Name: __________________________ Date: _____________ 1.

A) B) C) D) Under feudalism, markets rather than the government made the central economic decisions. tradition determined who produced what. governments let the market decide what to produce. governments distributed the rights to produce.

2. Private property rights are not essential to market economies. 3. Which of the following organizations was most likely to extend credit to Argentina when it experienced a financial crisis in 2002? A) The International Monetary Fund. B) The OECD. C) The Group of Five. D) The Group of Eight. 4. A) B) C) D) 5. A) B) C) D) 6. A) B) C) D) The opportunity cost of getting a job is: the income earned by taking the job. the benefit you would have obtained if you had not taken the job. the benefit you obtained by taking the job. the marginal cost of taking the job. An action taken by a government to influence the course of economic events is: an economic theory. an economic institution. an economic policy. a cultural norm. The opportunity cost for a student of attending college for a year is best measured by: the benefit received by the student. the tuition paid for the year. what the student would have accomplished if he had not attended college. the total money outlays associated with attending college.

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7. Which of the following agencies would be most likely to loan developing countries money to build a hydroelectric dam? A) The World Trade Organization. B) The World Bank. C) The International Monetary Fund. D) The Group of Eight. 8. A) B) C) D) 9. A) B) C) D) 10. A) B) C) D) 11. A) B) C) D) 12. A) B) C) D) The invisible hand is: not affected by social and political forces. affected by social but not political forces. affected by political but not social forces. affected by both political and social forces. For a market to exist, you have to have a capitalist economy. private property rights. no government intervention. externalities. An economic system: can eliminate scarcity. must solve the questions of what to produce, how to produce, and for whom to produce. requires government planning of production and distribution. must meet the needs of all individuals. Pure capitalism is not characterized by: government ownership of capital. private ownership of land. freedom of enterprise. worker freedom to seek the jobs of their choice. An economic system must address all of the following problems except: what goods to produce. how to produce the goods. how to assign initial property rights. for whom to produce the goods.

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13. A) B) C) D)

Scarcity arises because: individuals have not solved the three central coordination problems. governments have not solved the three central coordination problems. what some people want, other people are unwilling to provide. allocating resources is too complex.

14. In a market economy, the "what to produce" decision in practice is most often made directly by A) consumers. B) the market. C) government. D) firms. 15. A) B) C) D) 16. A) B) C) D) Government is a: seller in factor markets and a buyer in goods markets. buyer in factor markets and a seller in goods markets. seller in both factor markets and goods markets. buyer in both factor markets and goods markets. The invisible hand refers to: the role of government in a market economy. the price mechanism that guides economic actions. political forces. social forces.

17. Microeconomics is the study of inflation, unemployment, business cycles, and growth. 18. A) B) C) D) Globalization: is decreasing in importance. increases competition. reduces the need to specialize. reduces productivity.

19. The opportunity cost of reading Chapter 1 of the text: A) is about 1/20 of the price you paid for the book because the chapter is about one twentieth of the book. B) zero since you have already paid for the book. C) has nothing to do with the price you paid for the book. D) is 1/20 the price of the book plus 1/20 the price of the tuition.

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20. A) B) C) D)

Households are: sellers in factor markets and buyers in goods markets. buyers in factor markets and sellers in goods markets. sellers in both factor markets and goods markets. buyers in both factor markets and goods markets.

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Answer Key

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20.

B False A B C C B D B B A C C D D B False B C A

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