1. Within the resource market:
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| a. | Households buy goods and services. | | b. | Businesses purchase land, labor, capital and entreprenurial ability. | | c. | Households purchase land, labor, capital, and entrerpreneurial ability. | | d. | Businesses sell goods and services. | 2. Assume that you have a weekly budget of $30. With this budget you can buy pizza and or soda. Pizza costs $5 per slice. Sodas cost $2 per bottle. Given this information which of the following consumption choices would be on your budget line?
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| a. | 2 slices of pizza and 3 bottles of soda. | | b. | 6 slices of pizza and 15 bottles of soda. | | c. | 4 slices of pizza and 5 bottles of soda. | | d. | 5 slices of pizza and 4 bottles of soda. | 3. Given the information in the prior question, what is the opportunity cost of one more slice of pizza?
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| a. | 5 bottles of soda. | | b. | 1 bottle of soda. | | c. | 2.5 bottles of soda | | d. | 0.4 bottles of soda. | 4. The production possibilities curve is concave because:
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| a. | The resources used for the production of various goods are not equally substitutable. | | b. | In order to produce more of one good you must give up some production of another. | | c. | The opportunity cost of producing more of one good is constant regardless. | | d. | Resources are perfect substitutes for each other. | 5. In order for a barter economy to function:
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| a. | There must be a coincidence of wants. | | b. | The economy must use money. | | c. | Barter economies cannot function. | | d. | Everyone in the economy must be self sufficient. | 6. Adam Smith argued that:
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| a. | Society and people would be best served if you allow the economy to function with very limited government involvement. | | b. | People are unable to make