Dual Credit Econ. Final Exam Review

Which of the following most accurately illustrates the impact of price incentives? 

• a. People usually buy products regardless of price. 
• b. As the price of a product rises, suppliers will be less willing to produce that product. 
• c. The price of a product is unable to bring quantity demanded and quantity supplied into balance. 
• d. Consumers will adjust the amount they purchase in response to changes in prices. 

With the passage of time and advancements in technology, scarce resources 

• a. are transformed into goods and services more efficiently, but still remain scarce. 
• b. are no longer scarce.
• c. will become less available and the cost of producing goods and services will rise. 
• d. become less scarce, so that we do not have to choose between alternative uses of those resources. 

Which of the following most accurately states the economic significance of exchange? 

• a. Physical goods have value because they exist; exchange can neither increase nor decrease their value
• b. Production of physical goods creates value; exchange merely redistributes this value. 
• c. Exchange creates value by moving goods from parties who value them less to parties who value them more. 
• d. Exchange reduces value since it consumes resources without adding to the physical supply of goods. 

A country should import a good or a service 

• a. only if the imported item cannot be produced domestically. 
• b. if other countries can provide the imported item cheaper than it could be produced domestically 
• c. only if the current rate of unemployment is low. 
• d. as little as possible. It is always better to export as much as possible and import as little as possible. 

What is the role of losses in a competitive market economy? 

• a. Losses penalize firms for producing products that are unavailable from other suppliers. 
• b. Losses signal that more resources are needed in a particular market. 
• c. Losses show firms that barriers to entry are high. 
• d. Losses send a message that more value would be created if the resources were used to produce other goods. 

How does the invisible hand ensure that an economy will not run out of a renewable resource? 

• a. As resources run low, consumers will naturally decrease their demand for those resources. 
• b. Government will begin to regulate scarce resources as an effective means of rationing those resources. 
• c. If there is demand for those resources, producers will continue increasing supply regardless of price. 
• d. Price increases due to the diminishing supply of a resource will both curb consumption and provide incentive for producers to expand supply. 

Private owners will gain by conserving resources for the future, when 

• a. the current value of a resource exceeds its future value. 
• b. the expected future value of a resource exceeds its current value. 
• c. the owner will still be around when the resource is used. 
• d. government regulations restrict the present use of a resource for future use. 

When whale oil was in high demand in the middle of the nineteenth century, whales were being hunted to excess because 

• a. of the excessive government regulation imposed on whale hunting. 
• b. those who owned the hunting rights failed to see the future value of whale oil. 
• c. the public ignored the need to curb whale oil consumption. 
• d. no one owned the whales or the hunting rights, thus there was no incentive to conserve whales for the future. 

When new technology replaces an established product, such as when digital music replaced CDs and records, 

• a. jobs are lost and the economy will stagnate. 
• b. products will be more expensive to consumers. 
• c. the new technologies and improved products will promote economic progress. 
• d. total employment will decline unless the government subsidizes the firms harmed by the new technologies and products. 

If a nation is rich in natural resources, that nation will increase its wealth if 

• a. it keeps the resources for its own use and prevents them from being exported. 
• b. it is willing to sell the resources to buyers offering the highest prices even if some of the buyers live in other countries. 
• c. the resources are transformed into products domestically even if the domestic producers of the products have high costs. 
• d. the resources are protected and left untouched so they will be available for future generations.