____ 1. You go to a restaurant and order a veggie sandwich on wheat bread. The water that a farmer used to irrigate the wheat and vegetables is best categorized as which factor of production? a.
physical capital b.
land c.
labor d.
human capital
____ 2. A production possibilities curve can be used to illustrate a. economic growth over time.
b. decision making in a centrally planned economy.
c. how public goods are created.
d. opportunity costs in a nation’s economy.
____ 3. Every society must answer the three key economic questions because a. resources are scarce.
b. government involvement in the economy is limited.
c. every economy goes through cycles.
d. individuals want to pursue their own self-interest.
____ 4. Which type of economic system does this diagram best illustrate? a.
mixed economy b.
command economy c.
free market economy d.
traditional economy
____ 5. In order to earn money for college, David charges his friends a fee to act as a DJ for their parties. This is an example of what principle? a.
negative incentive b.
consumer sovereignty c.
legal equality

d.
profit motive
____ 6. The saying, “There is no such thing as a free lunch,” best illustrates which economic concept? a.
underutilization b.
trade-offs c.
factors of production d.
thinking at the margin
____ 7. What does a production possibilities curve illustrate? a. economic growth over time b. decision making in a centrally planned economy c. how public goods are created d. opportunity costs in a nation’s economy
____ 8. Why must every society answer the three key economic questions? a.
Resources are scarce.
b.
Government involvement is limited.
c.
Every economy has cycles.
d.
Self-interest motivates people.
____ 9. You work in a clothing store and receive a paycheck. Where in this diagram does the paycheck belong? a.
product market: monetary flow b.
product market: physical flow c.
factor market: physical flow d.
factor market: monetary flow
10. A nation’s automakers install new robotic machinery to build cars. As a result, cars take only a day to make, and the factories can produce many more cars than before. This is an example of growth caused by
A) natural resources.
B) labor.
C) technology.
D) production possibility curves.

11.
The graph shows how many new schools and new roads a city could build using all of its factor resources. What does the current production possibilities curve show?
A) As the number of schools increases, so does the number of roads.
B) As the number of schools increases, the number of roads decreases.
C) As the number of schools decreases, so does the number of roads.
D) The number of schools has no effect on the number of roads.
12.
The law of increasing costs means that as production shifts from one item to another,
A) the cost of production gets cheaper and cheaper.
B) the cost of producing an item stays the same no matter how many are produced.
C) more and more resources are necessary to increase production of the second item.
D) the land costs of increasing production rise much more steeply than do the labor costs.
13.
In the United States, all citizens participate in the economy
A) as voters.
B) as consumers.
C) as interest group members.
D) as entrepreneurs.
14. An efficient economy is one that
A) creates new resources through ongoing research and development.
B) conserves its resources through underutilization.
C) uses its resources to make the most goods and services.
D) does not face the problem of scarcity.

SHORT ANSWER QUESTIONS-
1. What are the three basic questions all economic systems attempt to answer?
2. Compare and contrast the elements of a command economy with a market economy
3. Explain what an externality is: Give an example of a positive and negative externality

SHORT ESSAY QUESTIONS-
1.
How can we make the best economic choices? (YOUR ANSWER SHOULD INCLUDE WHAT EACH OF US CAN
DO AND HOW ECONOMIC SYSTEMS CAN ASSIST IN THIS)
2.