opportunity cost of producing steel is lower
than any other country’s
• The relative proice of steel is higher in that
country than in any other
• It can produce more steel with a given amount
of resources than any other country can
• Its opportunity cost of producing steel is
greater than any other country’s
To say that a country has an absolute advantage
in the production of steel is to say that-
• Its opportunity cost of producing steel is lower
than any other country’s
• The relative price of steel is higher in that
country than in any other
• It can produce more steel with a given amount
of resources than any other country can
• Its opportunity cost of producing steel is
greater than any other country’s
International trade is based on specialization, as
countries specialize in products they have a
comparative advantage. What determines a
comparative advantage?
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Absolute advantage
Relative price
Sectors of the economy
Opportunity cost
International trade is based on specialization, as
countries specialize in products they have a
comparative advantage. What determines a
comparative advantage?
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Absolute advantage
Relative price
Sectors of the economy
Opportunity cost
Why is NAFTA important to trade?
• It eliminates barriers to trade and smoothes the
progress of the cross-border movement of goods and
services throughout N. America
• It is the only international organization whose main
function is to ensure that trade flows smoothly,
predictably, and freely
• It is an organization created to provide goods and
services to European countries torn apart after two
World Wars
• It is an agreement that ensures consistent trade
between the U.S. , Russia, and China
Why is NAFTA important to trade?
• It eliminates barriers to trade and smoothes the
progress of the cross-border movement of goods and
services throughout N. America
• It is the only international organization whose main
function is to ensure that trade flows smoothly,
predictably, and freely
• It is an organization created to provide goods and
services to European countries torn apart after two
World Wars
• It is an agreement that ensures consistent trade
between the U.S. , Russia, and China
The group that benefits the most from free
international trade is _____, and the group that
benefits the least is ____.
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Consumers; government
Labor; consumers
Consumers; labor
Government; labor
The group that benefits the most from free
international trade is _____, and the group that
benefits the least is ____.
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Consumers; government
Labor; consumers
Consumers; labor
Government; labor
What is one of the effects of trade barriers on
economic activity?
• Tariffs and quotas increase the price of an
imported product
• Quotas increase the number of a product
exported to a country
• Tariffs decrease the price of an imported
product
• Trade barriers guide consumers toward the
purchase of imported goods
What is one of the effects of trade barriers on
economic activity?
• Tariffs and quotas increase the price of an
imported product
• Quotas increase the number of a product
exported to a country
• Tariffs decrease the price of an imported
product
• Trade barriers guide consumers toward the
purchase of imported goods
Pierre is an importer of US corn. The cost of corn is
$2500 per 5000 bushels. Pierre wants to import 60,000
bushels. If the exchange rate is 1C = 1.50 USD, how
many Euros will Pierre need to convert to US dollars?
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30,000 C
20,000 C
25,000 C
7500 C
Pierre is an importer of US corn. The cost of corn is
$2500 per 5000 bushels. Pierre wants to import 60,000
bushels. If the exchange rate is 1C = 1.50 USD, how
many Euros will Pierre need to convert to US dollars?
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30,000 C
20,000 C
25,000 C
7500 C
1. Free Enterprise 2. Socialism 3. Communism
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What set best completes the chart?
1. Little Freedom, Total Freedom, No Freedom
2. Little Freedom, No Freedom, Total Freedom
3. Total Freedom, No Freedom, Little Freedom
4. Total Freedom, Little Freedom, No Freedom
1. Free Enterprise 2. Socialism 3. Communism
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What set best completes the chart?
1. Little Freedom, Total Freedom, No Freedom
2. Little Freedom, No Freedom, Total Freedom
3. Total Freedom, No Freedom, Little Freedom
4. Total Freedom, Little Freedom, No Freedom
What idea advocated by John Maynard Keynes was
attempted to pull the US economic system out of
recession.
• Allowing for strong free markets
• Little government intervention in the
economy
• Job specialization and division of labor to
increase the productivity of an economy
• Increased role of government to correct
instability in a country’s economy
What idea advocated by John Maynard Keynes was
attempted to pull the US economic system out of
recession.
• Allowing for strong free markets
• Little government intervention in the
economy
• Job specialization and division of labor to
increase the productivity of an economy
• Increased role of government to correct
instability in a country’s economy
Assume that consumers consider butter and bread
complementary goods. If the price of bread increases
by 25%, what will be the expected consequence for
butter?
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The demand for butter should increase
The demand for butter should decrease
The demand for butter remains the same
The price of butter should decrease
Assume that consumers consider butter and bread
complementary goods. If the price of bread increases
by 25%, what will be the expected consequence for
butter?
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The demand for butter should increase
The demand for butter should decrease
The demand for butter remains the same
The price of butter should decrease
Which of the following exemplifies monopolistic market
structure?
• Large number of sellers, substantial barriers to
entry, some control over price
• One seller, no opportunity to enter the
market, complete control over price
• Large number of sellers, few barriers to entry,
no control over price
• A few sellers, substantial barriers to entry,
some control over price.
Which of the following exemplifies monopolistic market
structure?
• Large number of sellers, substantial barriers to
entry, some control over price
• One seller, no opportunity to enter the
market, complete control over price
• Large number of sellers, few barriers to entry,
no control over price
• A few sellers, substantial barriers to entry,
some control over price.
Zoning laws
ordinances
regulating noise
building safety and sanitation
preservation of historic buildings
Which of the following is the best title for the
list above
• Gov’t restrictions placed on businesses
• Costs and benefits of business property
• Monopolistic competition
• Economic interdependence
Zoning laws
ordinances
regulating noise
building safety and sanitation
preservation of historic buildings
Which of the following is the best title for the
list above
• Gov’t restrictions placed on businesses
• Costs and benefits of business property
• Monopolistic competition
• Economic interdependence
According to the law of supply…
• The quantity of a product supplied will decrease as
buyers’ incomes decrease
• Producers will not supply a product if there is an
opportunity cost attached to acquiring the product
• There is a direct relationship between the price of a
product and the quantity of the product supplied
• There is an inverse relationship between the price of a
product and the quantity of the product supplied
According to the law of supply…
• The quantity of a product supplied will decrease as
buyers’ incomes decrease
• Producers will not supply a product if there is an
opportunity cost attached to acquiring the product
• There is a direct relationship between the price of a
product and the quantity of the product supplied
• There is an inverse relationship between the price of a
product and the quantity of the product supplied