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Lesson 3-4 Exam
| Question | Answer |
|---|---|
| The three fundamental economic questions are | what to produce, how, and for whom? |
| Why does every society face difficult choices in deciding what to produce? | Each society has limited resources but unlimited wants. |
| The ability to make our own economic decisions without interference from the government is called | economic freedom. |
| A society that values economic equity seeks to | give everyone a fair share of the economic pie. |
| Which economic goal is encroached upon when the government taxes your wages in order to provide unemployment benefits to help those out of work? | economic freedom |
| Most traditional economies today are found | among indigenous people who live much as their ancestors did. |
| Market economies | are highly efficient at producing goods and services that people want and are willing to pay for. |
| What does the circular flow model illustrate? | It shows how money, goods, and resources move through a market economy. |
| The two kinds of markets in the circular flow model are | the product market and the factor market. |
| When Adam Smith wrote about "the invisible hand," he was referring to the power of | markets to provide goods and services at prices people will pay. |
| Which economic goals are emphasized in a modern command economy? | economic security and equity |
| Which economic goals are emphasized in a market economy? | economic efficiency and freedom |
| What is the role of government in a mixed economy? | all of the above |
| Which statement about a mixed economy is true? | The government pays household and firms for their labor and products. |
| One of the most free economies in the world is | Australia |
| Individuals own the factors of production and make decisions about how to use those factors in | a free enterprise system. |
| Why is competition important to a free enterprise system? | It results in more choices for consumers. |
| In a laissez-faire economy | producers and consumers are relatively free of government intervention |
| Intellectual property law | encourage innovation by guaranteeing that inventors and artists can profit from their creations. |
| The most significant driving force of the free enterprise system is | the profit motive. |
| Americans dearly value their economic freedom, so much that we even describe our economy as a | free enterprise system. |
| Which of the following would likely discourage specialization in an area? | a lack of good transportation |
| The development of skills in one aspect of a job is called | specialization |
| Which of the following is true of self-sufficient societies? | Self-sufficient societies are less productive than specialized societies. |
| An athletic person picks fruit, and their sociable friend sells the fruit. This is an example of | division of labor. |
| An economy can produce more with the same inputs of land, labor, and capital when people | specialize in a specific task or skill. |
| According to James Gwartney, Richard Stroup, and Dwight Lee in "Common Sense Economics," what is the foundation of trade? | Mutual Gain |
| When people specialize and trade, they | become economically interdependent. |
| Why did the United State's founding fathers set up trade barriers to limit interstate trade? | They wanted to promote self-sufficiency. |
| Susan can score seven goals, where as Rob can score five. Susan has | an absolute advantage. |
| When does a person have a comparative advantage? | when they have a lower opportunity cost than others |
| How do you start calculating a person's comparative advantage? | You calculate their opportunity cost associated with an activity. |
| ________ based on comparative advantage benefits both trading partners. | Specialization |
| Which of the following could contribute to a nation having a comparative advantage over another nation? | all of the above |
| Economist Michael Bade defined wealth as | the total value of everything a person owns. |
| What is one reason trade makes people wealthier? | It lowers the cost of goods. |
| How does trade increase the value of goods? | Trade moves goods from people who value them less, to people who value them more. |
| Which of the following is true of the American economy and trade? | Most Americans experience benefits from global trade. |
| How can global trade function as a disadvantage for some people? | It can take business away from local producers. |
| How does trade increase the variety and quantity of goods available? | Trade provides access to goods from around the globe. |
| Because trade expands the market for products, it can | lower the cost of goods by using mass production. |
| How do people and nations gain from specialization and trade? | comparative advantage |
Created by:
jayxvu