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Question 1 In a market economy, resources are allocated by:


Question 1


In a market economy, resources are allocated by:
Answer

The centralized decisions of the government

The decentralized decisions of many firms and households as they interact in markets for goods and services

The centralized decisions of workers' unions and local governments

Either supply or demand, but not demand and supply simultaneously

5 points
Question 2


The study of how households and firms make decisions and how they interact in specific markets is called:
Answer

The invisible hand

Circular Flow of Income

Production Possibilities Frontier

Microeconomics

5 points
Question 3


An oncoming hurricane is announced on the evening news. The next morning, many customers go to the stores to buy plywood, but lumber yard owners had already doubled the price of plywood. Although not very happy, customers still buy the plywood. Which graph best explains this story?
Answer

Graph A

Graph B

Graph C

Graph D

There is not enough information to answer.

5 points
Question 4


To develop economic models, economists make assumptions. The purpose of this is:
Answer

To include as many aspects of reality as possible

To develop a universal macroeconomic theory

To simplify reality, so the models can help us see the most important aspects.

None of the above

5 points
Question 5


The people in the village are happy. Their incomes have risen and the shops in town are filled with new, imported goods.
Answer

Graph A

Graph B

Graph C

Graph D

There is not enough information to answer the question.

5 points
Question 6


The people in the village are unhappy. The shops are mostly empty and the few items available are very expensive.
Answer

Graph A

Graph B

Graph C

Graph D

There is not enough information to answer the question.

5 points
Question 7


The people in the village remember the good old days, when tourists came to visit and the place seemed to be alive day and night. Now, there is very little to do, although land and locally produced food are inexpensive.
Answer

Graph A

Graph B

Graph C

Graph D

There is not enough information to answer the question.

5 points
Question 8


The ability to produce a good at a lower opportunity cost than another producer is called:
Answer

Substitution effect

Externality

Comparative Advantage

Absolute Advantage

5 points
Question 9


Gasoline has doubled in price over the past couple years. Which graph best depicts the markets for bicycles, scooters, and other alternative modes of transportation?
Answer

Graph A

Graph B

Graph C

Graph D

There is not enough information to answer the question.

5 points
Question 10


Solar panels, windmills, and biodiesel generators are cheaper and almost as efficient for office buildings to produce the electricity that they need for themselves. Which graph depicts the market for existing utility companies?
Answer

Graph A

Graph B

Graph C

Graph D

There is not enough information to answer the question.

5 points
Question 11


Whatever must be given up to obtain something is called:
Answer

Externality

Comparative Advantage

Opportunity Cost

Specialization

5 points
Question 12


The price of gasoline has more than doubled in the past couple years. Which graph applies to this story?
Answer

Graph A

Graph B

Graph C

Graph D

There is not enough information to answer the question.

5 points
Question 13


Housing prices have begun to drop. New home construction has stopped and fewer run-down houses are being repaired.
Answer

Graph A

Graph B

Graph C

Graph D

There is not enough information to answer the question.

5 points
Question 14


Increases in price are always caused by an increase in demand.
Answer

True

False

5 points
Question 15


All other things being equal, an increase in demand always leads to an increase in equilibrium price. If prices are not allowed to rise to the new equilibrium, there will be shortages.
Answer

True

False

5 points
Question 16


All other things being equal, if there is a significant reduction in supply, it is possible to keep prices at their original level without causing shortages through anti-gouging legislation.
Answer

True

False

5 points
Question 17


When suppliers charge unfair prices, government can intervene to bring prices back to their fair levels.
Answer

True

False

5 points
Question 18


Economics studies ______.
Answer

How society manages its scarce resources

Social Welfare

Ethical use of resources

Protection of workers' rights

5 points
Question 19


When doing research, Economists:
Answer

follow the scientific method: observation, theory, and more observation

cannot use experiments, as they are often done in areas like Physics and Chemistry

have to use whatever data the world happens to give them

all of the above.

5 points
Question 20


When consumers expect the price of a product to be higher in the future, what graph illustrates their reaction today?
Answer

graph A

graph B

graph C

graph D

there is not enough information to specifiy any graph

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