Deck 2: Markets and Economies

Question 1

Which of the four resources of production does an economist consider wheat to be?

A) land
B) labor
C) capital
D) entrepreneurship

Answer 1

A

Question 2

An economist considers a taxi cab owned by a cab company to be which of the four resources of production?

A) land
B) labor
C) capital
D) entrepreneurship

Answer 2

C

Question 3

Lumen hires three people to work in her photography studio. Which category of the four factors of production do these three workers fall under?

A) capital
B) labor
C) land
D) entrepreneurship

Answer 3

B

Question 4

Alisa buys a 3D printer for the coworking space that she operates. Which category of the four factors of production does this printer fall under?

A) capital
B) labor
C) land
D) entrepreneurship

Question 5

Taylor decides to create an organic agriculture marketing firm and is working on the business plan for his new business. Which category of the four factors of production does his creation of this business fall under?

A) capital
B) labor
C) land
D) entrepreneurship

Question 6

The initiative to take risks and innovate falls under which category of the four factors of production?

A) capital
B) labor
C) land
D) entrepreneurship

Question 7

A professor who teaches a class is contributing which of the four factors of production to the creation of a college education?

A) capital
B) labor
C) land
D) entrepreneurship

Question 8

Which of the following does NOT fall under the land category?

A) wood from forests
B) chicken eggs
C) a farmer working on a farm
D) iron ore

Question 9

An economist would not consider which of the following to be under the category of capital?

A) a pan used by a chef
B) a camera used by a photographer
C) money used to buy stocks
D) running shoes owned by a professional runner

Question 10

The ability to assemble all of the other factors of production into a good falls under the category of:

A) capital.
B) labor.
C) land.
D) entrepreneurship.

Question 11

Groups of people who live together and share income are called:

A) firms.
B) households.
C) collectives.
D) individuals.

Question 12

What is earned by households in exchange for providing capital?

A) wages
B) profit
C) rent
D) credit

Question 13

Households receive _____ as payment for work effort.

A) wages
B) profit
C) rent
D) credit

Question 14

Wages are paid to households in exchange for the supply of:

A) capital.
B) labor.
C) land.
D) entrepreneurship.

Question 15

Rents are paid to households in exchange for the supply of:

A) capital only.
B) labor and entrepreneurship.
C) land only.
D) capital and land.

Question 16

A business owner receives which of the following types of payment in return for the willingness to accept risk and innovate?

A) wages
B) profit
C) rent
D) credit

Question 17

The payment made to the entrepreneurial economic resource is called:

A) wages.
B) rent.
C) profit.
D) credit.

Question 18

Rent is the payment that a household receives in exchange for providing:

A) capital.
B) entrepreneurship.
C) labor.
D) skills and knowledge.

Question 19

In the circular flow model, households:

A) employ factors from the product markets.
B) sell factors in the product markets.
C) collect taxes and pay transfers.
D) demand goods and services in the product markets.

Question 20

In the circular flow model, households:

A) supply factors in the factor markets.
B) sell factors in the product markets.
C) collect taxes and pay transfers.
D) demand goods and services in the factor markets.

Question 21

In the circular flow model, a firm will:

A) employ factors from the product markets.
B) sell factors in the product markets.
C) collect taxes and pay transfers.
D) sell goods and services in the product markets.

Question 22

If an entrepreneur wants the tightest control over the decision making in a firm, what is the best type of firm to operate?

A) sole proprietorship
B) limited liability partnership (LLP)
C) partnership
D) corporation

Question 23

The type of firm that is a distinct legal entity that is separate from the entrepreneur and other owners but cannot sell stock is a:

A) corporation.
B) partnership.
C) limited liability corporation (LLC).
D) nonprofit.

Question 24

The type of firm that is a distinct legal entity that is separate from the entrepreneur and other owners and can sell stock is a:

A) corporation.
B) partnership.
C) limited liability corporation (LLC).
D) nonprofit.

