1 Kate has saved $180. The total cost of the items she wants to purchase comes to $200. What basic economic fact does this situation illustrate?
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1 Name: ate: 1 Kate has saved $180. The total cost of the items she wants to purchase comes to $200. What basic economic fact does this situation illustrate? scarcity a shortage market failure inefficiency 2 You go to a restaurant and order a veggie sandwich on wheat bread. The water that a farmer used to irrigate the wheat and vegetables is best categorized as which factor of production? physical capital land labor human capital 3 The President proposes reducing military spending in order to make money available for new healthcare programs for young children. This is a classic example of free enterprise. a production possibilities decision. a guns or butter trade-off. a decision at the margin. 4 production possibilities curve can be used to illustrate economic growth over time. decision making in a centrally planned economy. how public goods are created. opportunity costs in a nation s economy. opyright by Pearson Education Page 1 of 7
2 5 Every society must answer the three key economic questions because resources are scarce. government involvement in the economy is limited. every economy goes through cycles. individuals want to pursue their own self-interest. 6 In the modern United States, the three economic questions are generally answered by government planners. private citizens and businesses with some government involvement. habit and custom. entrepreneurs and consumers without government interference. 7 Which of the following is NOT an example of a market in action? going to a movie answering a help-wanted ad growing your own vegetables taking part in an online auction. opyright by Pearson Education Page 2 of 7
3 8 irections: Use the diagram to answer the following question. Which type of economic system does this diagram best illustrate? mixed economy command economy free market economy traditional economy opyright by Pearson Education Page 3 of 7
4 9 irections: Use the diagram to answer the following question. You work in a clothing store. Where in this diagram does the paycheck that you receive from the store belong? product market: monetary flow product market: physical flow factor market: physical flow factor market: monetary flow 10 Which of the following people do you think would be most likely to agree with the following statement? bolish all private property. Karl Marx dam Smith a Swedish socialist an merican entrepreneur opyright by Pearson Education Page 4 of 7
5 11 The United States onstitution encourages free market activity primarily by guaranteeing property and contract rights. giving the government the power to tax. giving government the power to regulate business. guaranteeing a safety net for all citizens. 12 In order to earn money for college, avid charges his friends a fee to act as a J for their parties. This is an example of what principle? negative incentive consumer sovereignty legal equality profit motive 13 The county of Springfield wants to build a new road. Most of the people who own property along the proposed route agree to sell their land to the county for a fair price. However, one property owner refuses. Under the principle of eminent domain, what is most likely to happen? The county will abandon the road project. The county can force the property owner to sell. The county will have to make a higher offer. The county will seize the property. 14 The federal government agrees to provide billions of dollars of assistance to prevent a major auto manufacturer from going out of business. Which economic goal would the government best achieve by this action? ensuring employment limiting competition encouraging innovation providing public goods opyright by Pearson Education Page 5 of 7
6 15 state government uses federal grant money to build a dam to supply electricity to local citizens. This is an example of a free rider. a positive externality. a negative externality. a public good. 16 The Social Security program can best be described as a government grant. a system of in-kind benefits. a cash transfer social program. a federal workers compensation program. 17 Government patents help stimulate economic growth by creating jobs for economic planners. providing incentives for innovation. ensuring that products meet safety standards. slowing down obsolescence. 18 The saying, There is no such thing as a free lunch, best illustrates which economic concept? underutilization trade-offs factors of production thinking at the margin 19 In the United States, all citizens participate in the economy as voters. as consumers. as interest group members. as entrepreneurs. opyright by Pearson Education Page 6 of 7
7 20 What two systems were linked in the Soviet Union and hina? the free market and capitalism socialism and democracy communism and central planning traditional economy and authoritarianism opyright by Pearson Education Page 7 of 7
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