Act 7 - Economics Practice Questions
KEY – CORRECT ANSWERS
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Name________________________________________ Block______________
Your Act 7 Test. These questions focus on:
 Vocabulary - Pg. 131-132
 Consumers, Producers, and Supply and Demand- Pg. 134, 136
 Economic Systems (Free Market, Command, Mixed and Traditional)- Pg. 138, 140
 Global Economy Pg. 142
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Vocabulary: Use pages 131 and 132 in your notebook to answer the following questions!
Word Bank
*Scarcity
*Consumer Sovereignty
*Consumption
*Opportunity Cost
*Production
*Capital Resources
*Entrepreneurial Resource
*Incentive
*Resources
* Competition
*Natural Resource
*Human Resource
1. ____INCENTIVE_________ describes sales, special offers, and giveaways. An example is BOGO!
2. ___COMPETITION_____ is the rivalry between two competitors, such as McDonald’s and Burger King.
3. ____SCARCITY______________ This term describes the fundamental problem in economics, which is
that people have unlimited wants and needs but there are limited resources available.
4. ____CONSUMER SOVEREIGNTY__ is the idea that consumers get what they want! For example, Apple
decided to make the iPad Air because consumers wanted a lighter tablet.
5. __RESOURCES_________ are used to make items! There are four different types: capital, natural,
human, and entrepreneurial.
6. __NATURAL RESOURCES__ are materials that come from nature and are used to make a product, like
water and eggs.
7. __CONSUMPTION____ is when you buy and use something. An example of this is when you buy and
use a new shirt.
8. __PRODUCTION______ is when you make and sell something. An example of this is, Starbucks makes
and sells coffee. So Starbucks would be…
9. _CAPITAL RESOURCES__ are items that can be used over and over again, like a chair or desk.
10. _OPPORTUNITY COST__ is the option that is not chosen. For example, John wants to buy a new video
game but must decide between Call of Duty or Madden. John chooses Madden, so Call of Duty is the…
11. _ENTREPRENEURIAL RESOURCES_ is the idea behind a product! Albert Einstein has the IDEA to create
the light bulb!
12. __HUMAN RESOURCES_ is the person who does the work to make the product! The employee at
Starbucks who makes your coffee would be an example!
Now that you have practiced your vocab, practice with these examples!
13. Sarah wants to buy a new pair of shoes. She can choose to buy Nike or she can choose to buy Adidas.
Sarah decided to buy the Nike shoes. What is term that describes using the Adidas since she didn’t
choose that item?
OR
a.
b.
c.
d.
Choice
Resources
Opportunity cost
Needs
14. Toms and Bobs both sell shoes. Since both Toms and Bobs sell shoes, they are rivals for customers. This
pushes them both to have lower prices and higher quality products to get people to buy their shoes.
What economics term describes Toms and Bobs?
a. Incentive
b. Competition
c. Economic System
d. Fiscal
15. Often used to change economic behavior, these include sales, special offers, and giveaways:
a.
b.
c.
d.
Consumer Rebates
Demands
Incentives
Consumer Sovereignty
16. People have unlimited wants, but these wants cannot be satisfied due to limited resources. This is the
fundamental problem in economics called:
a.
b.
c.
d.
Consumer Preference
Incentives
Consumer Sovereignty
Scarcity
17. Many people asked Apple for more color options for the iPhone. Because of these requests, Apple came
out with colored iPhones.
This is an example of what concept?
a.
b.
c.
d.
Public Ownership
Producer is King
Centrally-Planned Economy
