CH02 Version1

Micro Economy Today 16th Edition by Schiller CH03
ANSWERS ARE LOCATED IN THE SECOND

PART OF THIS DOCUMENT
TRUE/FALSE - Write 'T' if the statement is true and 'F'
if the statement is false.
1) GDP is a measure of the market value of all final
goods and services produced in the economy in a given time
period.
1) ______
⊚ true
⊚ false
Topic : What America Produces

Question Details Accessibility : Screen Reader
AACSB : Reflective Thinking Compatible
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : 02-01 The relative size of the U.S. economy.
2) The GDP of the United States includes production by

foreign-owned firms located in the United States.
2) ______
⊚ true
⊚ false
Question Details
AACSB : Reflective Thinking
Bloom's : Understand
Difficulty : 2 Medium
Accessibility : Screen Reader Compatible
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3) The standard of living rises when population growth

exceeds economic growth.
3) ______
⊚ true
⊚ false
Question Details Difficulty : 2 Medium
AACSB : Reflective Thinking Accessibility : Screen Reader
Accessibility : Keyboard Navigation Compatible
4) The relative decline in goods production compared to

services produced means that we're producing fewer goods
than in earlier decades.
4) ______
⊚ true
⊚ false
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5) ______
⊚ true
⊚ false

Bloom's : Remember
Difficulty : 1 Easy
6) A good approximation of a country's standard of

living is per capita GDP, which is population divided by real
GDP.
6) ______
⊚ true
⊚ false

Bloom's : Remember
Difficulty : 1 Easy
7) According to the World Bank, nearly 40 percent of the

people on earth subsist on incomes of less than $3 per day.
7) ______
⊚ true
⊚ false
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Question Details
Bloom's : Remember
Difficulty : 1 Easy
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8) Education and training are examples of investment in

human capital.
8) ______
⊚ true
⊚ false
output.
Question Details Bloom's : Apply
Difficulty : 3 Hard
Topic : How America Produces
Learning Objective : 02-03 How the U.S. is able to produce so much
9) The high productivity of the U.S. economy results

from using highly educated workers in a capital-intensive
production process.
9) ______
⊚ true
⊚ false
Question Details
output.
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10) Outsourcing is a source of increased U.S. output.
10) ______
⊚ true
⊚ false
Learning Objective : 02-03 How

Question Details the U.S. is able to produce so
AACSB : Reflective Thinking much output.
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Bloom's : Understand Compatible
11) Government intervention is sometimes used to reduce

the external costs of production.
11) ______
⊚ true
⊚ false

12) Monopolists can dictate the price or the quantity of the

product they produce, but not both.
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12) ______
⊚ true
⊚ false

13) The richest fifth of U.S. households get nearly half of

all U.S. income.
13) ______
⊚ true
⊚ false

Question Details incomes are distributed in the
AACSB : Reflective Thinking United States and elsewhere.
Bloom's : Remember Compatible
Difficulty : 1 Easy
Topic : For Whom America Produces
14) Income inequalities are often greatest in the poorest

countries.
14) ______
⊚ true
⊚ false
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15) If GDP per capita rises, income inequality must have

risen.
15) ______
⊚ true
⊚ false
Bloom's : Analyze
Question Details Difficulty : 3 Hard
16) GDP per capita growth means inequality has fallen.
16) ______
⊚ true
⊚ false
Question Details Bloom's : Analyze
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MULTIPLE CHOICE - Choose the one alternative that

best completes the statement or answers the question.
17) Approximately how much of the world's output does
the United States produce?
17) ______
C) 30 percent
A) 5 percent D) 12 percent
B) 20 percent

Bloom's : Remember
Difficulty : 1 Easy
18) The United States has roughly how much of the

world's population?
18) ______
C) 15 percent
B) 10 percent
Question Details
Bloom's : Remember
Difficulty : 1 Easy
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19) The United States has roughly how much of the

world's arable land?
19) ______
C) 10 percent
B) 12 percent

Bloom's : Remember
Difficulty : 1 Easy
20) According to the World View titled "GDP per Capita

around the World,” which of the following nations has the
highest GDP per capita?
20) ______
C) United States
A) Japan D) China
B) Great Britain
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21) ______
of the economy.
A) the sum of the physical amounts of goods and D) a physical
services in the economy. measure of the capital
B) a dollar measure of final output produced during a stock of the economy.
given time period within a nation’s borders.
C) a measure of the per capita economic growth rate

Bloom's : Remember
Difficulty : 1 Easy
22) The best way to measure the value of final goods and
services produced each year in the United States is the
22) ______
D) total
A) GDP of the United States. manufacturing sales of all
B) percentage change in the GDP of the United goods.
States.
C) per capita GDP in the United States.

Bloom's : Remember
Difficulty : 1 Easy
23) Approximately how much of the world's output does

China produce?
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23) ______
C) 9 percent
B) 2 percent

Bloom's : Remember
Difficulty : 1 Easy
24) China has roughly how much of the world's

population?
24) ______
C) 35 percent
B) 18 percent

Bloom's : Remember
Difficulty : 1 Easy
25) Which of the following countries (or regions)

produces the most output annually?
25) ______
C) China
A) Japan D) Germany
B) United States
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Question Details
Bloom's : Remember
Difficulty : 1 Easy
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26) Which of the following statements is true about the

U.S. economy?
26) ______
as China does.
A) The United States produces more than one-fifth of D) The United
the world's production. States produces less than
B) The United States has the world's third largest one-third as much as Japan
economy. does.
C) The United States produces less than half as much

Bloom's : Remember
Difficulty : 1 Easy
27) According to the World View titled "Comparative

Output (GDP)," Russia's real GDP is
27) ______
D) the second
A) more than that of Germany highest in the world
B) more than that of China
C) nearly equal to that of Mexico

Bloom's : Remember
Difficulty : 1 Easy
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28) Per capita GDP is
28) ______
produce output in a
A) the sum of consumer goods, investment goods, country.
government services, and net exports. D) the dollar
B) a dollar measure of the economic growth rate of a value of GDP divided by
country. total population.
C) the value of the factors of production used to

Bloom's : Remember
Difficulty : 1 Easy
29) Average GDP per person is also known as
29) ______
D) a measure of
A) GDP. the economic growth rate
B) per capita GDP. of a country.
C) the value of the factors of production used to
produce output in a country.
Question Details
Bloom's : Remember
Difficulty : 1 Easy
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30) Which of the following is an indicator of how much

output the average person would get if all output were divided
up evenly among the population?
30) ______
C) per capita GDP

A) GDP D) real GDP
B) economic growth
31) Those who are interested in assessing the relative

standard of living of different countries over a given time
period are most likely to look at
31) ______
D) per capita
A) GDP. GDP.
B) percentage change in GDP.
C) population.
Question Details
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32) The best measure of how much output the average

person would get if all output were divided evenly among the
population would be
32) ______
D) the capital
A) GDP. stock of the economy.
B) the economic growth of the economy.
C) per capita GDP.

