Econ Unit 2 Exam

Why do U.S. economic policies seek to achieve the goal of maximum employment?

• A.High employment is a signal to producers to lower prices on goods and services.

• B.The Constitution guarantees a job to Americans who are willing and able to work.

• C.When more people work, the economy is more productive and the standard of living rises.

• D.The more people who are employed, the more secure the financial markets will be.

State and local ballot referendums allow American citizens to

• A.create government economic policies.

• B.enact government spending proposals.

• C.support the government goal of economic freedom.

• D.support the government goal of financial security.

Read each question and choose the best answer.

Private Bridge Attracts Public Interest

At the council meeting last night, the Drover Company demanded that the town enforce its private property laws. Last year, the company built a bridge across Snake Stream to make it easier for employees to reach its offices. "The bridge," company owner Celia Drover said, "is private." She went on to complain that many nonemployees have been using the bridge, rather than drive seven miles south to cross the stream on a state-owned bridge.Which of the following best describes the use of the private bridge by the public?Read each question and choose the best answer.

• A.the efficient allocation of resources

• B.the free-rider problem

• C.positive externalities

• D.negative externalities

Why has the United States space program been operated as a public good?

• A.Private enterprise does not have the technical skill needed to build the rockets that carry astronauts into space.

• B.The profit incentive for a private company to establish and run its own space program is too great.

• C.The inability of the American space program to land an astronaut on Mars is an example of market failure.

• D.It is impractical to exclude nonpayers from enjoying the scientific and technological benefits of the space program.

Read each question and choose the best answer.

"Whether we're talking about roads or bridges or mass transit, whether we're talking about canals and waterways, sewage and water facilities, whether we're talking about broadband, or we're talking about the grid to transmit electricity, whether we're talking about schools, an investment in infrastructure that serves the needs of our children and their education, . . . these infrastructure investments offer our nation job-creating opportunities to reinvigorate the American economy."—Nancy Pelosi, Speaker of the House, Press Release, March 11, 2008

Government-built infrastructure is a public good. Which of the following BEST paraphrases the intent of this press release by a government official?

• A.to inform people about the various types of infrastructure

• B.to warn people that the nation's infrastructure needs to be repaired

• C.to alert people to the large investment needed to repair infrastructure

• D.to persuade people that the benefits of repairing infrastructure outweigh the costs

Select the phrase that Adam Smith used to summarize the self-regulating device of the marketplace.

Every individual necessarily labors to render the annual revenue of the society as great as he can. . . . He intends his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.

• annual revenue

• invisible hand

• promote an end

• own gain

Which of the following is a function of firms in the market economy?

• A. They ensure that the monetary flow is greater than the physical flow.

• B. They supply households with land, labor, and capital.

• C. They convert land, labor, and capital into goods and services.

• D. They consume the goods and services that households produce.

"Competition encourages entrepreneurs to find new ways of producing goods and services." 
This statement MOST CLOSELY relates to which of the advantages shown in the concept web?

• A. growth and innovation

• B. variety of goods and services

• C. freedom of choice for consumers and producers

• D.efficient response to changing marketplace conditions

Who benefits from the free market economy?

• a. consumers and producers

• b. people living in poverty

• c. wealthy entrepreneurs

• d. the federal government

Which basic economic question deals with the issue of where a person can afford to live?

• a. How should goods and services be produced?

• b. Who consumes the goods and services that are produced?

• c. Why should goods and services be produced?

• d.What goods and services should be produced?