Consumer Sovereignty
18. The process of creating an ice cream stand business, building the stand, gathering resources such as
milk and sugar and then making the ice cream is known as what?
a. Consumption
b. Production
19. The process of buying and eating the ice cream from a producer is called?
a. Consumption
b. Production
20. There are four types of resources used to make lemonade: capital, entrepreneurship, natural, and
human. Match the resources to each of the following resources.
New Recipe: _ENTREPRENEURSHIP__
Lemons: _NATURAL__
Worker: _HUMAN__
Juicer Machine: __CAPITAL___
21. All four of the following are factors of production in ice cream.
New Recipe, Milk, Worker, Ice Cream Scoop
Find the answer below that correctly identifies the types of resources used to make ice cream in the
correct order.
a.
b.
c.
d.
Capital, Human, Natural, Entrepreneurial
Entrepreneurial, Natural, Human, Capital
Entrepreneurial, Natural, Capital, Human
Natural, Human, Entrepreneurial, Capital
Supply and Demand: Use page 134 and 136 to answer the following questions:
22. Supply is the amount individuals want to (sell, buy)
23. Demand is the amount individuals want to (sell, buy)
24. According to the chart below which column is:
A
B
a. Supply____B_____________
b. Demand ___A____________
c. So the Price is ______$5____________. How did you know? _SUPPLY AND DEMAND ARE EQUAL__
25. According to the laws of supply and demand, what is the price of the item?
a.
b.
c.
d.
$1
$2
$3
$4
Economic Systems Practice: Use pages 138 and 140 to answer the following questions:
Command Economy
Mixed Economy
In a Command Economy:
Free Market Economy
In a Free Market Economy:
-The _________ (government OR
individuals) makes decisions
-The _________ (government OR
individual) makes decisions
-Prices are _________________
(centrally-planned OR set by supply
and demand)
-Prices are ___________________
(centrally-planned OR set by supply
and demand)
-All property is ________ (public OR
private)
-All property is ________ (public OR
private)
Answer Bank for 13-20:
Free Market Economy
Command Economy
13. What type of economy has the most consumer choice? ___FREE MARKET_______________
14. What type of economy has the least consumer choice? ___COMMAND___________________
15. What type of economy has the most government control? __COMMAND___________________
16. What type of economy has the least government control? __FREE MARKET_______________
17. The King of a new island country believes the government should NOT be involved in the economy.
Because of this, which economic system would the king support? __FREE MARKET____________
18. In the country called Zapadkaville, the government sets the price of cars. The government also chooses
which company sells the cars and how many cars you can buy. What term best describes the economic
system in Zapadkaville? ___COMMNAND________________
19. In some countries, supply and demand are controlled by the individual for all products without any
government rules or regulation. What type of economic system is this? __FREE MARKET__
20. All schools are centrally-owned property in some countries. What type of economic system would this be?
______COMMAND_____________
21. All gas stations are centrally-owned property in some countries. This means this property is owned by:
___GOVERNMENT___ (government OR individuals OR businesses)
Economic Systems Practice: Use pages 138 and 140 to answer the following questions:
Command Economy
Mixed Economy
22. Circle all the statements below that are true of
23. Circle all the statements below that are true of
Command Economies:

