Study Guide CBA 4

How do firms and governments interact within product markets?

 

Select TWO correct answers.

• A.

  Governments collect property taxes from firms.

• B.

  Governments and firms own the factors of production.

• C.

  Governments process payments that households make to firms.

• D.

  Governments and firms compete as producers of some goods or services.

• E.

  Governments act as consumers and purchase goods and services from firms.

Recently, the government announced that it would discontinue the production of a particular military aircraft. How will this decision affect the circular flow model?

• A.There will be a shift of government spending to the production of alternative products.

• B.There will be an increase in unemployment resulting in the creation of new types of jobs.

• C.There will be a reduction in the income of households resulting in reduced purchasing power.

• D.There will be an increase in the product market because aircraft makers will be more efficient.

In comparison to the U.S. free enterprise system the economy of China is characterized by a lack of —

• competition

• well paying jobs

• trade incentives

• manufacturing industries

What is the relationship between scarcity and decision making in economics?

• A.

  Consumers are more likely to choose goods and services that are scarce.

• B.

  When certain goods are scarce it complicates decision making.

• C.

  Individuals must choose how to use scarce resources to satisfy their wants.

• D.

  When resources are scarce the government will prioritize certain goods to influence decision making.

Scarcity is a basic economic problem because —

▲

• A.resources are limited

• B.governments limit production

• C.opportunity costs limit demand

• D.people have trouble making choices

The basic idea of choice presents which of the problems in economics?

• People get to decide what they want.

• Businesses can sell what they want.

• Decisions produce costs.

• Choice is a way of life.

In a free market society, the answer to the question about how much to produce is determined by —

• census data

• profit projections

• consumer demand

• government quotes

Which of the following represents capital needed to start a tailoring or garment making business?

• dressmakers

• building spaces

• marketing team

• sewing machines

Which of the following is a basic characteristic of all economic systems?

• price controls

• wage incentives

• small business owners

• distribution of goods and services

Which characteristic of the U.S. free enterprise system creates the incentive to work, save, and invest?

• social security system

• voluntary exchanges

• private property ownership

• consumer sovereignty