Question 25

Which of the following is a key distinction between corporations and limited liability corporations (LLCs)?

A) Corporations are distinct legal entities for the purpose of taxes, but LLCs are not.
B) Corporations shield owners from legal liabilities, but LLCs do not.
C) Corporations can borrow money, but LLCs cannot.
D) Corporations can issue stock, but LLCs cannot.

Question 26

Which of the following is an advantage that a limited liability corporation has but a corporation does not?

A) Owners are protected from legal liability.
B) A small amount of paperwork is necessary to start them.
C) Owners are protected from tax liability.
D) Owners have the ability to sell stock.

Question 27

Pawsabilities is a dog grooming service entirely owned by Clark, Art, and Fred. What type of firm is Pawsabilities?

A) single proprietorship
B) partnership
C) corporation
D) limited liability corporation

Question 28

Pawsabilities is a dog grooming service entirely owned by Clark, Art, and Fred. Which of the following statements does NOT describe a downside of this business form?

A) It faces significant paperwork requirements to start.
B) Each owner is personally liable for debts created by the firm.
C) It can use loans only as a way to raise money to expand.
D) Each owner is liable for a legal claim against the firm.

Question 29

Any enterprise that employs the factors of production and sells goods and services is called:

A) a household.
B) labor.
C) capital.
D) a firm.

Question 30

What are the owners of a limited liability corporation (LLC) called?

A) shareholders
B) owners
C) members
D) bondsmen

Question 31

______ represent(s) ownership in a corporation.

A) Bonds
B) Debt
C) Stocks
D) Dividends

Question 32

A ______ is a payment of a portion of a corporation's profits that is made to a shareholder of the corporation.

A) bond
B) debt
C) stock
D) dividend

Question 33

Firms sell stock to:

A) generate a profit.
B) raise funds to begin or expand a business.
C) pay employees.
D) create a liability for shareholders.

Question 34

To begin her accountancy firm, Cheryl filed articles of incorporation and issued 1,000 shares of stock. Cheryl's accountancy firm is a:

A) sole proprietorship.
B) limited liability corporation.
C) corporation.
D) partnership.

Question 35

Which of the following is a reward that a shareholder receives in payment for holding stock?

A) rent
B) dividends
C) wages
D) profit

Question 36

A firm that is legally distinct from its owners, who are called shareholders, is called a:

A) limited liability corporation.
B) sole proprietorship.
C) partnership.
D) corporation.

Question 37

A firm that is legally distinct from its owners, who are called members, is called a:

A) limited liability corporation.
B) sole proprietorship.
C) partnership.
D) corporation.

Question 38

What is a stock?

A) a partial ownership in a firm
B) an article of incorporation
C) the employees of a firm
D) the inventory of a firm

Question 39

Which of the following is a key distinction between a corporation and a limited liability corporation (LLC)?

A) A corporation shields its owners from the debts of the firm, but an LLC does not.
B) A corporation shields its owners from legal claims against the firm, but an LLC does not.
C) A corporation issues stock, but an LLC does not.
D) A corporation has many members, but an LLC has one member.

Question 40

An organization that has the authority to lead and govern is called a:

A) corporation.
B) government.
C) limited liability corporation (LLC).
D) partnership.

Question 41

A _____ is made by a government for something other than the purchase of a good or service.

A) dividend
B) tax
C) share
D) transfer payment

Question 42

Which of the following is NOT an example of a transfer payment?

A) An elderly man receives a social security payment.
B) The government buys 200 statues of chickens.
C) The government pays unemployment insurance to unemployed workers.
D) A chicken farmer receives a subsidy.

Question 43

A state government collects _____ to pay for necessary services and to employ workers in the state.

A) transfer payments
B) dividends
C) taxes
D) interest

Question 44

In order to purchase goods and services and factors of production, a government must:

A) collect taxes.
B) issue stock.
C) pay dividends.
D) provide transfer payments.

