76. In the simple circular-flow diagram,
a.
households own the factors of production.
b.
households buy all the goods and services that firms produce.
c.
land, labor, and capital flow from households to firms.
d.
All of the above are correct.
77. In the simple circular-flow diagram, who buys the factors of production?
a.
households only
b.
firms only
c.
both households and firms
d.
neither households nor firms
78. The simple circular-flow diagram is a model that includes only some key players in the real economy. Which of the
following key players are omitted from the simple circular-flow model?
a.
b.
c.
d.
79. In the circular-flow diagram, another name for goods and services produced by firms is
a.
factors of production.
b.
output.
c.
inputs.
d.
resources.
80. Which markets are represented in the simple circular-flow diagram?
a.
markets for goods and services and markets for financial assets
b.
markets for factors of production and markets for financial assets
c.
markets for goods and services and markets for factors of production
d.
markets for goods and services and markets for imports and exports
81. In the markets for goods and services in the circular-flow diagram,
a.
households and firms are both buyers.
b.
households and firms are both sellers.
c.
households are buyers and firms are sellers.
d.
households are sellers and firms are buyers.
82. In the circular-flow diagram, in the markets for
a.
goods and services, households and firms are both sellers.
b.
goods and services, households are buyers and firms are sellers.
c.
the factors of production, households are buyers and firms are sellers.
d.
the factors of production, households and firms are both buyers.
83. In the circular-flow diagram, in the markets for
a.
goods and services, households and firms are both sellers.
b.
goods and services, households are sellers and firms are buyers.
c.
the factors of production, households are sellers and firms are buyers.
d.
the factors of production, households and firms are both buyers.
84. In the markets for goods and services in the circular-flow diagram,
a.
households provide firms with savings for investment.
b.
households provide firms with labor, land, and capital.
c.
firms provide households with output.
d.
firms provide households with profit.
85. In the markets for the factors of production in the circular-flow diagram,
a.
households are sellers and firms are buyers.
b.
households are buyers and firms are sellers.
c.
households and firms are both buyers.
d.
households and firms are both sellers.
86. In the markets for factors of production in the circular-flow diagram,
a.
households provide firms with labor, land, and capital.
b.
households provide firms with savings for investment.
c.
firms provide households with goods and services.
d.
firms provide households with revenue.
87. Which of the following transactions does not take place in the markets for factors of production in the circular-flow
diagram?
a.
a landowner leases land to a farmer
b.
a farmer hires a teenager to help with harvest
c.
a construction company rents trucks for its business
d.
a woman buys corn for dinner
88. Which of the following transactions takes place in the markets for the factors of production in the circular-flow
diagram?
a.
Dylan receives a salary for his work as a financial analyst for an investment firm.
b.
Kristin buys two business suits to wear to her job as a Chief Information Officer.
c.
Jim receives clean water in his home in exchange for paying his water bill.
d.
Caroline owns a nail salon and receives payments from her clients for her services.
89. In the circular-flow diagram,
a.
firms are buyers in the markets for goods and services.
b.
households are sellers in the markets for the factors of production.
c.
firms are sellers in the markets for factors of production and in the markets for goods and services.
d.
dollars that are spent on goods and services flow directly from firms to households.
90. The two loops in the circular-flow diagram represent
a.
the flow of goods and the flow of services.
b.
the flow of dollars and the flow of financial assets.
c.
the flow of inputs into production processes and the flow of outputs from production processes.
d.
the flows of inputs and outputs and the flow of dollars.
91. The outer loop of the circular-flow diagram represents the flows of dollars in the economy. Which of the following
does not appear on the outer loop?
a.
wages
b.
income
c.
capital
d.
rent
92. The inner loop of the circular-flow diagram represents the flows of inputs and outputs. Which of the following does
not appear on the inner loop?
a.
wages
b.
land
c.
capital
d.
goods and services sold
93. In the circular-flow diagram,
a.
profit flows from households to firms.
b.
labor flows from households to firms.
c.
services flow from households to firms.
d.
All of the above are correct.
94. In the circular-flow diagram,
a.
taxes flow from households to firms, and transfer payments flow from firms to households.
b.
income payments flow from firms to households, and sales revenue flows from households to firms.
c.
resources flow from firms to households, and goods and services flow from households to firms.
d.
inputs and outputs flow in the same direction as the flow of dollars, from firms to households.
95. In the circular-flow diagram,
a.
factors of production flow from government to firms.
b.
goods and services flow from households to firms.
c.
income paid to the factors of production flows from firms to households.
d.
spending on goods and services flows from firms to households.
