Identify the letter of the choice that best completes the statement or answers the question.
____1.What is the difference between a scarcity and a shortage? |a. |A scarcity occurs when producers will not or cannot offer goods or services at the current prices, and a shortage occurs| | |when there are limited quantities to meet unlimited wants. | |b. |Scarcity is the effort that people devote to a task that meets unlimited wants, and a shortage occurs when supplies of | | |goods or services run low. | |c. |A scarcity occurs when supplies of goods and services are suddenly attainable, and a shortage occurs when producers will| | |not or cannot offer goods or services at the current prices. | |d. |A scarcity occurs when there are limited quantities to meet unlimited wants, and a shortage occurs when a good or | | |service is unavailable. |
____2.A legislative committee is weighing the pros and cons of a clean-air program. If it spends $1 million on the program, the air will be cleaner by 20 percent. If it spends $2 million, the air will be cleaner by 30 percent. If it spends $3 million, the air will be cleaner by 35 percent. After comparing opportunity costs and benefits at the margin, the committee agrees to fund the program with $2 million. Why did it not choose to appropriate $3 million? |a. |At $3 million, the air is not improved as much as the committee would like. | |b. |At $3 million, the costs are no longer worth the benefits. | |c. |It was too much to spend without a guarantee. | |d. |The air is improved by the same amount whether $2 million or $3 million is spent. |
____3.How does a society answer the three economic questions about the production and consumption of goods and services? |a. |Its answer is based on the importance it attaches to various economic goals and societal values. | |b. |Its answer is based on the importance it attaches to the stock market. | |c. |Its answer is based on recent technological advances. | |d. |Its answer is based solely on current environmental regulation. |
____4.In a free market economy, the factor market involves which type of exchange? |a. |The goods and services that households produce are purchased by firms. | |b. |Firms purchase factors of production from households. | |c. |Households purchase factors of production from firms. | |d. |Firms loan money to households to purchase capital. |
____5.Centrally planned economies can work effectively toward explicitly stated goals, but which of the following is one disadvantage of such a system? |a. |Its performance almost always falls short of its ideals. | |b. |These economies never produce an increase in output. | |c. |The workers control all the production factors. | |d. |It gives too...