Economics Chapters 1 - 5

Who used his resources wisely to make gunpowder for President Jefferson?

• John Adams

• E.I. du Pont

• Pierre Samuel du Pont

• Adam Smith

What type of economy is directed by customs and habits?

• Traditional economy

• Free market economy

• Command economy

• Mixed economy

What type of economy is directed by an "invisible hand"? 

• Traditional economy

• Free market economy

• Command economy

• Mixed economy

What type of economy would a Communist-controlled country have?

• Traditional economy

• Free market economy

• Command economy

• Mixed economy

What type of good is a forklift that is used to transport imported goods within a warehouse?

• Capital

• Imported

• Consumer

• Specialized

What type of good is a computer that is used for personal home use?

• Capital

• Imported

• Consumer

• Specialized

What term refers to a person that owns a share of some business that produces goods?

• Distributor

• Capitalist

• Entrepreneur

• Supplier

Who is the person that risks his investment of time and money in the management of an economic enterprise?

• Distributor

• Capitalist

• Entrepreneur

• Supplier

Diligent work directed by ingenious intelligence allowed to develop under conditions of freedom is the true source of what?

• Wealth

• Value

• Prosperity

• Utility

All people are said to be producers, or people who use goods.

• True

• False

A mixed economy provides barely enough to keep a society alive.

• True

• False

State capitalism is a system in which the government controls most of the capital.

• True

• False

When a country finds ways to produce more goods from existing resources, the prosperity of the national economy increases.

• True

• False

The prosperity and efficiency of the free market economy is owed to its foundation of limited government, freedom of enterprise and competition, and natural resources.

• True

• False

The two entities that make the majority of the economic decisions in the free market are private households and private businesses.

• True

• False

Adam Smith stressed the importance of separating work into individualized tasks, an idea known as division of labor.

• True

• False

The difference in value of goods that a country sells abroad compared to those it purchases from other countries is purchasing balance.

• True

• False

According to economists, the factors of production are scarce.

• True

• False

Who were the French group of 18th-century economists who believed the market should be guided by the "rule of nature"?

Who was the founder of the Austrian school of economics?

What are taxes that governments apply only to imported goods?

The value associated with any good is directly related to what TWO things? (two words)

What do some economists list as a fifth factor of production?

What refers to the direct benefit received by the owner of a good?

• Marginal utility

• Value in exchange

• Total utility

• Value in use

What refers to the total amount of satisfaction received from possessing a particular amount of a good?

• Marginal utility

• Value in exchange

• Total utility

• Value in use

What refers to the amount of satisfaction that results from a one-unit increase of a good?

• Marginal utility

• Value in exchange

• Total utility

• Value in use

Profit motive gives a person the willingness to trade certain goods for other goods that have greater personal value to him.

• True

• False

What type of good is capable of being used in conjunction with another?

• Substitute good

• Durable good

• Complementary good

• Nondurable good

What type of good is expected to last at least three years?

• Substitute good

• Durable good

• Complementary good

• Nondurable good

If Miss Johnson quit a job where she annually made $40,000 to start a business whose expense was $20,000 and total revenue was $15,000 during the first year, what would her opportunity cost for the year equal?

• $5,000

• $25,000

• $45,000

• $60,000

What states that when the price of a certain good rises, people tend to find alternatives that are less expensive?

• Substitution effect

• Value effect

• Income effect

• Elasticity effect

What is the relationship between a good's price and the amount that people are willing to buy?

What is the relationship between a good's price and the amount that producers are willing to provide for consumers?

Select 4 of the 5 Factors that can change the demand for a good.

• Tastes and Preferences

• Producer Expectations

• Prices of Related Goods

• Income

• Population

What are three of the six factors that can cause a shift in a good's supply?

• Resource Prices

• Prices of Consumer Goods

• Number of Buyers

• Producer Expectations

• Government Taxes, Subsidies, and Regulations

In a free market, who ultimately determines the distribution of goods?

What term refers to incentives given by the government to businesses to try to encourage production?

What factor causes a change in quantity supplied within an existing supply?

A demand schedule is a graphic representation of the amount of goods purchased at different prices.

• True

• False

The purchase of normal goods, such as used tires, decreases as the average income rises.

• True

• False

Economists use the vertical axis of a graph to represent quantity supplied.

• True

• False

A regulated price level set above the equilibrium price is considered a price floor.

• True

• False

The result of a price ceiling would be a surplus.

• True

• False

The public sector is the part of an economy controlled by national, state, and local governments.

• True

• False

If the demand for a car dealer's new convertibles decreased by he still wanted to sell the same amount of cars, he would have to decrease his prices.

• True

• False

The amount of money that a buyer pays the seller for a particular item is the item's price.

• True

• False

The availability of substitutes is a major reason why the demand for most goods is inelastic.

• True

• False

The income effect says that when the price of a good falls, consumers tend to buy less of that good or of other items because they can do so without giving up anything.

• True

• False