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For economists, the word "utility" means:

The want-satisfying power of a good or service; the satisfaction or pleasure a consumer obtains from the consumption of a good or service.

Economics may best be defined as the:

A social science concerned with making optimal choices under conditions of scarcity

Which of the following most closely relates to the idea of opportunity costs?

The amount of other products that must be forgone or sacrificed to produced a unit of a product

A well-tested economic theory is often called:

Economic Principle

The process by which economists test hypotheses against facts to develop theories, principles, and models is called:

Scientific Method

The Latin term "ceteris paribus" means:

Other-Things-Equal assumption

Macroeconomics approaches the study of economics from the viewpoint of

Examines the economy as a whole or its basic subdivisions or aggregate.

A normative statement is one that

A subjective perspective of the economy.

A positive statement is one which is

Deals with economic facts

Which of the following is a positive statement

Remember that it deals with facts

The alternative combinations of two goods which a consumer can purchase with a given money income is shown by

A budget line

Which of the following is a land resource

Natural Gas

A production possibilities curve shows:

Displays the difference combination of goods and services that society can produce in a fully employed economy, assuming a fixed available ability of supplies of resources and fixed technology

Which of the following is a distinguishing feature of a command system

Central Planning

Examples of command economies are:

Cuba and North Korea

Of the following countries, which one best exhibits the characteristics of a market economy


An economic system

Is a Particular set of institutional arrangements and coordinating mechanism used to respond to the economizing problem

Economic systems differ according to which two main characteristics

Who owns the factor of production and what method is used to motivate, coordinate, and direct economic activity

The regulatory mechanism of the market system is


The "coincidence of wants" problem associated with barter refers to the fact that

For exchange to occur each seller must have a product that some buyer wants

Which of the following is one of the Five Fundamental Questions

What goods and services will be produced

In a competitive market economy firms select the least-cost production technique because

To do so will maximize the firms profit.

The market system's answer to the fundamental question "What will be produced?" is essentially

Goods and services that create a profit

The market system's answer to the fundamental question "How will the goods and services be produced?" is essentially

Minimize the cost per unit by using the most efficient techniques which are technology, and price of the necessary resources.

The market system's answer to the fundamental question "Who will get the goods and services?" is essentially

Consumers with he ability and willingness to pay will get the product

The market system's answer to the fundamental question "How will the system accommodate change?" is essentially

Through the guiding function of prices and the incentive function of profits.

The market system's answer to the fundamental question "How will the system promote progress?" is essentially

Through the profit potential that encourages development of new technology

"Consumer sovereignty" means that

Both businesses and resource suppliers are subject to the wants of consumers. Through their dollar votes, consumers decide on the composition of output

Which of the following best describes the invisible-hand concept?

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

In terms of the circular flow diagram, businesses obtain revenue through the _____ market and make expenditures in the _____ market.

Resource, Product

A market

Is an institution that brings together buyers and sellers

The law of demand states that, other things equal

As price falls, the quantity demanded rises, and as the price rises, the quantity demanded falls

Graphically, the market demand curve is:

Its downward slope reflects the law of demand-people buy more of a product service, or resource as its price falls

If two goods are complements

One is used together with another good. If the price of the complement goes up, the demand for the related good will decline.

DVD players and DVDs are

Complement Good

Which of the following is most likely to be an inferior good

Used Clothing

A normal good is one

Whose demand caries directly with money income are called superior goods.

If the demand for steak (a normal good) shifts to the left, the most likely reason is that:

The price has increased

The law of supply indicates that, other things equal

As the price rises, the quantity supplied rises and as the price falls, the quantity supplied falls.

The supply curve shows the relationship between

Quantity supplied and the price of the product.

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