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Review for Exam 1 (excluding #17,18, 32, 33, 35, 36, 42, 43, due to graphs and/or tables)

Henry wants to buy a book. The economic perspective suggests that Henry will buy the book if:

The marginal benefit to the book is greater than its marginal cost

Comparing marginal costs with marginal benefits is an essential element of:

The economic perspective

Which question is an example of a microeconomic question?

Will the merger of two airlines likely lead to higher airline ticket prices?

Which is the Primary focus of study in macroeconomics?

The national economy

Wages and salaries constitute about what proportion of total income?

71 percent

A durable good is a product that:

Has an expected life of 3 years or more

The statement that "what this nation needs to promote economic growth is a major tax cut" is an example of:

A normative economic statement

Which would be a positive economic statement?

Bankers are now charging higher interest rates on credit cards to cover the increased cost of loaning funds to consumers

The economizing problem for individuals is that:

Economic wants are greater than economic means

The basic economic problem for society is the combined existence of:

Scarce economic resources and unlimited economic wants

A group of firms that produce the same or similar products is:

An industry

Which statement best describes a command economy?

The production and allocation of goods and services is determined primarily through government

Which is a key feature of the market system?

The right to own private property and control resource use

Which condition will encourage competition?

The freedom of sellers and buyers to enter or exit an industry

Of all business enterprises in the United States, corporations constitute approximately:

20 percent and account for 84 percent of all business sales

The personal distribution of income refers to the:

Division of the nation's money income among individual households

Which is an example of a positive externality?

A flood control dam that provide a recreational lake

The development of the Internet and e-mail to replace the regular mail services in many cases would be an example of:

Creative destruction

Which best describes the "invisible hand" concept?

The desires of producers and resource suppliers to further their own self interest will automatically promote the social interest

The influential book written by Adam Smith was:

The Wealth of Nations

The principal-agent problem in corporations arises from:

A conflict of interest between corporate executives who manage the firm and stockholders who own the firm

Which is true of an economy which operates entirely through central planning?

Individual economic performance is reduced by the absence of the profit motive

Economists would classify all the following as land except:

A hydroelectric dam

Which is not considered to be an economic resource?


A nation that devotes more of its resources to capital investment is likely to:

Cause its production possibilities curve to shift outward

The law of demand states that:

Price and quantity demanded are inversely related

A market:

Is an institution that brings together buyers and sellers

If two goods are complements:

A decrease in the price of one will increase the demand for the other

The demand curve for a product might shift as the result of a change in:

Consumer tastes, consumer incomes, the prices of related goods

The term quantity demanded:

Refers to the amount of a product that will be purchased at some specific price

The law of supply indicates that:

Producers will offer more of a product at high prices than they will at low prices

The two general types of economic systems that exist today are:

Market systems and command systems

In economics, the pleasure, happiness, or satisfaction received from a product is called:


Which is a determinant of supply?


All of the following are assumed to be constant when the supply curve for a product is drawn, except the:

Price of the product

Suppose that a particular good is characterized by rivalry and excludability. We can conclude that:

It is a private good

Is it reasonable that snow removal on streets is a service often provided by local governments?

Yes, private companies cannot afford to have all the equipment sitting idle through the other three seasons

Which is an example of negative externality?

A neighbor who plays loud music and makes a lot of noise

Which of the following is a government transfer payment?

Unemployment compensation

If government receives tax revenues primarily from middle- and upper- income groups and provides transfer payments primarily to lower-income groups, the result is likely to be:

A more equal distribution of income

Which is not an example of externality?

The rise in the price of gasoline because of the higher crude oil prices

If two goods are close substitutes:

An increase in the price of one will increase the demand for the other

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