Question 45

The city council of Moose Jaw in Saskatchewan, Canada, is an example of a:

A) corporation.
B) sole proprietorship.
C) limited liability corporation (LLC).
D) government.

Question 46

In the circular flow model, the government:

A) collects taxes and pays transfer payments.
B) purchases goods and services in the factor markets.
C) purchases resources in the product markets.
D) pays dividends to households.

Question 47

In the circular flow model, a firm:

A) sells factors in the product markets.
B) employs factors from the factor markets.
C) collects taxes and pay transfers.
D) sells goods and services in the factor markets.

Question 48

In the circular flow diagram, what flows from households to product markets?

A) spending
B) products
C) factor payments
D) income

Question 49

In the circular flow diagram, what flows from firms to factor markets?

A) factors of production
B) products
C) factor payments
D) spending

Question 50

In the circular flow diagram, what flows from firms to product markets?

A) spending
B) income
C) factors of production
D) services

Question 51

In the circular flow diagram, _____ are traded in product markets, and _____ are traded in factor markets.

A) goods and services; resources
B) resources; goods
C) services; goods
D) transfer payments; taxes

Question 52

Which of the following statements is correct about the role that is played by the government in the circular flow diagram?

A) The government collects taxes only from households.
B) The government both receives factors of production and makes factor payments.
C) The government provides goods and services only to households and collects taxes only from firms.
D) The government does not interact with the product market.

Question 53

Which of the following is the role that is played by the government in the circular flow diagram?

A) It provides goods and services to households and firms and pays for these using taxes.
B) It provides resources to product markets in exchange for factor income and provides goods and services to households.
C) It provides goods and services in factor markets and provides goods and services to firms.
D) It provides more goods and services to households and firms than it collects in the form of taxes.

Question 54

A situation is considered efficient if:

A) there is no alternative allocation of resources that can make someone better off without making someone else worse off.
B) all resources are allocated in such a way that all participants receive an equal share of what has been produced.
C) production has been allocated in such a way that all people receive the output that they expected to receive.
D) some people receive a higher share of production than others.

Question 55

The economist who developed the idea of efficiency in economics is:

A) A. W. Phillips.
B) Adam Smith.
C) David Ricardo.
D) Vilfredo Pareto.

Question 56

The central objective that firms, households, and governments have when making economic decisions is:

A) profit.
B) rent.
C) efficiency.
D) equity.

Question 57

Economists evaluate an allocation of resources as efficient if:

A) the allocation makes the majority of citizens happy.
B) the allocation distributes the resources equally across all citizens.
C) the allocation of resources produces goods at the lowest possible prices.
D) no alternative allocation could make some people better off without making other people worse off.

Question 58

There are 12 cookies to be distributed between two friends. Which of the following choices would allocate the cookies in the most efficient manner?

A) One person gets 12 cookies, and the other get no cookies.
B) Each person gets an equal share of six cookies.
C) The cookies are distributed by a random lottery.
D) The most cookies are allocated to the friend with the strongest desire for cookies, and the other person gets the rest of the cookies.

Question 59

Economists evaluate an allocation of resources as _____ if no alternative allocation could make some people better off without making other people worse off.

A) fair
B) efficient
C) egalitarian
D) unjust

Question 60

When Eric is staring into the refrigerator trying to figure out what to make for dinner, which of the three economic questions is he attempting to answer?

A) What should the price be?
B) What should be produced?
C) How should it be produced?
D) For whom should it be produced?

Question 61

Cher is a struggling soybean farmer who is frustrated with low soybean prices. In the spring, rather than planting more soybeans, Cher decides to use her economic resources to grow barley instead. Cher's decision is an example of what fundamental economic question?

A) What should be produced?
B) Where shall we produce?
C) How should it be produced?
D) For whom should it be produced?

Question 62

If an economy figures out how to allocate land, labor, and capital in such a way that no other allocation makes society better off, then the economy has answered what question?

