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