True/False
Indicate whether the sentence or statement is true
or false.
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1.
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The
economic system of a country affects how an item is produced, how it is distributed, and the demand
for the item.
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2.
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In
some economies, the resources to produce goods and services are unlimited, so scarcity does not
occur.
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3.
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The
distribution and production of goods and services is determined by the government in a command
economy.
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4.
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A
good that sells in a market economy will remain on the market; a good that does not sell will not
continue to be produced.
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5.
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In a
market economy, consumers determine the prices and quantities of goods and services
produced.
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6.
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The
demand curve shows that individuals are willing to consume more of a product or service at a lower
price.
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7.
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The
equilibrium price and quantity for a good or service are at the point where the supply and demand
curves intersect.
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8.
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If a
monopoly charges a price that is too high, consumers will switch to a lower-priced good or
service.
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9.
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A
business must pay its fixed costs regardless of the quantity of goods or services it
produces.
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10.
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The
variable costs of a business increase when sales increase, but fixed costs stay the
same.
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11.
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Marginal cost measures the advantages of producing one additional unit of a good or
service.
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12.
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If
the marginal cost of a change in company policy is less than the opportunity cost of the change, the
owner should not make the change.
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13.
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Opportunity cost is the cost of choosing one opportunity or investment over
another.
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14.
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The
government affects the U.S. economy by taxing certain goods and services.
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15.
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Producers of certain kinds of goods, such as agricultural products, receive a subsidy
from the government.
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16.
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The
USDA inspects some businesses to be sure the owners have passed examinations and paid licensing
fees.
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17.
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OSHA
inspects factories to be sure that conditions are safe for workers.
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18.
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A
public is a good from which everyone receives benefits, not just the individual consuming the
good.
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19.
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Social security and aid for dependent children and the aged are social programs that
are paid for by private charities.
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20.
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Redistributing income by the government is widely agreed to be unnecessary and causes
an undue burden on entrepreneurs.
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Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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21.
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The
demand curve shows that the quantity consumed of a good or service a. | decreases as
price decreases | c. | increases as
price increases | b. | is not affected by price | d. | increases as price decreases | | | | |
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22.
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A
company that competes for business a. | is a monopoly | c. | cannot charge prices that are much higher than its
competitors | b. | must be licensed | d. | will usually fail in a market economy | | | | |
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23.
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In a
market economy a. | individuals are
usually able to obtain exactly what they want | c. | production decisions are made by the
government | b. | there is very little choice in what is
available | d. | scarcity does
not exist | | | | |
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24.
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Supply, the quantity of a good or service a producer is willing to produce at
different prices a. | decreases as
price increases | c. | is not affected
by price | b. | increases as price increases | d. | increases as price decreases | | | | |
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25.
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Marginal benefit measures the advantages of a. | changing a fixed
cost to a variable cost | c. | producing one
additional unit of a good or service | b. | increased opportunity costs | d. | a competitive market | | | | |
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26.
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If an
entrepreneur decides to buy new equipment rather than increase advertising, the cost of the new
equipment is a. | marginal
cost | c. | an opportunity
cost | b. | a demand
cost | d. | all of
these | | | | |
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27.
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Variable costs of a business a. | are the same each month | c. | include the cost of insurance | b. | include interest
on business loans | d. | are based on the
quantity of goods produced | | | | |
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28.
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The
government regulates some businesses by requiring them to obtain a. | patents | c. | inspection
permits | b. | licenses | d. | subsidies | | | | |
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29.
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Government influences production in a market economy by a. | determining what
goods and services are to be produced | c. | purchasing goods and services | b. | requiring
subsidies from producers of certain kinds of goods | d. | charging monopolies a high fee | | | | |
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30.
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In a
market economy, the government may serves as a a. | provider of social programs | c. | provider of public goods | b. | redistributor of
income | d. | all of
these | | | | |
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Essay
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31.
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What
are the characteristics of a market economy?
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32.
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Describe what a demand curve looks like.
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33.
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Explain why a supply curve looks the way it does.
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34.
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Define variable costs and give an example of a variable cost.
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35.
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How
does government regulate businesses in a market economy?
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