Bloom's : Remember
Difficulty : 1 Easy
33) Average living standards are best measured using
33) ______
D) the capital
A) GDP. stock of the economy.
B) the economic growth of the economy.
C) per capita GDP.

Bloom's : Remember
Difficulty : 1 Easy
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34) What percentage of the world's population subsists on incomes of less than $3 a
day?
34) ______
C) 60 percent
B) 50 percent

Bloom's : Remember
Difficulty : 1 Easy
35) Per capita GDP will rise if GDP
35) ______
D) increases more
A) increases more rapidly than the population slowly than the population
increases. increases.
B) increases at the same rate as the population
increases.
C) decreases and the population increases.
36) Per capita GDP will definitely fall if
36) ______
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D) there is a
A) the population falls. decrease in the size of the
B) the rate of GDP growth falls. working population.
C) the rate of GDP growth is less than the rate of
population growth.
Question Details
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37) Per capita GDP will definitely rise if
37) ______
D) there is a
A) the population falls and GDP does not fall. decrease in the size of the
B) the rate of GDP growth falls. working population.
C) the rate of GDP growth is less than the rate of
population growth.
38) If population growth is less than output growth for a

country,
38) ______
D) the per capita

A) real GDP has decreased. living standard will
B) average living standards will decrease. increase.
C) GDP must have fallen at a rapid rate.
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39) If output growth exceeds population growth for a country,
39) ______
opportunity costs.
A) average living standards will increase.
B) GDP must have fallen at a very rapid rate.
C) per capita GDP will decrease.
D) this country must have overcome the problem of
40) Economic growth exists when there is
40) ______
D) a natural
A) an increase in output or real GDP. disaster or war.
B) a contraction in the production possibilities curve.
C) reduced capacity in the short run.

Bloom's : Remember
Difficulty : 1 Easy
41) On average, U.S. output has grown roughly ____

times faster than population growth since 1900.
41) ______
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C) 3
A) 5 D) 2
B) 4

Question Details the U.S. output mix has changed
AACSB : Reflective Thinking over time.
Difficulty : 1 Easy
42) On average, the population of the United States has

grown by roughly ____ percent per year since 1900.
42) ______
C) 3
A) 9 D) 1
B) 6

Difficulty : 1 Easy
43) On average, U.S. output has grown by roughly ____

percent per year since 1900.
43) ______
C) 3
A) 9 D) 1
B) 6

Question Details Accessibility : Keyboard
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Navigation time.
Bloom's : Remember Accessibility : Screen Reader
Difficulty : 1 Easy Compatible
Learning Objective : 02-02 How the U.S. output mix has changed over
44) Which of the following countries experienced a

decline in total output from 2000 to 2018?
44) ______
C) China
A) Canada D) Burundi
B) Libya

Difficulty : 1 Easy
45) Which of the following countries had the highest

average growth rate for per capita GDP from 2000 to 2018?
45) ______
C) China
A) Canada D) Burundi
B) Haiti

Difficulty : 1 Easy
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46) The current U.S. economy is based primarily on the

production of
46) ______
D) services.
A) agricultural goods.
B) goods for federal government use.
C) manufacturing goods.

Difficulty : 1 Easy
47) As the U.S. economy relies more and more heavily on

the production of services rather than goods,
47) ______
D) nearly all
A) GDP will decrease since there will be less real future job growth will be
production. in service-producing
B) international trade will become more difficult. industries.
C) mass unemployment will result.

Topic : What America Produces Compatible
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48) Which of the following is considered a service in the calculation of GDP?
48) ______
D) manufacturing
A) manufacturing reclining chairs automobiles
B) constructing new homes
C) tax preparation
AACSB : Analytical Thinking

Question Details Bloom's : Analyze
Accessibility : Keyboard Navigation Difficulty : 3 Hard
Topic : What America Produces Accessibility : Screen Reader
Learning Objective : 02-02 How the U.S. output mix has changed over Compatible
time.
49) Differences in size of real GDP across countries are

best explained by
49) ______
D) None of the
A) population growth. choices are correct.
B) human capital.
C) large farming sector.
time.
Question Details Topic : How America Produces
50) Over the past two centuries, the United States has seen
a
50) ______
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D) relative decline
A) decline of total value of world trade. in service sector to
B) relative increase in farming to manufacturing. manufacturing.
C) relative decline in manufacturing to the service
sector.

51) Which of the following contains the two sectors whose

percentage contribution to the real GDP has declined since
1800?
51) ______
D) services and
A) farming and manufacturing exports
B) manufacturing and exports
C) farming and services

52) During the past 100 years, the United States has
transformed into primarily
52) ______
A) a
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manufacturing economy. D) a service
B) a closed economy with little foreign trade. economy.
C) an agricultural economy.

53) To an economist, the four factors of production are
53) ______
D) None of the
A) labor, workers, profit, and services. choices are correct.
B) land, labor, capital, and entrepreneurship.
C) entrepreneurship, machinery, workers, and profit.
Question Details
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54) The “what goods and services does the United States
produce” question can best be answered using data about
which of the following?
54) ______
D) the distribution
A) the distribution of output in markets, specifically of GDP among different
among manufacturing, services, and agricultural sectors income quintiles
B) per capita GDP
C) productivity

55) As of the year 2000, services accounted for what

percentage of total U.S. output?
55) ______
C) 80 percent
B) 50 percent

Difficulty : 1 Easy
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56) As of the year 2000, manufacturing, mining, and output?
construction accounted for what percentage of total U.S.
56) ______
C) 28 percent
B) 19 percent

Difficulty : 1 Easy
57) As of the year 2000, agriculture accounted for what

percentage of total U.S. output?
57) ______
C) 8 percent
B) 5 percent

Difficulty : 1 Easy
58) Which component(s) of U.S. real GDP decreased in

size relative to total U.S. real GDP from 1900 to 2000?
58) ______
A) only
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agriculture D) only services
B) only manufacturing
C) agriculture and manufacturing

Difficulty : 1 Easy
59) Which component(s) of U.S. real GDP increased in

size relative to total U.S. real GDP from 1900 to 2000?
59) ______
D) only services
A) only agriculture
B) only manufacturing
C) agriculture and manufacturing

Difficulty : 1 Easy
60) According to the World View chart in the text, from

highest to lowest real GDP per capita, which is correct?
60) ______
Korea
A) United States, Japan, France, Canada, China D) United States,
B) United States, China, Japan, Germany, Russia China, India, Jordan,
C) United States, Germany, Canada, Japan, South
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Germany, Japan, Russia
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Question Details
Bloom's : Remember
Difficulty : 1 Easy
time.
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61) As of 2010, per capita GDP in the United States was

approximately how many times the world average?
61) ______
C) 7
A) 3 D) 9
B) 5

62) As of 2019, per capita GDP in the United States was

approximately
62) ______
C) $64,000
A) $26,000 D) $78,000
B) $37,000

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63) ______
D) utilizes the
A) has a high ratio of labor to capital. manufacturing sector.
B) has a high ratio of capital to labor.
C) is used only in the United States.