96. In the circular-flow diagram, which of the following items does not flow from households to firms?
a.
revenue
b.
land, labor, and capital
c.
factors of production
d.
profit
97. In the circular-flow diagram, which of the following items does not flow from firms to households?
a.
goods
b.
services
c.
capital
d.
profit
98. In the circular-flow diagram, which of the following items flows from households to firms through the markets for
goods and services?
a.
goods and services
b.
dollars paid to land, labor, and capital
c.
dollars spent on goods and services
d.
wages, rent, and profit
99. In the circular-flow diagram, which of the following items flows from firms to households through the markets for
goods and services?
a.
goods and services
b.
dollars paid to land, labor, and capital
c.
dollars spent on goods and services
d.
wages, rent, and profit
100. In the circular-flow diagram, which of the following items flows from firms to households through the markets for
the factors of production?
a.
goods and services
b.
land, labor, and capital
c.
dollars spent on goods and services
d.
wages, rent, and profit
101. In the circular-flow diagram, which of the following items flows from households to firms through the markets for
the factors of production?
a.
goods and services
b.
land, labor, and capital
c.
dollars spent on goods and services
d.
wages, rent, and profit
102. In the circular-flow diagram, which of the following items represents a payment for a factor of production?
a.
interest
b.
capital
c.
spending by households on goods
d.
spending by households on services
103. In the simple circular flow diagram, the flow of money from the firms to the markets for factors of production is
called
a.
spending.
b.
revenue.
c.
income.
d.
wages, rent, and profit.
104. In the simple circular flow diagram, the flow of money from the markets for goods and services to the firms is called
a.
spending.
b.
revenue.
c.
income.
d.
wages, rent, and profit.
105. Among economic models, the circular-flow diagram is unusual in that it
a.
drastically simplifies the real world.
b.
features more than one type of market.
c.
features flows of dollars.
d.
does not involve mathematics.
106. According to the circular-flow diagram, if Suzy is a worker who delivers flowers for Happy Day Flower Company,
she participates
a.
in the markets for factors of production exchanging labor for income.
b.
in the markets for factors of production exchanging flowers for revenue.
c.
in the markets for goods and services exchanging flowers for wages, rent, and profit.
d.
in the markets for goods and services exchanging labor for income.
107. According to the circular-flow diagram, if Denny is the owner of a landscaping business and he just received $50 for
mowing Mrs. Pendleton’s lawn,
a.
the $50 represents a cost of production for Denny’s firm.
b.
the $50 represents wages, rent, and profit to Denny’s firm.
c.
Denny acts as a firm who interacted in the markets for factors of production with Mrs. Pendleton.
d.
Denny acts as a firm who interacted in the markets for goods and services with Mrs. Pendleton.
108. Refer to Figure 2-1. Which arrow represents the flow of goods and services?
a.
A
b.
B
c.
C
d.
D
109. Refer to Figure 2-1. Which arrow represents the flow of spending by households?
a.
A
b.
B
c.
C
d.
D
110. Refer to Figure 2-1. Which arrow represents the flow of land, labor, and capital?
a.
A
b.
B
c.
C
d.
D
111. Refer to Figure 2-1. Which arrow represents the flow of income payments?
a.
A
b.
B
c.
C
d.
D
112. Refer to Figure 2-1. Raymond buys a refrigerator for his new home. To which of the arrows does this transaction
directly contribute?
a.
A only
b.
A and B
c.
C only
d.
C and D
113. Refer to Figure 2-1. Harvey receives his first paycheck for working as an ice cream vendor. To which of the arrows
does this transaction directly contribute?
a.
B only
b.
A and B
c.
C only
d.
C and D
114. Refer to Figure 2-2. Boxes A and B of this circular-flow diagram represent
a.
firms and households.
b.
households and government.
c.
the markets for goods and services and the markets for financial assets.
d.
the markets for goods and the markets for services.
115. Refer to Figure 2-2. Boxes C and D of this circular-flow diagram represent
a.
households and government.
b.
firms and government.
c.
the markets for goods and services and the markets for financial assets.
d.
the markets for goods and services and the markets for factors of production.
116. Refer to Figure 2-2. If Box A of this circular-flow diagram represents firms, then which box represents households?
a.
Box B
b.
Box C
c.
Box D
d.
Any one of the other boxes (B, C, or D) could represent households.
117. Refer to Figure 2-2. If households are sellers in the markets represented by Box D of this circular-flow diagram,
then
a.
Box D must represent the markets for factors of production.
b.
Box C must represent the markets for goods and services.
c.
firms are buyers in the markets represented by Box D.
d.
All of the above are correct.
118. Refer to Figure 2-2. If households are buyers in the markets represented by Box C of this circular-flow diagram,
then
a.
Box C must represent the markets for the factors of production.
b.
Box D must represent the markets for goods and services.
c.
firms are sellers in the markets represented by Box C.
d.
All of the above are correct.
119. Refer to Figure 2-2. If the owners of land, labor, and capital are represented by Box B of this circular-flow diagram,
then
a.
households are represented by Box A.
b.
firms are represented by Box C.
c.
firms are represented by Box A.
d.
firms are sellers in Box B.
120. Refer to Figure 2-2. If the outer loop of this circular-flow diagram represents flows of dollars, then the inner loop
includes
a.
flows of goods and services from households to firms.
b.
flows of inputs from households to firms.
c.
flows of rent payments paid to owners of land.
d.
flows of wages and salaries paid to workers.
