Chapter 2 One Characteristic That Has Allowed The

81. One characteristic that has allowed the U.S. economy to change the mix of output in response to consumer

demand is the

82. Whenever technology advances, an economy can produce more output with

83. Which of the following does not contribute to the high productivity of the U.S. economy?

84. Which of the following will contribute to accelerated growth for the U.S. economy?

85. Outsourcing leads to

86. Outsourcing leads to

A. Increases in total output, but with temporary job losses for some domestic workers.

87. Which of the following would be a legitimate government activity in the U.S.

economy? A.

88. The government establishes the rules of the game for economic transactions in order to

A. Legitimatize and enforce contracts.

89. The term externalities refers to

90. The cost or benefit of a market activity borne by a third party is

A. An externality.

91. Which of the following is an example of an external cost?

92. When the production of a good creates external costs,

A. Profits for the producer of the good will be lower.

93.

Goods that have spillover costs affect our collective well-being and therefore can be overproduced because

94. Government intervention to reduce the level of pollution is prompted by the existence

of A. An inequitable distribution of income.

95. The government regulates food additives

96. A monopoly exists when

A. A small number of firms are the only producers of a good.

97. When unregulated monopolies exist,

A. Prices tend to be higher than with a competitive market.

98. The purpose of antitrust policy in the United States is to

99. In a market economy with no government intervention, the HOW to produce question is based on

A. Production costs alone.

100. The result of government intervention in the market is that

A. Society is always better off.

101. Which of the following statements about the way markets allocate resources is most accurate from society’s

perspective?

A. The market always allocates resources in the best way.

102. The bottom 80 percent of the families in the United States receive approximately ______ percent of

total income.

A. 10

103. The theory of how to grow GDP is

104.

Income inequality tends to be greatest in

105. A country that increased its literacy rate and thereby its average human capital would probably

106. A rich country that opened its borders to trade with a poor country would cause in the long run

107. A rich country that opened its borders to trade with a poor country would cause in the long run

108.

As of 2013, to be in the top quintile for income distribution in the United States, a family needed in income at

least

109. As of 2010, to be in the bottom quintile for income distribution in the United States, a family needed in

income no more than

110. As of 2010, for income distribution in the United States, the minimum family earnings in the top quintile were

approximately _______ times the maximum family earnings in the bottom quintile.

A. 3

111. A laissez faire economy

A. Relies predominantly on government policy rather than free market action.

112. The income distribution of the United States is basically the nation’s answer to the

113. Which of the following statements is true concerning income inequality?

A. Income is equally distributed in poor countries.

114. One-fifth of the population, rank ordered by income, is

115. The richest 20 percent of the families in the United States receive approximately ______ percent of

total income.

116. The 20 percent of families with the lowest income in the United States receive approximately ______ percent of

total income.

A. 1

117. When compared to the average household in most low-income countries, poor people in the United

States receive

A. About the same amount of goods and services.

118. Income inequality is

A. Often greatest in the richest countries.

119. Income inequalities are greatest

in A. Highly developed countries.

120. According to the World View titled “Income Share of the Rich,” in which of the following would the top tenth of

the population be most likely to receive the highest percentage of the country’s income?

A. Namibia.

121. According to the World View titled “Income Share of the Rich,” in which of the following would the top tenth of

the population be most likely to receive the highest percentage of the country’s income?

A. Japan.

122. According to the World View excerpt that compares GDP figures for several nations, Japan’s real GDP is

approximately

123. According to the World View excerpt that compares GDP figures for several nations, Russia’s real GDP is

approximately

A. More than that of Germany.

124. The World View article titled “The Education Gap between Rich and Poor Nations” says that 85 percent of

all Americans graduate from high school. This is an example of

A. The inequitable distribution of income.

125. The World View article titled “The Education Gap between Rich and Poor Nations” says that a greater

percentage of people graduate from high school in rich nations than in poor nations. This investment in human

capital can lead to

126. The World View article in the text titled “Income Share of the Rich” reports, “In poor, developing countries the

richest tenth of the population typically gets 40 to 50 percent of all income.” Which of the following is a form of

government intervention designed to change this situation?

127. In the United States today, nearly _________ of the population has attained a college degree.

A. 30 percent

128. The role of the government in establishing how private business can operate includes all of the following

except

A. Providing a legal framework.

129. According to the World View article that compares GDP per capita figures for several nations, which of the

following nations has the highest GDP per capita?

A. Japan.

130. Externalities measure

A. Only costs of a market activity borne by a third party.

131. Over many years the capital stock in the United States has grown to approximately

132. The GDP is a measure of the market value of all final goods and services produced in the economy in a

given time period.

133. The GDP of the United States includes production by foreign-owned firms that are located in the United States.

134. The standard of living rises when population growth exceeds economic growth.

135. The relative decline in goods production compared to services produced means that we’re producing fewer

goods than in earlier decades.

136. On average over the last century, the U.S. population has grown three times as fast as the U.S. real GDP.

137. A good approximation of a country’s standard of living is per capita GDP, which is population divided by

real GDP.

138. According to the World Bank, nearly one-third of the people on earth subsist on incomes of less than $2 per

day.

139. In the years from 2000 through 2009, China’s standard of living or per capita GDP grew faster than that of

the United States.

TRUE

140. Education and training are examples of investment in human capital.

141. The high productivity of the U.S. economy results from using highly educated workers in a capital-

intensive production process.

142. Outsourcing is a source of increased U.S. output.

143. Government intervention is sometimes used to reduce the external costs of production.

144. Monopolists can dictate the price or the quantity of the product they produce, but not both.

145. The richest fifth of U.S. households get nearly half of all U.S. income.

146. Income inequalities are often greatest in the poorest countries.

147. How is per capita GDP calculated, and what does it tell us about the economy?

148. How is per capita GDP affected by GDP growth and population growth?

149. Compare the composition of U.S. output in the year 1900 with its composition in the year 2000.

150. What are externalities, and how do they affect who pays the true cost of a polluting factory?

151. What factors contribute to the high level of productivity of the American worker?

152. What is human capital, and how does it affect U.S. productivity?

Chapter 02 Test Bank Summary