Difficulty : 1 Easy
64) Over many years the capital stock in the United States
has grown to approximately
64) ______
C) $90 trillion
A) $80 trillion D) $20 trillion
B) $40 trillion

65) A labor-intensive production process is one that
65) ______
C) is used only in
A) has a low ratio of labor to capital. the United States.
B) has a low ratio of capital to labor. D) utilizes the
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agriculture sector.
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Question Details
Bloom's : Remember
Difficulty : 1 Easy
output.
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66) The United States has a larger real GDP than China
because
66) ______
intensive jobs.
A) the U.S. population is smaller but works in D) the U.S.
capital-intensive jobs. population is larger but
B) the U.S. population is smaller but works in labor- works in labor-intensive
intensive jobs. jobs.
C) the U.S. population is larger but works in capital-

Difficulty : 1 Easy
67) As a country's human capital increases, we observe

that
67) ______
D) worker
A) labor-intensive production processes increases. productivity decreases.
B) worker productivity increases.
C) sector service jobs decreases.

Difficulty : 1 Easy
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68) 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
68) ______
D) capital-
A) the inequitable distribution of income. intensive production.
B) a negative externality.
C) investment in human capital.
output.
Difficulty : 3 Hard
69) 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
69) ______
D) a bigger capital
A) lower productivity. stock.
B) increased output per worker.
C) lower labor quality.
output.
Question Details Topic : For Whom America
AACSB : Reflective Thinking Produces
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70) Regarding increasing productivity, factor mobility is
70) ______
a dynamic economy.
A) important in that it helps to fix a stable labor- D) not important
intensive production process. in either a stable or
B) important in that it helps to fix a stable capital- dynamic economy.
intensive production process.
C) important in that it helps to reallocate resources in

Difficulty : 1 Easy
71) Factor mobility aids in economic development when
71) ______
insourcing.
A) capital equipment is difficult to move. D) workers
B) a technological advance causes some firms to go struggle to change
out of business. industries easily.
C) there is a decrease in both outsourcing and

Difficulty : 1 Easy
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72) Ceteris paribus, an increase in factor mobility means
that an economy's production possibilities curve will
72) ______
D) become less
A) shift inward. steep.
B) become steeper.
C) shift outward.

Difficulty : 1 Easy
73) How will a decrease in technology from a natural

disaster such as a hurricane, ceteris paribus, affect an
economy's production possibilities curve?
73) ______
D) There will be a
A) The curve will shift the curve inward. movement along the curve.
B) There will be a movement from a point inside the
curve to a point on the curve.
C) The curve will shift the curve outward.
Question Details
Bloom's : Remember
Difficulty : 1 Easy
output.
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74) An example outcome of a U.S. firm that outsources

jobs would be
74) ______
U.S. parts.
A) building a factory in Kentucky and hiring D) hiring workers
Canadian workers. from California and
B) buying raw materials from a Georgia firm instead relocating them to New
of a U.S. firm. York.
C) buying computers assembled in Mexico that used

75) Although the necessary role of government in the

economy is highly debated, many people agree that it should
75) ______
D) impose as
A) provide a legal framework. many regulations as
B) leave the environment alone. possible.
C) protect firm interests.

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76) In providing a legal framework, the government
76) ______
D) expands the
A) usually avoids implementing a patent system. size of the criminal justice
B) discourages publishers of textbooks from applying system.
for copyrights.
C) protects the ownership of private property to
encourage the private sector.

77) When the government provides a legal framework,
77) ______
D) private market
A) private market transactions suffer and government transactions benefit and
market transactions suffer. government market
B) private market transactions suffer and government transactions suffer.
market transactions benefit.
C) private market transactions benefit and
government market transactions benefit.

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78) The role of the government in establishing how private

business can operate includes all the following except
78) ______
D) protecting
A) providing a legal framework. consumers from defective
B) providing raw materials to business. products.
C) protecting the environment.

79) Which of the following best represents an example of

the government providing a legal framework?
79) ______
D) regulations to
A) regulations of pricing practices and advertising protect water quality
claims by firms
B) child labor laws
C) enforcement of contracts in the court system
output.
Difficulty : 3 Hard
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80) Which of the following best represents an example of the government protecting
labor?
80) ______
D) Antitrust laws
A) Regulations to protect water quality that prohibit monopolies
B) Subsidies to law enforcement from forming
C) Child labor laws
output.
Difficulty : 3 Hard
81) The term externalities refers to
81) ______
D) economic
A) only positive benefits of a market activity borne measures that pertain to
by a third party. countries outside of the
B) only negative costs of a market activity borne by a United States.
third party.
C) the negative costs and positive benefits of a
market activity borne by a third party.
Question Details
Bloom's : Remember
Difficulty : 1 Easy
output.
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82) An example of a positive externality is
82) ______
benefited from a tornado.

A) increased factory use of private sector robotics D) dirty water
that came from government research. from factory pollution.
B) increased health problems from air pollution.
C) increased business profits at a hardware store that

Difficulty : 1 Easy
83) The government regulates monopolies to
83) ______
C) protect firms
A) ensure that product quality meets minimum from increased taxation.
standards, such as testing of new drugs. D) exert control
B) encourage mergers or acquisitions that would over the private sector.
lessen competition.

Difficulty : 1 Easy
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84) Which of the following is not a way the government intervenes in the economy
to protect labor?
84) ______
provisions
A) enforcing child labor laws to prevent child D) ensuring that
exploitation everyone has a job
B) ensuring workplace safety conditions
C) ensuring minimum wages in addition to overtime

Difficulty : 1 Easy
85) According to economists, which of the following is

not a factor of production?
85) ______
D)
A) land entrepreneurship
B) labor
C) money

86) An example of
human capital would be
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86) ______
D) a warehouse
A) a computer
B) carpentry skills
C) a carpenter's saw

87) In the United States today, nearly _________ of the

population has attained a college degree.
87) ______
C) 50 percent
B) 15 percent

88) The term factor of production refers to
88) ______
B) labor only.
A) only those goods that are produced and then used C) any resource
to produce other goods and services. input used to produce
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goods and services.
D) factories and machinery only.