A) What should the price be?
B) What should be produced?
C) How should it be produced?
D) For whom should it be produced?

Question 63

If resources are allocated in such a way that no more of a good can be produced without producing less of another good, what question has been answered?

A) What should the price be?
B) What should be produced?
C) How should it be produced?
D) For whom should it be produced?

Question 64

Sonny owns a grocery store. He realizes that his profits will increase if he can buy more automated check-out machines and then employ fewer workers who check out each shopper. This decision to replace labor with capital is an example of what fundamental economic question?

A) What shall be produced?
B) Where shall we produce?
C) How should it be produced?
D) For whom should it be produced?

Question 65

If the goods and services that are produced in a society are allocated in such a way that the ones who receive those goods and services are the ones who value them the most, what economic question has been answered?

A) What should the price be?
B) What should be produced?
C) How should it be produced?
D) For whom should it be produced?

Question 66

When a college uses a lottery to determine who is assigned the nicest dorm room on campus, what economic question is being answered?

A) What should the price be?
B) What should be produced?
C) How should it be produced?
D) For whom should it be produced?

Question 67

Jane is celebrating her barbershop's fifth anniversary by auctioning a free haircut to the highest bidder. Jane's auction is an example of what fundamental economic question?

A) What shall be produced?
B) What time shall we produce?
C) How should it be produced?
D) For whom should it be produced?

Question 68

Which of the following questions is NOT one of the fundamental economic questions?

A) What shall be produced?
B) When shall we produce?
C) How should it be produced?
D) For whom should it be produced?

Question 69

What are the fundamental economic questions?

A) What should be produced, and how much should it be sold for?
B) What should be produced, when should it be produced, and how much should it be sold for?
C) How many units of a good should be produced, when should it be sold, and how should it be priced?
D) What should be produced, how should it be produced, and for whom should it be produced?

Question 70

When power plants switch from using coal as a fuel for electricity generation to using less expensive natural gas as a fuel, it demonstrates which of the economic questions?

A) What shall be produced?
B) For whom should it be produced?
C) How should it be produced?
D) Where shall we produce?

Question 71

When the state of Colorado uses a lottery to determine which hunters will receive a tag to hunt mountain goats, it demonstrates which of the economic questions?

A) What shall be produced?
B) For whom should it be produced?
C) How should it be produced?
D) Where shall we produce?

Question 72

When cell phone producers decided to produce more smartphones and fewer flip-style phones, they demonstrated which of the economic questions?

A) What shall be produced?
B) For whom should it be produced?
C) How should it be produced?
D) Where shall we produce?

Question 73

Answers to the fundamental economic questions are determined by the _____ system that is in place.

A) economic
B) operating
C) voting
D) educational

Question 74

An economy in which economic decisions are based on precedent is known as a _____ economy.

A) market-based
B) socialist
C) traditional
D) command

Question 75

When a nation adopts aspects of traditional, market, and command economies, it is known as a _____ economy.

A) socialist
B) communist
C) democratic
D) mixed

Question 76

Traditional economies make economic decisions based on:

A) markets.
B) elected committees.
C) precedent.
D) supply and demand.

Question 77

The nation of Lumen produces goods and services by using techniques that have been around for generations and allocates them based on a complicated social structure. What kind of economic system exists in Lumen?

A) market-based economy
B) socialist economy
C) traditional economy
D) command economy

Question 78

What is a characteristic of a purely traditional economic system?

A) There is rapid innovation.
B) Prices determine the allocation of goods.
C) Legislators from a single political party allocate resources.
D) Economic decisions are based on precedent.

Question 79

All goods, services, and resources are allocated based on their price, and those who value them the most pay that price. This best describes what economic system?

A) communism
B) socialism
C) market economy
D) traditional economy

Question 80

An economy in which economic decisions are based primarily on the interactions of buyers and sellers is known as a _____ economy.

A) market-based
B) socialist
C) traditional
D) command