Economics unit 2 USA test prep

Which of these is the BEST example of how the free enterprise system of the United States promotes individual initiative?

A) Men must register for selective service.
B)
A citizen may be called to serve on a jury.
C)
The legislative branch levies an income tax.

D)
Authors can have original works copyrighted.
D) Authors can have original works copyrighted.

Suppose the government passed a law, taxing manufacturers according to the amount of pollutants they released into the environment. This law would be an example of which regulatory function of the government?

A)
protect consumers
B)
promote competiton
C)
regulate negative externalities
D)
supervise labor and management relations
C)
regulate negative externalities

-Provide public goods
-Regulate market failures
-Promote economic growth

In a mixed economy, these functions are generally the responsibility of which group?

A)
Consumers
B)
Government
C)
For-profit firms
D)
Not-for-profit firms
B. Government

Property rights are theoretical elements in economics for determining how a resource is used and owned. Resources can be owned by individuals, associations or governments. There are four parts to property rights: the right to use the good, the right to transfer the good to others, the right to enforcement of property rights, and _______.

What is the fourth part to property rights?

A)
the right to demand a profit
B)
the right to extract efficiency
C)
the right to earn income from the good
D)
the right to insure equity of goods and services
C)
the right to earn income from the good

“[W]ith respect to interstate and overseas air transportation to consider the following as being in accordance with the public convenience and necessity: (1) the maintenance of safety as the highest priority in air commerce; (2) placing maximum reliance on competition in providing air transportation services; (3) the encouragement of air service at major urban areas through secondary or satellite airports; (4) the avoidance of unreasonable industry concentration which would tend to allow one or more air carriers to unreasonably increase prices, reduce services, or exclude competition; and (5) the encouragement of entry into air transportation markets by new air carriers, the encouragement of entry into additional markets by existing air carriers, and the continued strengthening of small air carriers.”

– Public Law 95-504, “Airline Deregulation Act”

The LEAST LIKELY result of the passage of the Airline Deregulation Act of 1978 was

A)
ticket prices determined by market forces.
B)
greater competition within the airline industry.

C)
a decreased average level of safety for passengers.
D)
the creation of more and smaller airports in the U.S.
C)
a decreased average level of safety for passengers.

The United States Congress passes a law requiring that all businesses, regardless of size, pay 100% of employees’ healthcare costs. What is a likely result of this action?
A)
Businesses will hire more workers.
B)
Congress will collect more tax revenue.
C)
Big Businesses will earn greater profits.

D)
Many small businesses will be forced to close.
D)
Many small businesses will be forced to close.

A government that operates a market economy MIGHT become involved in the economy
A)
to increase the profits of a specific company.
B)
to eliminate income inequality among its citizens.
C)
to make sure all products are produced the same way.
D)
to provide public goods and services to its citizens.

D)
to provide public goods and services to its citizens.
Which of these is an example of how the U.S. Constitution protects the free enterprise system?
A)
Congress is given the power to borrow money.
B)
Congress is given the authority to collect taxes.
C)
Congress is given the authority to raise and support armies.
D)
Congress is given the authority to grant patents and copyrights.

D)
Congress is given the authority to grant patents and copyrights.
Which scenario is the BEST example of how the government would act in a mixed market economy?
A)
The government requires a factory to produce surplus goods for the use of the military.
B)
The government stops a factory from producing imitations of an expensive type of purse.
C)
The government allows only two competitors to offer goods for sale on the country’s highways.
D)
The government imposes a limit on the number of television sets that can be exported annually.

B)
The government stops a factory from producing imitations of an expensive type of purse.
How might consumer credit laws contribute to the empowerment of individuals?
A)
Seller and lender abuses are reduced under consumer credit laws.
B)
Consumers are able to borrow money regardless of their credit history.
C)
Lenders can choose not to extend credit to individuals with a poor credit rating.
D)
Consumer credit laws prevent individuals from borrowing money, keeping them out of debt.

A)
Seller and lender abuses are reduced under consumer credit laws.
When deciding whether to undertake a large public works project (such as building a road, bridge, sports venue, etc.) the government must determine not only the costs, but also
A)
the needs of the contractors.
B)
the benefits to the community.
C)
the restrictions on labor unions.
D)
the competition from other governments.

B)
the benefits to the community.
Which statement describes an opportunity cost that could result from the government regulating businesses?
A)
Less recalls occur as a result of government regulations.
B)
Government regulations can lead to an increase in product safety.
C)
Government regulations can lead to an increase in production costs.
D)
Consumer protection declines as a result of government regulations.

