What is meant by the statement that every economic system faces the problem of scarcity?

There are never enough resources to satisfy all human wants

From an economic point of view, which approach to controlling pollution is most efficient?

Reduce pollution if the benefits are greater than the costs

The main difference between a command economy and a market economy is that in a market economy

buyers and sellers determine resource allocation

Government rather than private business provides national defense because

not all who benefit from it would pay for it.

Why do medical doctors generally earn more than farmers?

Doctors are scarcer, given demand for their services.

A government budget deficit exists when

government spending is greater than tax revenues

When there is a shortage of a product in a competitive market, it is usually the case that the

market price of the product will eventually increase.

Which would most likely increase the quantity of gasoline sold in a competitive market?

A decrease in the price of automobiles.

Which is a basic economic question that must be answered by all economic systems?

How will goods and services be produced?

Specialization and division of labor by nations followed by more trade probably would

increase total world production of goods and services.

The opportunity cost of a new public high school is the

other goods that must be given up for the new school

If Nation A adopts policies that restrict imports from another nation, then in Nation A

consumers will pay higher prices for products.

Gross domestic product (GDP) is a measure of:

market value of a nation’s output of final goods/services

A basic role of entrepreneurs in the economy is to

take the risks associated with starting new businesses.

What impacts people’s incentive to produce and exchange goods and services in a market economy?

The right to own private property.

Inflation is an increase in

the general level of prices over time.

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Test of Economic Literacy Review

23 termsStudBud Administration212 plays

Semester econ review

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Questions 23

Answers

1
Profits are equal to total
revenue minus total cost.
sales minus wages and salaries.
sales minus taxes and depreciation.
assets minus total liabilities.
2
What is meant by the statement that every economic system faces the problem of scarcity?
There are never enough resources to satisfy all human wants
All economies have recessions during which scarcities exist
Additional benefits of goods/services > additional costs
Sometimes some products can be purchased only at high prices
3
From an economic point of view, which approach to controlling pollution is most efficient?
Abolish the use of toxic chemicals in all production
Adopt laws prohibiting activities that cause pollution
Reduce pollution if the benefits are greater than the costs
Use economic resources to eliminate all pollution
4
The main difference between a command economy and a market economy is that in a market economy
buyers and sellers determine resource allocation
shortages occur more often than surpluses.
central planning creates an effective incentive system
prices are determined by government regulation of businesses
5
Government rather than private business provides national defense because
if some benefit from it, less is available for others.
it is a benefit and not a cost.
it is a cost and not a benefit.
not all who benefit from it would pay for it.
6
Why do medical doctors generally earn more than farmers?
Doctors provide a service rather than make a product.
Doctors are scarcer, given demand for their services.
Doctors are more efficient than farmers.
There are fewer doctors than farmers in our economy.
7
A government budget deficit exists when
government spending is rising.
tax revenues are falling.
government spending is greater than tax revenues
the national debt is decreasing.
8
When there is a shortage of a product in a competitive market, it is usually the case that the
quantity exchanged won't change; demand will increase
quantity of the product exchanged will eventually decrease.
market price of the product will eventually increase.
market price of the product will eventually decrease.
9
A boy buys a sweat-shirt at a 20% discount off the regular price. In this exchange,
the store benefits, but the student does not.
the boy and the store benefit.
neither the student nor the store benefits.
the boy benefits, but the store does not.
10
Which would most likely increase the quantity of gasoline sold in a competitive market?
An increase in taxes on gasoline products.
A decrease in the income of consumers.
A decrease in the price of automobiles.
An increase in the price of crude oil.
11
Which is a basic economic question that must be answered by all economic systems?
What will be the amount of the minimum wage for workers?
What will be the share of profits that go to businesses?
How will government collect income taxes?
How will goods and services be produced?
12
Specialization and division of labor by nations followed by more trade probably would
eliminate differences in standards of living among nations.
lower living standards in the poor nations of the world.
increase the level of worldwide unemployment.
increase total world production of goods and services.
13
The opportunity cost of a new public high school is the
other goods that must be given up for the new school
financial cost of constructing the new school at a later date
financial cost of hiring teachers for the new school
change in the annual tax rate to pay for the new school
14
What primary function is money serving when it is used to buy a ticket to a movie?
Unit of account.
Store of value.
Medium of exchange.
Flow of funds.
15
Firms want to sell at high prices; Households want to buy at low prices. This is resolved by
competition.
collective bargaining.
government regulation.
lawsuits.
16
If Nation A adopts policies that restrict imports from another nation, then in Nation A
consumers will pay higher prices for products.
job opportunities in export industries will increase.
saving and investment will increase
the cost of producing products will decrease.
17
An item costs $5 in a free market. The government sets a minimum price at $6, which results in
a surplus of the product.
a shortage of the product.
a decrease in the supply of the product.
an increase in the demand for the product.
18
If payroll taxes on the wages of workers are reduced, then there will most likely be
an increase in unemployment.
decrease in saving.
a decrease in investment.
an increase in consumption.
19
Gross domestic product (GDP) is a measure of:
total spending by federal, state,and local governments.
market value of a nation’s output of final goods/services
the price level of goods and services sold
quantity of goods/services produced by private businesses
20
Which one of the following do economists consider to be an example of capital goods?
Common stocks in a computer business
Machines in an auto plant.
Money in a bank.
Corporate bonds of an oil company
21
A basic role of entrepreneurs in the economy is to
buy and sell the common stocks of new corporations.
show government new products the economy can sell.
create dividends for investors in new businesses.
take the risks associated with starting new businesses.
22
What impacts people’s incentive to produce and exchange goods and services in a market economy?
The right to own private property.
Restrictions on consumer choice.
An equal distribution of income.
Controls on the supply of gold.
23
Inflation is an increase in
real gross domestic product over time.
the general level of prices over time.
interest rates over time.
the standard of living over time.

Test of Economic Literacy Review Flashcards | StudBud