Difficulty : 1 Easy
89) Human capital is defined as the
89) ______
C) knowledge and
A) amount of machinery, factories, and buildings an skills workers possess.
individual owns. D) stock of people
B) dollar value of all the stocks and bonds an that are of working-age.
individual owns.

Difficulty : 1 Easy
90) How will an increase in the level of human capital,

ceteris paribus, affect an economy's production possibilities
curve?
90) ______
to a point on the curve.

A) It will shift the curve inward. C) It will shift the
B) It will result in a movement from inside the curve curve outward.
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D) It will result in a movement along the curve.
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Question Details
output.
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91) How will an increasein the level of human capital,

ceteris paribus, affect an economy's production possibilities
curve?
91) ______
D) It will result in
A) It will shift the curve outward a movement along the
B) It will shift the curve inward curve
C) It will result in a movement from inside the curve
to a point on the curve

92) As a nation's average education level increases, the

nation's level of productivity
92) ______
D) decreases, and
A) increases, and the production possibilities curve the nation moves to a new
shifts outward. point on the same
B) decreases, and the nation's production possibilities production possibilities
curve shifts inward. curve.
C) increases, and the nation moves to a new point on
the same production possibilities curve.
Question Details Topic : How America Produces
AACSB : Reflective Thinking Learning Objective : 02-03 How
Accessibility : Keyboard Navigation the U.S. is able to produce so
Bloom's : Understand much output.
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93) Which of the following will increase the level of

human capital in an economy?
93) ______
D) a decrease in
A) an increase in land mass the population
B) an increase in literacy rates
C) an increase in factory capacity

94) A country that increased its literacy rate and thereby

its average human capital would probably
94) ______
D) None of the
A) decrease GDP. choices are correct.
B) increase GDP.
C) have no impact on GDP.

Difficulty : 1 Easy
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95) In terms of an economy's production possibilities paribus, will cause
curve, a decrease in the level of human capital, ceteris
95) ______
D) an expansion
A) an inward shift of the curve. of the curve.
B) a movement from the curve to a point inside the
curve.
C) a movement along the curve.

96) Productivity is a measure of
96) ______
D) input per dollar

A) output per unit of input. of output.
B) output per dollar of input.
C) input per unit of output.

Difficulty : 1 Easy
97) Productivity
97) ______
A) rises when the
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value of output rises relative to the cost of inputs. D) falls when
B) falls when the value of output rises relative to the factors of production cost
cost of inputs. more.
C) rises when the ratio of output to input increases.

98) Which of the following means productivity must have

increased?
98) ______
D) less output
A) more output from fewer workers from more workers
B) less output from fewer workers
C) more output from more workers

99) Which of the following would not increase

productivity?
99) ______
C) outsourcing
A) reduced factor mobility and trade
B) technological advances D) increased
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human capital investment
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Question Details
output.
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100) Which of the following would notincrease

productivity?
100) ______
D) Increased
A) Trade restrictions human capital investment
B) Technological advances
C) Increased factor mobility

101) When economists describe a production process as

capital-intensive, they mean that the
101) ______
advanced technology
A) process uses a high ratio of machinery and other D) capital used in
capital to labor the process tends to wear
B) process needs a greater emphasis on labor to out (depreciate) very
increase productivity rapidly
C) capital used in the process reflects the most

Difficulty : 1 Easy
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102) Production processes that use a high ratio of capital to

labor inputs are referred to as
102) ______
D) factor-
A) labor-intensive. intensive.
B) production-intensive.
C) capital-intensive.

Difficulty : 1 Easy
103) Which of the following contributes to the high

productivity of American workers?
103) ______
D) the decreasing
A) the labor-intensive production process in the investment in human
United States capital
B) the abundance of capital relative to labor
C) the low level of factor mobility

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104) Which of the following is likely to be most capital- intensive?
104) ______
D) production of
A) farming in developing countries handmade soap in Taiwan
B) production of clothing in rural China
C) oil refining in the United States

Accessibility : Keyboard Navigation much output.
AACSB : Analytical Thinking Accessibility : Screen Reader
Bloom's : Analyze Compatible
Difficulty : 3 Hard
105) The investment in human capital through education

and training can result in
105) ______
D) reduced output
A) greater productivity. per labor hour.
B) low factor mobility.
C) less capital-intensive production.

106) Factor mobility refers to
106) ______
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D) the increase in
A) technological change in the use of capital. labor productivity.
B) the ease of reallocating resources.
C) technological change in the use of labor.

Difficulty : 1 Easy
107) When workers move from one industry to another in

response to demand changes, this is an example of
107) ______
D) the decreasing
A) factor quality. investment in human
B) factor mobility. capital.
C) capital stock.
output.
Difficulty : 3 Hard
108) One characteristic that has allowed the U.S. economy

to change the mix of output in response to consumer demand
is
108) ______
B) the abundance
A) factor mobility. of scarce resources.
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C) the large number of proprietorships.
D) labor-intensive production processes.

109) Whenever technology advances, an economy can

produce more output with
109) ______
D) no resources.
A) fewer resources.
B) more resources.
C) current resources.

110) Which of the following does not contribute to the high

productivity of the U.S. economy?
110) ______
D) technology
A) the capital stock
B) factor mobility
C) negative externalities
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Question Details
output.
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111) Which of the following will contribute to accelerated

growth for the U.S. economy?
111) ______
goods and services

A) a decrease in factor mobility D) a decrease in
B) a decrease in government involvement in tax credits for research and
copyright laws development
C) increased use of outsourcing for inputs and
increased use of comparative advantage for trade in final

112) Outsourcing leads to
112) ______
output.
A) increases in productivity and increases in total D) decreases in
output. productivity and decreases
B) increases in productivity and decreases in total in total output.
output.
C) decreases in productivity and increases in total

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113) Outsourcing leads to
113) ______
D) decreases in
A) increases in total output but with temporary job total output along with
losses for some domestic workers. permanent job losses for
B) increases in total output but with permanent job some domestic workers.
losses for some domestic workers.
C) decreases in total output but with no changes in
the number of domestic jobs available.

114) Which of the following would be a legitimate

government activity in the U.S. economy?
114) ______
D) providing a
A) the removal of antitrust laws sound legal framework
B) the regulation of who can work at a specific job
C) repealing child labor laws

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115) The government establishes the rules of the game for

economic transactions to
115) ______
D) encourage
A) legitimatize and enforce contracts spillover costs
B) discourage the production of capital
C) discourage the ownership of property

116) The term externalities refers to
116) ______
D) The
A) black-market economic activity inequitable distribution of
B) the impact on markets of imported goods income
C) the costs or benefits of a market activity borne by
a third party
Question Details
Bloom's : Remember
Difficulty : 1 Easy
output.
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117) The cost or benefit of a market activity borne by a

third party is
117) ______
D) black-market
A) an externality economic activity
B) a government directive
C) a monopoly

Difficulty : 1 Easy
118) Which of the following is an example of an external

cost?
118) ______
D) eating a
A) unemployment sandwich at a local deli
B) unfair pricing behavior by a monopoly
C) automobile exhaust fumes
output.
Difficulty : 3 Hard
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119) When the production of a good creates external costs,
119) ______
D) the level of
A) profits for the producer of the good will be lower. environmental pollution
will be lower.
B) production of the good will be lower.
C) society's collective well-being will be lower.

