Semester Exam Review II

Scarcity is a basic economic problem because —

• resources are limited

• governments limit production

• opportunity costs limit demand

• people have trouble making choices

In a free market society, the answer to the question about how much to produce is determined by —

• census data

• profit projections

• consumer demand

• government quotes

Maria raised the price of the most popular pair of jeans in her clothing store. Two weeks later, she was surprised to learn that she did not sell any jeans at the new price. Considering the law of demand, why did Maria sell fewer jeans when she increased the price?

• The quality of the jeans declined.

• The cost of producing the jeans increased.

• The market is slow to adjust to price changes.

• The consumers were less able or willing to pay.

Which event would MOST LIKELY cause the price of a sports magazine to decrease?

• A. A competing sports magazine firm closes.

• B. The largest sports news website starts offering free subscriptions.

• C. A natural disaster destroys the country’s largest paper mill.

• D. The magazine wins a prestigious award for high-quality reporting.

With a given amount of resources, a country with a comparative advantage will produce a product with —

• decreased demand

• lower opportunity costs

• cheaper natural resources

• higher quality specifications

One way the United States could increase exports of sports cars would be to —

• negotiate to lower tariffs on sports cars

• reduce gasoline taxes in the United States

• increase the exchange rate of the American dollar

• raise the prices of sports cars in the United States

How do fluctuations to the international exchange rate of a nation's currency affect its balance of trade?

• If a country's exchange rate increases, the country's balance of trade stays the same.

• If a country's exchange rate increases, the country can import goods less expensively.

• If a country's exchange rate decreases, a negative trade balance occurs for that country.

• If a country's exchange rate decreases, the country's balance of trade stays the same.

Which of the following is a basic characteristic of all economic systems?

• Price controls

• Wage incentives

• Small business owners

• Distribution of goods and services

In comparison to the U.S. free enterprise system, the economy of China is characterized by a lack of —

• A. competition

• B. well-paying jobs

• C. trade incentives

• D. manufacturing industries

Which economist advocated for the increased role of government in the economy during times of economic instability?

• A. Friedrich Hayek

• B. Adam Smith

• C. Milton Friedman

• D. John Maynard Keynes