Economics Micro & Macro (CliffsAP)

11. In which of the following economies does the government decide how to use the factors of production?
    A. Market economy
    B. Traditional economy
    C. Command economy
    D. Free-trade economy
    E. Trade-restrictive economy

12. Which one of the following is not an economic goal?

A. Freedom

B. Incentives

C. Equity

D. Efficiency

E. Profit

13. Which one of the following is considered the regulating force of the market system?

A. Government

B. Government and firms

C. Firms and taxes

D. Suppliers and consumers

E. All of the above

14. What do the plot points on the production possibilities graph represent?

A. Ta xe s

B. Unemployment

C. Inflation

D. Trade-offs

E. Firms

15. Which one of the following is a factor of production?

A. Money

B. Revenue

C. Profit

D. Labor

E. Ta xe s

Answers to Review Questions

1. C.Land is a factor of production. Money is a medium of exchange, not a resource. To produce a good or service,
   the government has to use one of the factors of production.


2. D. Opportunity cost is the value, both monetary and non-monetary, of your next best alternative. There can be
   only one opportunity cost.


3. C.When analyzing comparative advantage, you must remember to examine the opportunity cost of the country
   or entity. The country or entity with the lowest opportunity cost has the comparative advantage. Whoever is
   giving up the least to make something has the advantage.


4. C.Machines are used to produce other goods and services; therefore, they are considered capital. There are two
   forms of capital: human and physical. Education is human capital, whereas machines are considered physical
   capital.

Part I: The Fundamentals