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Exam 1: Welcome to Economics

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Question 1

Multiple Choice

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Which of the following best denotes the reason for the existence of substantial black markets?

A) a market-oriented economy
B) a command economy
C) government laws and rules
D) the microeconomy

E) A) and D)
F) A) and B)

Correct Answer

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B

Question 2

Multiple Choice

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In the circular flow diagram model:

A) households receive income from businesses in exchange for providing inputs and use that income to buy goods and services from businesses.
B) businesses receive revenues from households in exchange for providing goods and services and use those revenues to buy inputs from households.
C) households receive revenue for selling goods and services to businesses, and use that revenue to buy inputs from businesses.
D) Both a) and b) are correct.

E) B) and C)
F) A) and C)

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Question 3

Essay

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What is a black market, and under what economic condition is it most likely to thrive?

Because of their relatively small national economies, which of the following is most likely considered to be the most important factor for Belgium, Korea, and Canada to take full advantage of specialization?

How does microeconomics relate to macroeconomics?

Clem Oatley could grow wheat and barley. He could grow 75 bushels of wheat or 125 bushels of barley using the same resources on an acre of his land. The price of wheat is $2.00 per bushel and the price of barley $ 0.80. Show the benefits to Clem from specialization. What should he specialize in?

In a _______________________, most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers.

Which of the following best describes a monetary policy tool?

Which of the following best describes a fiscal policy tool?

Which of the following statements most likely lies within the realm of microeconomics?

Recent decades have seen a trend toward globalization, which means that buying and selling in markets have crossed national borders to an increasing extent. As a result, firms and workers from different countries are increasingly interconnected. Globalization has occurred for a number of reasons. List three reasons and briefly describe their effect contributing toward globalization.

The circular flow diagram of economic activity is a model of the:

Which of the following is generally accepted as a valid criticism of the production of useful goods and services?

Regardless of whether you are looking through the microeconomics microscope or the macroeconomics telescope, the fundamental subject material of the interconnected __________ doesn't change.

Economic models like the _____________________ are not physical models, but instead are diagrams or graphs or even mathematical equations that represent economic patterns or theories.

In the first chapter of The Wealth of Nations, Smith introduces the idea of the __________, which means the way in which the work required to produce a good or service is divided into a number of tasks that are performed by different workers.

Each year, researchers at the Heritage Foundation and the Wall Street Journal look at 50 different categories of economic freedom for countries around the world. In each category, they give each nation a score based on extent of economic freedom in that category. What sorts of questions regarding the level of economic freedom might these researchers have asked within this survey which would help rank nations' economic freedom? Please list at least three questions.

In a market-oriented economy, the amount of a good that is produced is primarily decided by the interaction of:

How can a group of workers, each specializing in certain tasks, produce so much more than the same number of workers who try to produce the entire good or service by themselves? Adam Smith offered three reasons. List them and briefly describe the rationale behind each.

The two main tools of macroeconomic policy include monetary policy and fiscal policy. Briefly describe the main components of each.