120) Goods that have spillover costs affect our collective

well-being and therefore can be overproduced because
120) ______
provisions.
A) the government has failed to establish rules for D) the
contracts. government is concerned
B) most businesses are more concerned about profits about broad economic
than how the environment is affected. welfare.
C) the government has failed to enforce contract
Question Details
output.
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121) Government intervention to reduce the level of

pollution is prompted by the existence of
121) ______
D) government
A) an inequitable distribution of income. failure.
B) negative externalities.
C) a monopoly.

122) The government regulates food additives
122) ______
D) to prevent
A) to keep food producers from dominating their externalities.
markets.
B) to restrain the market power of food producers.
C) to assess their safety.

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123) A monopoly exists when
123) ______
D) one firm
A) a small number of firms are the only producers of produces all the output for
a good. a particular good or
B) a large number of firms are producing a good. service.
C) the government intervenes on behalf of
consumers.

Difficulty : 1 Easy
124) When unregulated monopolies exist,
124) ______
competitive market.
A) prices tend to be higher than with a competitive D) externalities
market. occur.
B) quality tends to be higher than with a competitive
market.
C) production tends to be higher than with a
Question Details
output.
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125) The purpose of antitrust policy in the United States is

to
125) ______
D) encourage
A) encourage competition among producers. business mergers and
B) check the validity of advertising claims. acquisitions.
C) determine drug safety and performance.

126) In a market economy with no government

intervention, the how to produce question is based on
126) ______
D) consumer
A) production costs alone. demand.
B) production costs plus environmental
considerations.
C) environmental considerations only.

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127) The result of government intervention in the market is that
127) ______
D) society is
A) society is always better off. always worse off.
B) the production possibilities curve always shifts
outward.
C) society could be made better or worse off.

128) Which of the following statements about the way

markets allocate resources is most accurate from society's
perspective?
128) ______
D) Markets
A) The market always allocates resources in the best always fail to allocate
way. resources properly, so we
B) The market may not always allocate resources in a must rely on the
way that is in society's best interest. government to determine
C) Resource allocation by markets may not be the proper use of our
perfect, but it is always better than government allocation of resources.
resources.

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129) The bottom 80 percent of the families in the United

States receive approximately ______ percent of total income.
129) ______
C) 50
A) 10 D) 90
B) 20

Difficulty : 1 Easy
130) Income inequality tends to be greatest in
130) ______
D) Western
A) poorest countries. countries.
B) middle-income countries.
C) richest countries.

Difficulty : 1 Easy
131) As of 2019, to be in the top quintile for income income of at least

distribution in the United States, a household needed in
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131) ______
C) $143,000.
A) $85,000. D) $240,000.
B) $117,000.

Difficulty : 1 Easy
132) As of 2010, to be in the bottom quintile for income

distribution in the United States, a family needed in income of
no more than
132) ______
C) $35,000.
A) $15,000. D) $42,000.
B) $28,000.

Difficulty : 1 Easy
133) As of 2019, for income distribution in the United

States, the minimum family earnings in the top quintile were
nearly _______ times the maximum family earnings in the
bottom quintile.
133) ______
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C) 7
A) 3 D) 10
B) 5

Difficulty : 1 Easy
134) The income distribution of the United States is

basically the nation's answer to the
134) ______
D) what, how, and

A) what question. for whom questions.
B) how question.
C) for whom question.

135) Which of the following statements is true concerning

income inequality?
135) ______
C) The
A) Income is equally distributed in poor countries. government has no way to
B) Developed countries have greater income alter income inequality.
inequality than developing countries. D) The free
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market produces an unequal distribution of income.
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136) One-fifth of the population, rank ordered by income, is

a(n)
136) ______
D) factor quintile.
A) population quintile.
B) income quintile
C) earnings-population quintile.

Difficulty : 1 Easy
137) The richest 20 percent of the families in the United

States receive approximately ______ percent of total income.
137) ______
C) 50
A) 10 D) 90
B) 20
Difficulty : 1 Easy
Question Details Topic : For Whom America
AACSB : Reflective Thinking Produces
Accessibility : Keyboard Navigation Learning Objective : 02-04 How
Bloom's : Remember incomes are distributed in the
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United States and elsewhere. Accessibility : Screen Reader
Compatible
138) The 20 percent of families with the lowest income in

the United States receive approximately ______ percent of
total income.
138) ______
C) 15
A) 1 D) 20
B) 3

Difficulty : 1 Easy
139) Suppose the lowest 4 quintiles of income in the

country of Karax make 7, 11, 20, and 30 percent of total
income. This must mean that the highest quintile of earners
receives ______________ of total income.
139) ______
C) 18 percent
B) 32 percent

Difficulty : 2 Medium Compatible
Bloom's : Apply
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140) Suppose the lowest 4 quintiles of income in the

country of Ducib make 5, 10, 16, and 25 percent of total
income. This must mean that the highest quintile of earners
receives ______________ of total income.
140) ______
C) 15 percent
B) 44 percent

Difficulty : 2 Medium Compatible
Bloom's : Apply
141) When compared to the average household in most

low-income countries, poor people in the United States, on
average, receive
141) ______
D) far more goods

A) about the same amount of goods and services. and services.
B) somewhat fewer goods and services.
C) far fewer goods and services.

Difficulty : 1 Easy
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142) Income inequality is
142) ______
redistribution of income
A) often greatest in the richest countries. through the federal tax
B) an issue because households in the lowest quintile system.
receive more than their share of income.
C) often greatest in the poorest countries.
D) not an issue in the United States because of the

143) Income inequalities are greatest in
143) ______
D) countries with
A) highly developed countries. many factors of
B) poor countries. production.
C) rich countries.

144) According to the World View titled "Global Inequalities," in which of
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the following would the top tenth of the population be most income?
likely to receive the highest percentage of the country's
144) ______
C) Canada
A) Namibia D) Japan
B) South Africa

Difficulty : 1 Easy
145) According to the World View titled "Global

Inequalities," 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?
145) ______
C) Germany
A) Canada D) United States
B) Sweden

Difficulty : 1 Easy
146) According to the World View titled "Global

Inequalities," the percentage of income going to Japan’s
richest tenth is
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146) ______
D) the lowest of
A) second only to that of the United States. all developed economies.
B) more than that of China.
C) nearly equal to that of Germany.