C)
Government regulations can lead to an increase in production costs.
Government Attempts to Regulate Technology
by Stephen J. Bigelow, Processor Magazine, November 12, 2004

“One of the key roles of government is to form policies and regulate activities that improve the health and welfare of everyday citizens or protect citizens from harm. Because technology plays such a critical role in our lives, it’s no surprise that governments also seek to place controls and regulations on technologies, as well. Most regulatory efforts have either resulted in undesired side effects or have proven impractical because they are impossible to enforce…In general, small and medium-sized enterprises are disproportionately hit by the cost of regulatory compliance.”

Which of these BEST summarizes the opinion of the author regarding regulatory activities of the government?

A)
Most types of government regulations result in harm to consumers.

B)
Regulatory measures often have results contrary to the original intention.

C)
Small technology enterprises bear less of the costs of regulatory compliance.

D)
Government effectively monitors regulatory compliance of the technology industry.
B)
Regulatory measures often have results contrary to the original intention.

What MIGHT be the purpose of government regulation of natural monopolies, or economies of scale?

A)
Government regulation might be used to facilitate competition.

B)
Government regulation might be designed to put a firm out of business.

C)
Government regulation might be intended to raise prices on all consumers.

D)
Government regulation might be created for less oversight of a profitable business.
A)
Government regulation might be used to facilitate competition.

Why is private ownership an important source of economic prosperity?

A)
It eliminates the opportunity cost of using a resource.

B)
It allows owners to do anything they want with their property.

C)
It makes it possible for owners to ignore the desires of others without having to bear the cost.

D)
It provides owners with a strong incentive to develop and use assets in ways that others value highly.
D)
It provides owners with a strong incentive to develop and use assets in ways that others value highly.

Which scenario is LEAST LIKELY to occur in a market economy?

A)
The government pays farmers to stop planting certain crops for a period of time.

B)
The government stops a factory from producing imitations of an expensive type of purse.

C)
The government offers tax breaks to companies that meet efficiency goals in their products.

D)
The government allows only two competitors to offer goods for sale on the country’s highways.
D)
The government allows only two competitors to offer goods for sale on the country’s highways.

To promote competition…in order to secure lower prices and higher quality services for American telecommunications consumers and encourage the rapid deployment of new telecommunications technologies.

-Telecommunications Act of 1996

The Telecommunications Act of 1996 is MOST LIKELY an example of

A)
regulation.

B)
divestiture.

C)
deregulation.

D)
market failure.
C)
deregulation.

Imagine that personal preferences and advertising change and the demand curve shifts outward (to the right). How will this impact production?

A)
It will have no impact on production.
B)
It will cause the quantity of output in production to increase.
C)
It will cause the quantity of output in production to decrease.

D)
It will cause technology, labor, and capital in production to increase.
A)
It will have no impact on production.

When the amount of output produced by a given amount of inputs increases, the MOST LIKELY result is

A)
overall productivity rises.
B)
economic interdependence rises.
C)
consumer spending on productive resources increases.
D)
business spending on productive resources increases.
A)
overall productivity rises.

On a supply and demand graph, if the demand curve shifts to the left, what would be the resulting effect on equilibrium price and quantity?

A)
price will fall and quantity will fall
B)
price will fall and quantity will rise

C)
price will rise and quantity will fall
D)
price will rise and quantity will also rise
A)
price will fall and quantity will fall

Which determinant MIGHT increase supply in the market?
A)
an increase in the price of complementary goods

B)
an increase in the number of sellers of a product

C)
an increase in the number of consumers in the market
D)
an increase in the price of inputs to make the product
B)
an increase in the number of sellers of a product

How might a law setting minimum wage below the equilibrium point have an unintended effect?

A)
The effect might be less demand for workers.

B)
The law might result in wages lower than the equilibrium wage.
C)
The actual wages earned by workers might be higher than the equilibrium.
D)
The equilibrium point might shift upward in response to the minimum wage law.
B)
The law might result in wages lower than the equilibrium wage.

How might a minimum wage law impact the supply and demand of workers?

A)
It might result in a surplus of supply.
B)
It might result in a shortage of supply.

C)
It might result in lower wages for workers.
D)
It might result in a lower unemployment rate.
A)
It might result in a surplus of supply.

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