Name: ______Date: ______

1. / An answer to the question "How are goods produced?" determines:
A) / who receives the goods that are produced.
B) / how tastes and preferences are determined.
C) / how resources are combined in the production of goods.
D) / the types and quantities of goods and services produced.
2. / Which of the following explains why the U.S. economy produces more than the Chinese economy?
A) / The United States buys more goods from China than China buys from the United States.
B) / In comparison to China, the United States has stronger environmental protection rules.
C) / The population of the United States is less than 1/4 the population of China.
D) / The United States has more capital per worker available than China.
3. / Specialization arises because
A) / some people don't like doing some tasks.
B) / differences in the costs of production give some producers a comparative advantage in the production of particular goods or services.
C) / the government directs resources into certain activities.
D) / inefficient production forces producers to trade.
4. / Describe what would happen in a market if the current price were above the equilibrium price (assume no government interference). Using the same assumptions, describe what would happen if the current price were below the equilibrium price. Use a graph to explain your answer.
5. / The relationship between the price of a good and the quantity people are willing and able to purchase and the independent variables that determine quantity is:
A) / supply.
B) / demand.
C) / equilibrium.
D) / disequilibrium.

Use the following to answer question 6:

6. / (Exhibit: Demand and Supply Shifters) The exhibit shows how supply and demand might shift in response to specific events. Suppose consumer incomes increase. Which panel best describes how this will affect the market for dress ties, a normal good?
A) / Panel (a)
B) / Panel (b)
C) / Panel (c)
D) / Panel (d)
7. / A decrease in the price of a good will, all other things unchanged, result in:
A) / an increase in demand.
B) / an increase in supply.
C) / an increase in the quantity demanded.
D) / more being supplied.

Use the following to answer question 8:

8. / (Exhibit: Demand Shifters and Supply Shifters) The exhibit shows how supply and demand might shift in response to specific events. Suppose the birth rate (the number of babies per female in the childbearing age bracket) increases. Which panel best describes how this will affect the market for diapers?
A) / Panel (a)
B) / Panel (b)
C) / Panel (c)
D) / Panel (d)
9. / Given the events listed below that take place in the bread market, decide if demand changes or quantity demanded changes and determine the direction of change.
A. The economy prospers and incomes increase dramatically.
B. The price of bread falls.
C. The price of flour, an ingredient of bread, falls.
D. The price of bread increases.
E. A severe weather problem occurs and most grain crops are destroyed.
F. The price of potatoes, a substitute for bread, rises.
10. / Technological improvements will:
A) / leave the production possibilities curve unchanged.
B) / shift the production possibilities curve inward.
C) / shift the production possibilities curve to outward.
D) / necessarily lead to increased unemployment.
11. / Society's production possibilities curve is primarily concerned with answering the economic question of what goods and services a society can produce.
A) / True
B) / False
12. / The role of government in shifting the production possibilities curve to the right is considered:
A) / supporting economic growth.
B) / redistributing income.
C) / providing certain goods and services.
D) / enforcing private property rights.
13. / The statement that "there is no such thing as a free lunch" means:
A) / there are no tradeoffs between economic goals.
B) / any production requires the use of scarce resources, and thus the sacrifice of another alternative.
C) / choices need not be made in rational behavior.
D) / scarcity only exists in poor societies.
14. / A systematic set of procedures through which knowledge is created is:
A) / the economy.
B) / the scientific method.
C) / a market.
D) / a model.
15. / A term that means "all other things unchanged" is:
A) / dependent variable.
B) / independent variable.
C) / quid pro quo.
D) / ceteris paribus.
16. / The market for health care is characterized by which of the following?
A) / significant third-party payments
B) / a falling fraction of the total cost the consumers of health care actually pay
C) / dramatic increases in costs because of technological advances in medical care
D) / all of the above
17. / A market price support policy establishes price ______the market equilibrium.
A) / floors below
B) / floors above
C) / ceilings below
D) / ceilings above
18. / In the mid 1960s, the percentage of total output the United States devoted to health care was about ______percent.
A) / 2
B) / 6
C) / 10
D) / 13
19. / In the market for personal computers and in the stock market:
A) / supply and demand shifts change prices and quantities.
B) / persistent shortages and surpluses rarely exist.
C) / in response to shifts in supply and demand, equilibrium is restored quickly.
D) / all of the above are true.
20. / Farm legislation has historically tried to increase farm income by:
A) / guaranteeing a minimum price to farmers.
B) / imposing limits on production.
C) / insulating farmers from fluctuations in prices.
D) / doing all of the above.

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