Bloom's : Remember
Difficulty : 1 Easy
147) The World View article in the text titled "Global

Inequalities" reports that, "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?
147) ______
exports from poor nations

A) antitrust laws
B) spillover costs
C) laissez faire
D) rich nations opening their domestic markets to

Difficulty : 3 Hard Compatible
Bloom's : Apply
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148) ______
by a third party.
A) only costs of a market activity borne by a third D) the size of
party. markets external to an
B) only benefits of a market activity borne by a third economy.
party.
C) either costs or benefits of a market activity borne

Difficulty : 1 Easy
ESSAY. Write your answer in the space provided or on a

separate sheet of paper.
149) How is per capita GDP calculated, and what does it
tell us about the economy?
Bloom's : Analyze
Learning Objective : 02-01 The relative size of the U.S. economy. Compatible
150) How is per capita GDP affected by GDP growth and

population growth?
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Bloom's : Analyze
151) Compare the composition of U.S. output in the year

1900 with its composition in the year 2000.
Bloom's : Analyze
152) What are externalities, and how do they affect who

pays the true cost of a polluting factory?

Difficulty : 1 Easy
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153) What factors contribute to the high level of productivity of the
American worker?

Difficulty : 1 Easy
154) What is human capital, and how does it affect U.S.

productivity?

Difficulty : 1 Easy
155) Why would production that takes place in Canada not U.S. company?
be included in the GDP of the United States, even if it is a
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Question Details
Difficulty : 3 Hard
Bloom's : Apply
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156) Why has the reduction in some industries such as iron

and steel not resulted in poor economic outcomes in the
United States?

Bloom's : Remember
Difficulty : 1 Easy
157) Why are human capital differences often used as an

explanation for differences in GDP across countries?
output.
158) Why is establishing a legal framework such an