121. Refer to Figure 2-2. If the flow of goods and services is part of what is represented by the inner loop of this circular-
flow diagram, then
a.
the flow of factors of production is also part of what is represented by the inner loop.
b.
the flow of income paid to households is also part of what is represented by the inner loop.
c.
the flow of revenue to firms is also part of what is represented by the inner loop.
d.
households must be sellers of output.
122. Refer to Figure 2-2. Devin works as an attorney for a corporation and is paid a salary in exchange for the legal
services he performs. Juan owns office buildings and rents his buildings to companies in exchange for rent payments. If
Devin’s income is represented by a flow of dollars from Box D to Box B of this circular-flow diagram, then Juan’s
income is represented by a flow of dollars
a.
from Box A to Box C.
b.
from Box C to Box A.
c.
from Box B to Box D.
d.
from Box D to Box B.
123. Refer to Figure 2-2. Carla regularly buys fruits and vegetables at a grocery store. Roberto regularly pays a lawn-care
company to mow his lawn. If the flow of fruits and vegetables from the grocery store to Carla is represented by an arrow
from Box C to Box B of this circular-flow diagram, then the money paid by Roberto to the lawn-care company is
represented by an arrow
a.
from Box A to Box D.
b.
from Box B to Box C.
c.
from Box C to Box B.
d.
from Box D to Box A.
Figure 2-3
124. Refer to Figure 2-3. Which shape refers to the markets for goods and services?
a.
oval A
b.
oval B
c.
rectangle 1
d.
rectangle 2
125. Refer to Figure 2-3. What is flowing from rectangle 1 to oval A?
a.
revenue
b.
goods and services sold
c.
factors of production
d.
labor, land, and capital
126. Refer to Figure 2-3. Which of the following is an activity undertaken by the actors in rectangle 2?
a.
produce and sell goods and services
b.
hire and use factors of production
c.
own and sell factors of production
d.
exchange goods and services between firms and households
127. The production possibilities frontier is a graph that shows the various combinations of output that an economy can
possibly produce given the available factors of production and
a.
society’s preferences.
b.
the available production technology.
c.
a fair distribution of the output.
d.
the available demand for the output.
128. The production possibilities frontier is a graph that shows the various combinations of output that an economy
a.
should produce.
b.
wants to produce.
c.
can produce.
d.
demands.
129. When constructing a production possibilities frontier, which of the following assumptions is not made?
a.
The economy produces only two goods or two types of goods.
b.
Firms produce goods using factors of production.
c.
The technology available to firms is given.
d.
The quantities of the factors of production that are available are increasing over the relevant time period.
130. Any point on a country’s production possibilities frontier represents a combination of two goods that an economy
a.
will never be able to produce.
b.
can produce using all available resources and technology.
c.
can produce using some portion, but not all, of its resources and technology.
d.
may be able to produce in the future with more resources and/or superior technology.
131. Which of the following is not an assumption of the productions possibilities frontier?
a.
A country produces only two goods or types of goods.
b.
Technology does not change.
c.
The amount of available resources does not change.
d.
There is a fixed quantity of money.
132. Which of the following is a correct statement about production possibilities frontiers?
a.
An economy can produce only on the production possibilities frontier.
b.
An economy can produce at any point inside or outside a production possibilities frontier.
c.
An economy can produce at any point on or inside the production possibilities frontier, but not outside the
frontier.
d.
An economy can produce at any point inside the production possibilities frontier, but not on or outside the
frontier.
133. Where can an economy not produce?
a.
inside its production possibilities frontier
b.
on its production possibilities frontier
c.
outside its production possibilities frontier
d.
at the endpoints of its production possibilities frontier
134. An economic outcome is said to be efficient if the economy is
a.
using all of the scarce resources it has available.
b.
conserving on resources, rather than using all available resources.
c.
getting all it can get from the scarce resources it has available.
d.
able to produce more than what is currently being produced without additional resources.
135. Production is efficient if the economy is producing at a point
a.
on the production possibilities frontier.
b.
outside the production possibilities frontier.
c.
on or inside the production possibilities frontier.
d.
inside the production possibilities frontier.
136. If an economy is producing efficiently, then
a.
there is no way to produce more of one good without producing less of another good.
b.
it is possible to produce more of both goods without increasing the quantities of inputs that are being used.
c.
it is possible to produce more of one good without producing less of another good.
d.
it is not possible to produce more of any good at any cost.
137. An economy’s production of two goods is efficient if
a.
all members of society consume equal portions of the goods.
b.
the goods are produced using only some of society’s available resources.
c.
it is impossible to produce more of one good without producing less of the other.
d.
the opportunity cost of producing more of one good is zero.
138. When an economy is operating at a point on its production possibilities frontier, then
a.
consumers are content with the mix of goods and services that is being produced.
b.
there is no way to produce more of one good without producing less of the other.
c.
equal amounts of the two goods are being produced.
d.
All of the above are correct.