An efficient economy is one that
uses its resources to make the most goods and services.
What does a production possibilities frontier show?
the maximum amount that an economy can produce
Which of the following is characteristic of a traditional economy?
Children tend to have the same jobs as their parents did.
What is the most effective way for consumers to make their desires known to businesses?
by the purchases they make
What are inferior goods?
goods for which the demand falls when income rises
What shows the quantities of products demanded at each price by all consumers in a market?
a market demand schedule
What kind of table lists the quantity of a good that a person will buy at different prices?
demand schedule
Which of the following is the best example of the law of supply?
A sandwich shop increases the number of sandwiches they supply every day when the price is increased.
When the selling price of a good goes up, what is the relationship to the quantity supplied?
It becomes practical to produce more goods.
Complete the following sentence: At the most profitable level of production, a firm’s marginal cost will be _____ the market price.
equal to
Why did the U.S. government use rationing for some foods and consumer goods during World War II?
to guarantee each civilian a minimum standard of living in wartime
What is one kind of monopoly that the U.S. government generally permits?
professional sports leagues
How does a company arrange to sell its products to people who are unwilling to pay the top price for them?
by charging different prices according to the group to which the buyer belongs
Which of the following is NOT a form of nonprice competition?
Which of the following is NOT a condition for perfect competition?
Sellers offer a wide variety of products
What is one of the effects that the Internet has had on business?
It has reduced start-up costs for many businesses.
Which of these will NOT lead to a monopoly?
antitrust laws
Which of the following is a disadvantage of a sole proprietorship?
lack of permanence
Which of the following is a business organization owned by a group of people for their mutual benefit?
a cooperative
Tracy, a recent college graduate who earned straight “A’s” as a history major, is applying for a job as a legal assistant. Although she does not have a background in law, she hopes to land the job because of the
screening effect.
Suppose the cost of having your teeth filled rises in your area. The result will likely be
an increase in the number of dental students in your area.
What were “greenbacks”?
commodity money used by the Union during the Civil War
What happens when you make a purchase using a credit card?
The credit card issuer pays the store.
Products that would be used in calculating GDP include
cars manufactured in Tennessee at a factory owned by a Japanese automobile company.
The calculation of GDP would include
the income of a high school English teacher.
The amount of money a person has left of his or her income after taxes is called
disposable personal income
The “market basket” that is used by the Bureau of Labor Statistics to calculate prices is made up of which of the following?
typical goods and services for an urban household
What is a major problem for businesses during a period of chronic inflation?
They cannot anticipate their costs.
What do taxes collected under the Federal Insurance Contribution Act (FICA) fund?
Social Security and Medicare
Your department store receipt says that you paid a 5% sales tax on sports equipment. This sales tax is an example of a
regressive tax
When you drive away from the gas pump, you have just paid a(n)
excise tax.
The Office of Management and Budget
is responsible for deciding how much money each government agency receives in the budget.
All of the following are characteristics of classical economics EXCEPT
a significant role for government in the running of the economy.
The President has vetoed several appropriations bills. What is the next step in the budget process?
Congress can vote to override the vetoes or pass new appropriations bills that the President is likely to sign.
Why does the Federal Reserve alter monetary policy?
to lessen the effect of natural business cycles
What was one reason the U.S. government started a Federal Reserve system?
to provide consumers with access to funds for business expansion
How could the Federal Reserve encourage banks to lend out more of their reserves?
reduce the discount rate
What is one possible short-term effect of an easy money policy?
increased investment spending
The Federal Reserve system consists of _____ Federal Reserve Banks.
Which of these tools in an example of monetary policy?
changing reserve requirements
When a nation imports more than it exports, economists say it has which of the following?
a trade deficit
How do countries protect their domestic economy from excessive influence by multinational corporations?
by requiring the multinational to export a certain percentage of its product
What does a “most-favored-nation (MFN)” status mean?
A country pays the same tariffs as those paid by all MFN countries.
The United States placed a limit on the number of cars that can be brought into the country for sale. This is an example of
an import quota.
Brain drain is
the tendency of educated people to leave less developed countries build careers in developed countries.
What two methods can a less developed country use to finance its economic development?
internal financing and foreign investment