important role of the government?
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Version 1 88
Answer Key
Test name: CH02
Version 1 89
1) TRUE
2) TRUE
3) FALSE
4) FALSE
5) FALSE
6) FALSE
7) TRUE
8) TRUE
9) TRUE
10) TRUE
11) TRUE
12) FALSE
13) TRUE
14) TRUE
15) FALSE
16) FALSE
17) B
With less than 5 percent of the world’s produce more than
population, the United States is able to 20 percent of the
world’s output.
18) A
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With less than 5 percent of the world’s produce more than
population, the United States is able to 20 percent of the
world’s output.
19) B
With only 12 percent of the world’s arable than 20 percent of
land, the United States is able to produce more the world’s output
20) C
The United States has the highest GDP per
capita because it produces one-fifth of the
world's output with only 5 percent of the
world's population.
21) B
GDP is a measure of how well a nation is translates into
doing economically because economists often income for its
assume that production of goods and services citizens.
22) A
The total market value of all final goods and
services produced within a nation’s borders in
a given time period is defined as its GDP.
23) A
With 18 percent of the world’s population,
China is able to produce 17 percent of the
world’s output.
24) B
With 18 percent of the world’s population, China is able to
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produce 17 percent of the world’s output.
25) B
The United States is the largest economy in
the world, based on GDP.
26) A
The United States is a prosperous country with a relatively
because it produces a large amount of output small population.
27) C
Russia's transformation from primarily a rank structure of
command economy to more of a market countries as
economy is causing it to move upward in the measured by real
GDP.
28) D
Per capita GDP is an important measure of much income per
economic well-being because it describes how person an economy
generates.
29) B
GDP divided by the population is the average
or per capita GDP.
30) C
or per capita GDP.
31) D
Per capita GDP indicates the average income per person in an
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economy and so is used to assess relative
standards of living across economies.
32) C
or per capita GDP and this assumes all output
is divided evenly throughout the economy.
33) C
Per capita GDP indicates the average income assess relative
per person in an economy and so is used to standards of living
between economies.
34) A
Nearly half of the world’s population subsists
on less than $3 per day.
35) A
As long as the growth in GDP outpaces
population growth, living standards will rise.
36) C
Because GDP per capita takes GDP and rises slower than
divides it by the size of the population, if GDP population, GDP
per capita must fall.
37) A
Because GDP per capita takes GDP and
divides it by the size of the population, if GDP
remains constant while population falls, GDP
per capita must rise.
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38) D
If the percentage change in the numerator (real capita living
GDP) increases faster than the percentage standards will
change in the denominator (population), per increase.
39) A
Growth in output is important for economic
growth.
40) A
Economic growth reflects more production
and consumption, as measured by GDP.
41) C
Since 1900, real GDP has grown an average of at 1 percent per
3 percent per year while population has grown year.
42) D
Population growth is important to fill jobs in a
growing economy.
43) C
Living standards can rise when real GDP is
growing at a greater percentage than
population.
44) B
Some countries, such as Libya, are unable to population growth
successfully grow their economies as is greater than GDP
growth.
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45) C
China's real GDP grew at the fastest rate on
the planet while its population growth was
almost stagnant.
46) D
Production in the U.S. economy is mostly
directed toward services.
47) D
A service sector that is growing faster than the service sector jobs
manufacturing sector will cause growth in relative to
manufacturing jobs.
48) C
Any consumption spending on intangibles is
for services.
49) B
Real GDP growth is determined not by quality of factors of
quantity of factors of production but by production such as
human capital.
50) C
The service sector as a percentage of real GDP
has grown relative to the manufacturing
sector.
51) A
Farming and manufacturing are less important in the overall
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economy today compared to the service sector.
52) D
Once households have enough food, they
begin to demand more consumption items
with an increasing percentage being services.
53) B
The general terms for the four factors of
production are land, labor, capital, and
entrepreneurship.
54) A
The composition of GDP and output reflects
what a country is producing.
55) C
Services have played an increasingly likely to do so in the
important role in the U.S. economy and are future.
56) B
Although manufacturing, mining, and has shrunk
construction are important parts of our significantly since
economy, their relative size in U.S. real GDP World War II.
57) A
Technological advancements make it possible component of U.S.
to produce the same amount with fewer real GDP to shrink
workers, causing the relative agricultural significantly.
58) C
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Although agriculture, along with size in U.S. real
manufacturing, mining, and construction, are GDP shrank
important parts of our economy, their relative significantly since
World War II.
59) D
Due to technological advances, the services has
agricultural component of U.S. real GDP increased.
shrank significantly, and with the significant
increase in per capita income, the demand for
60) C
The United States leads the world not only in
real GDP but also in GDP per capita.
61) B
The per capita GDP of the United States is
five times higher than the world average.
62) C
U.S. per capita GDP, at $64,000 in 2019, was
five times the world average per capita GDP.
63) B
Ceteris paribus, the greater the amount of workers up to the
physical capital employed in the production point of diminishing
process, the greater the productivity of the returns.
64) A
Every year, positive investment spending
causes the capital stock to grow.
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65) B
Ceteris paribus, the smaller the amount of process, the less the
physical capital employed in the production productivity of the
workers.
66) A
Real GDP is simply the product of (average making real GDP in
productivity per capita) × (population). While the United States
China has a far greater population, the average higher.
productivity of workers in the United States is
far higher than that of Chinese workers,
67) B
Ceteris paribus, higher human capital
individuals tend to be more productive.
68) C
Human capital includes education received at
various levels such as high school and college.
69) B
Human and physical capital both increase
worker productivity.
70) C
As factor mobility increases, this allows for opportunities in a
management to be more flexible to dynamic economy.
71) B
The more fluid the factor mobility, the more easily the economy
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and its micro components will adjust to a dynamic economy.
72) C
Ceteris paribus, as factors become more possibilities curve
flexible to dynamic situations, the production will shift outward.
73) A
Ceteris paribus, if there is a power outage or possibilities curve
infrastructure decay, the production will shift inward.
74) C
If money is sent offshore, this is a form of
outsourcing jobs.
75) A
As per capita income increases, an increasing
role of government is requested by its citizens.
76) C
Without guarantees from both buyer and seller harming the
as established in contracts, many market economy.
activities would cease to exist, thereby
77) C
A legal framework provides benefits to both
the private and public sector.
78) B
The government plays important roles to
safeguard the rights of individuals and society
at large.
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79) C
The government monitors economic activity protecting
and fosters competition by providing a legal consumers, and
framework, protecting the environment, protecting labor.
80) C
The government monitors economic activity protecting
and fosters competition by providing a legal consumers, and
framework, protecting the environment, protecting labor.
81) C
An externality is anything that affects a third-
party to a market transaction.
82) A
Because the government research did not government’s
explicitly seek to increase the use of robotics decision.
in the private sector, the benefits the private
sector receives are external to the
83) A
There will typically be government to protect
intervention to limit the powers of a monopoly consumers.
84) D
The U.S. government has increasingly increase working
intervened in the workplace to beneficially conditions.
85) C
Money does not directly do anything. Instead, it helps to buy the
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factors of production that actually produce.
86) B
Human capital represents the quality of labor,
including skills and abilities.
87) D
Human capital has increased in the United education over
States due to the heavy investment in many years.
88) C
This includes land, labor, capital, and
entrepreneurship.
89) C
Human capital depicts the quality of labor and allows greater
is an important factor of production that productivity.
90) C
An increase in any resource will lead to
economic growth, which is modeled as a shift
outward of the production possibilities curve.
91) A
An increase in any resource will lead to
economic growth, which is modeled as a shift
outward of the production possibilities curve.
92) A
Human and physical capital increase the therefore shift the
productivity of a nation's workers and
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production possibilities curve outward.
93) B
Education, training, and skills count as human
capital.
94) B
A higher literacy rate will increase equitable
productivity and GDP and make more distribution of GDP.
95) A
A decrease in any resource, including human
capital, will decrease a nation's production
possibilities.
96) A
Productivity is the amount of output produced
by the average input, forexample, output per
labor hour.
97) C
Productivity measures the amount we can
produce with our inputs in a given time frame.
98) A
If the numerator (output) is changing faster (productivity) is
than the denominator (input), then the quotient increasing.
99) A
Productivity increases as factors become more trade increase,
mobile, technology advances, outsourcing and
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and/or human capital investments rise.
100) A
Productivity increases as factors become more
mobile, technology advances, outsourcing and
trade increase, and/or human capital
investments rise.
101) A
In the United States, production is relatively
capital-intensive.
102) C
The majority of U.S. output comes from
capital-intensive production.
103) B
Ceteris paribus, the more capital a nation has
relative to labor, the more productive its
workers will be.
104) C
Capital-intensive means there is a high ratio of machinery in large
capital to labor used in production. Oil buildings, so this is
refining requires a significant amount of the best choice.
105) A
Human and physical capital both increase the
productivity of workers.
106) B
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The more mobile resources are, the easier it is
to pursue production in growing, high value-
added industries.
107) B
Factor mobility describes how mobile an
economy can be through changes to inputs
between sectors.
108) A
Economies will be more responsive to change more productive
when resources can be easily reallocated to uses.
109) C
Technological advances are one of the forces
that keep shifting resources from one industry
to another.
110) C
Negative externalities make internal costs "fix-it" costs in the
inexpensive in the short run, but cause higher long run.
111) C
Outsourcing of inputs, as well as comparative and able to enjoy a
advantage in selection of productive output, higher standard of
make a country more efficient in production living.
112) A
Outsourcing allows U.S workers to pursue capabilities that
their comparative advantage, leading to an increases living
increase in productivity and total output standards.
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113) A
While outsourcing may eliminate some creates many more
domestic jobs in the short run, it ultimately domestic jobs in the
long run.
114) D
The government makes many contributions to addition to
society by providing public goods along with maintaining the
environmental and child labor regulation in legal system.
115) A
Without guarantees from both buyer and seller harming the
as established in contracts, many market economy.
activities would cease to exist, thereby
116) C
Externalities are things like pollution that hurt
third parties.
117) A
An example such as secondhand smoke is a
cost imposed on third parties.
118) C
Clean air benefits everyone; pollution harms
parties not directly involved in the use of a
good.
119) C
External costs are spillover costs involved in a market transaction
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that affects a third-party member. The to those harmed by
government can potentially restore well-being external costs.
120) B
What is best for the individual is not the best
for society when negative externalities are
present.
121) B
Negative externalities that are present in an intervention to
economic activity justify government improve on the
market outcome.
122) C
Governments should intervene to reduce or
eliminate external costs.
123) D
There will typically be government
intervention to limit the powers of a
monopoly.
124) A
Since the monopolist has no competitors, no one else to buy
prices will typically be higher because there is the good from.
125) A
Competition among firms usually benefits
consumers and therefore the economy.
126) A
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Firms in search of greater profits are always
looking for ways to lower costs.
127) C
Government intervention might lead to possibly even worse
government failure simply replacing a market off.
—failure, leaving society no better off, and
128) B
Markets are usually the best way to allocate society's best
resources, but sometimes they do not work in interests.
129) C
The top 20 percent of families get 50 percent
of the income, and the bottom 80 percent of
families get 50 percent of the income.
130) A
Poor countries have low GDPs relative to
population size and are not necessarily
controlled by democratic governments.
131) C
A great deal of income goes to the top fifth of bottom quintile
families. The minimum family earnings in the ($28,000).
top quintile ($143,000) were approximately
five times the maximum family earnings in the
132) B
The minimum family earnings in the top times the maximum
quintile ($143,000) were approximately five
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family earnings in the bottom quintile ($28,000).
133) B
134) C
Who ultimately gets the goods and services
will shape the income distribution in a nation.
135) D
Income inequality will vary depending on how
active the government is in the economy.
136) B
An income quintile partitions earners of an
economy into five groups and orders them to
understand differences between each group.
137) C
138) B
Very little income is received by the bottom approximately five
fifth of households. The minimum family
earnings in the top quintile ($143,000) were
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times the maximum family earnings in the
bottom quintile ($28,000).
Version 1 109
139) B
Income quintiles split individuals into five quintile would need
equal-sized groups, ranked according to to earn 100 percent
income. The four lowest quintiles would minus the sum of all
represent the income of the lowest 80 percent income earned by
of earners in a country. Therefore, the highest the lowest quintiles.
140) B
Income quintiles split individuals into five quintile would need
equal-sized groups, ranked according to to earn 100 percent
income. The four lowest quintiles would minus the sum of all
represent the income of the lowest 80 percent income earned by
of earners in a country. Therefore, the highest the lowest quintiles.
141) D
Even the worst off in the United States do far
better than their counterparts in many regions
of the world.
142) C
Income distribution can vary a great deal from
country to country.
143) B
Wealthier countries tend to redistribute more reducing income
income than poorer countries, thereby inequality.
144) B
Poorer countries tend to have greater income
inequality.
Version 1 110
145) D
Income inequality tends to be greater in poorer
countries, but exists in developed economies
as well.
146) C
Income inequality is not unique to Western
nor Eastern economies.
147) D
If rich nations opened their markets to exports income throughout
from poor countries, both rich and poor the world.
countries would benefit from trade, and there
would be a more equitable distribution of
148) C
Externalities are benefits received or costs market transaction
paid indirectly by third parties to a market affecting
transaction. Externalities are by-products of a bystanders.
149) Per capita GDP is the dollar value of population. It can be
GDP divided by total population. It indicates used to measure
how much output each person would get if the average living
output were divided evenly among the standards.
150) Per capita GDP is the dollar value of at a more rapid rate
GDP divided by total population. If GDP than population for
increases and population is constant, then per per capita GDP to
capita GDP will grow. If population and GDP increase. Even if
grow at the same time, then GDP must grow GDP grows, if
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population grows at a more rapid rate, then per capita GDP will
decline.
151) At the beginning of the 1900s, about output consisted of
two-thirds of U.S. output consisted of farm services.
goods, manufactured goods, and mining,
whereas in the year 2000, 80 percent of U.S.
152) Externalities are the market effects felt product. What is not
either beneficially or detrimentally by third in the final price of
parties in a market exchange. Another way to the product is the
look at this is that externalities are by-products external cost of the
affecting bystanders. An example would be pollution paid by
when a factory gets rid of production waste those living
more cheaply by polluting a river than by downstream and
disposing of the waste in a manner that does suffering health
not affect the environment. By polluting the costs and loss of
river, the factory has a lower internal cost of income.
production, a lower price of output, and
thereby a larger quantity demanded of its
153) Productivity is affected by the size of our ability to
the capital stock, the quality of human capital, outsource and trade.
factor mobility, technological advance, and
154) Human capital is the knowledge and the direct result of
skills possessed by the workforce. The U.S. the high quality of
economy has invested heavily in human its resources,
capital through education and job training. including well-
The high productivity of the U.S. economy is educated workers.
155) GDP looks at production within a country to see how
Version 1 112
productive that nation is in using that factors of
country’s factors of production. While a firm production. This
producing outside of that country may be means income is
productive, it does not indicate the production likely to remain in
of the economy in question. In addition, GDP Canada rather than
is tied to income, and it can be assumed that if go back to the
a firm is in Canada, it is producing using local United States.
156) As the U.S. economy has grown, there output from

has been an increasing shift to service-based shrinking industries.
industries. As a result, many jobs have been
created in the service sector and this has more
than offset the losses to employment and
157) Human capital—or the skills, attainment, and this
knowledge, and training of the workforce— makes their
makes workers more productive. As they workforce less
acquire human capital, they are more likely to productive, which is
know how to use capital equipment part of the
effectively, thereby increasing GDP. Many explanation for
poorer economies have lower educational differing outcomes.
158) Without a legal framework, trust in an anything and

economy disintegrates. Firms wouldn’t have production would
ownership over their products, nor would stop entirely.
consumers own things they bought. This
would mean that no one would produce or buy
Version 1 113

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Micro Economy Today 16th Edition by Schiller CH03

ANSWERS ARE LOCATED IN THE SECOND

Topic : What America Produces

2) The GDP of the United States includes production by

3) The standard of living rises when population growth

4) The relative decline in goods production compared to

Topic : What America Produces

6) A good approximation of a country's standard of

Topic : What America Produces

7) According to the World Bank, nearly 40 percent of the

8) Education and training are examples of investment in

9) The high productivity of the U.S. economy results

10) Outsourcing is a source of increased U.S. output.

Learning Objective : 02-03 How

11) Government intervention is sometimes used to reduce

Learning Objective : 02-03 How

12) Monopolists can dictate the price or the quantity of the

Learning Objective : 02-03 How

13) The richest fifth of U.S. households get nearly half of

Learning Objective : 02-04 How

14) Income inequalities are often greatest in the poorest

15) If GDP per capita rises, income inequality must have

16) GDP per capita growth means inequality has fallen.

MULTIPLE CHOICE - Choose the one alternative that

Topic : What America Produces

18) The United States has roughly how much of the

19) The United States has roughly how much of the

Topic : What America Produces

20) According to the World View titled "GDP per Capita

Topic : What America Produces

Topic : What America Produces

23) Approximately how much of the world's output does

Topic : What America Produces

24) China has roughly how much of the world's

Topic : What America Produces

25) Which of the following countries (or regions)

26) Which of the following statements is true about the

Topic : What America Produces

27) According to the World View titled "Comparative

Topic : What America Produces

28) Per capita GDP is

Topic : What America Produces

29) Average GDP per person is also known as

30) Which of the following is an indicator of how much

C) per capita GDP

31) Those who are interested in assessing the relative

32) The best measure of how much output the average

Topic : What America Produces

33) Average living standards are best measured using

Topic : What America Produces

Topic : What America Produces

35) Per capita GDP will rise if GDP

36) Per capita GDP will definitely fall if

37) Per capita GDP will definitely rise if

38) If population growth is less than output growth for a

D) the per capita

40) Economic growth exists when there is

Topic : What America Produces

41) On average, U.S. output has grown roughly ____

Learning Objective : 02-02 How

42) On average, the population of the United States has

Learning Objective : 02-02 How

43) On average, U.S. output has grown by roughly ____