The government tries to provide for all citizens
Free Market Economy
Free Market Economies:

equally
The government provides for all citizens equally in
free market economies.

Central Ownership of Property

Central Ownership of Property

Consumer Sovereignty

Consumer Sovereignty

Centrally-Planned Economy

Centrally-Planned Economy

Lack of Consumer Choice

Lack of Consumer Choice

Competition is prevalent

Competition is prevalent in Free Market Economies

There are a lot of market choices

There are a lot of market choices.

Free Market economies have private property only.
24. Circle all the statements below that are true of
25. Circle all the statements below that are true of
Mixed Economies:
Traditional Economies:

Public Property

Most economies are traditional

Private Property

Based on customs and culture

Consumer Sovereignty

Centrally-Planned Economy

Supply and Demand

People do the job that their parents and

Government can make rules for
businesses
grandparents had done

Competition is prevalent

There are a lot of market choices
26. Country One: This country is one of the world’s most populated and it has a lot resources such as coal, arable
land (farm land), and an educated work force. The country’s government recently added more rules for
businesses in the economy. The government tries to protect private property rights but will sometimes decide to
get involved in the market. It also will tax citizens and use the money to pay various public programs such as
defense, national parks, and unemployment benefits. In this country, consumers have a lot of choices and
competition
Command Economy
Free Market Economy
--------------------------------------------------------------------------------------------------------------
1
2
3
4
5
Please explain in a couple sentences why you placed the country in that location:
_____This country has a lot of choice and competition and resources. They try to protect citizens and tax them
but there are more freedom than rules. This is why the country is a 4 on the spectrum above!____
27. Country Two: This country has a large population and few resources. Most parts of the economy are regulated
by the government. There is little business freedom or trade freedom as most things are centrally planned. The
country’s economy is largely driven by its main resource: oil. This resource is controlled by the government and
all money from the sale of oil goes to public spending. There is some private ownership of property but most is
publicly owned.
Command Economy
Free Market Economy
---------------------------------------------------------------------------------------------------------------
1
2
3
4
5
Please explain in a couple sentences why you placed the country in that location:
Because they have a lot of government control!
28. Look at questions 26 and 27. Which country do you think would be the United States: Country One or
Country Two? _COUNTRY 1_____ Why? __Because the USA has a lot of choice but the government does provide
some things.___
Global Economy: Use page 142 to answer the following questions:
US buys diamonds from countries in Africa and
sells other products to Africa that they do not
have!
29. What is a global economy?
 Buying and selling of goods and services in worldwide markets
 Purchasing goods ONLY from your country to save money
 Selling of goods and services at the highest price possible
 Buying and selling of goods and services from command markets
30. Specialization means that countries focus on doing _______________ (one thing OR many things) well.
31. Something the United States specializes in is ________________________________ (Oil or Movie Production).
Directions: Read the paragraph below and highlight the reasons why nations and states trade. (Hint there are 4!)
Nations and states trade for many different reasons. One reason the United States specializes in certain good and
services, is to sell to other countries to make money. An example of this would be the United States selling cars they
produce here to other countries, like FORD. However, the United States is not good at producing, or making everything!
The United States trades with the Middle East for oil, because we do not produce oil here efficiently and the Middle East
is fast and very good at producing oil which means they are efficient. When nations and states are efficient, or fast and
good, at producing a product they can produce it much cheaper and we can buy it from them at a lower cost or lower
opportunity cost. This is also good, because the Middle East makes money selling goods and services, like oil, to other
countries, which brings money into the country and creates jobs for people in the Middle East. The buying and selling of
the goods and services between nations and countries promotes efficiency and growth of the country and/or state.
32. Why do states and nations participate in a global economy? (Circle all the correct responses.)
 To create jobs in the nation and/or state
 To obtains goods and services they can produce at a higher cost
 To sell goods and services to other countries
 To buy goods at a higher cost
 To make products for fun and excitement
 To buy at a lower cost or opportunity cost
 To obtain goods and services they cannot produce or produce efficiently.
Match the reason from above with the correct picture below.
33. __To buy at lower
cost_
This game is so cheap
because it was made in
China!
34. _Create jobs__
35. To obtain goods and
services not produced
here.
Oil is not produced here!
36. __To sell goods and
services._
Ford cars are sold in
other countries
Now that you know why nations trade, match the reason from the answer bank for examples 37-40.
37. _C_Electronics are cheaper to buy if they are produced in China.
Answer Bank:
38. _A_The United States does not have diamonds. We get them from the
Africa.
39. _D_By selling more cars in other countries, the United States can hire more
people.
40. _B_Movies from the United States are shown to huge audiences across the
world. Many people buy tickets to these shows.
a. To obtain goods and
services they cannot
produce themselves
b. To sell goods and services
to other countries
c. To buy goods and services
at a lower cost
d. To create jobs
41. Virginia and the Unites States specialize in the production of certain goods and services, which promotes
_____________________________________ and ___________________________.
a.
b.
c.
d.
Goods and services
Consumers and producers
Efficiency and Growth
Technology and goods
Technology and Trade
Over time, innovations or advances in technology, such as the Internet and airplanes, have allowed information, capital
(money), goods, and services to flow, or move, easily around the world. For example, now that we have the airplanes, we
can ship packages or goods quickly to other countries. Before airplanes, the package or goods would need to travel by
boat, which takes a lot longer. Also, the Internet has changed the way we send and receive information and capital. This
means the Internet has made it much easier to get information or money to another person in a different country. For
example, it now only takes seconds for you to send an email to a friend in Germany. Before the Internet, it could have
taken months for your friend to receive this letter. Technological advances have also added to the global economy
because they decrease the cost of producing items. An example of this would the cost to make a car. It is now much
cheaper and faster to make a car because of the assembly line.
42. _____________________________ has contributed to the global flow of information, goods, services, and
capital and lowers the cost of __________________________________.
 Trade, Consumption
 Technology, Production
 Technology, Consumption
 Trade, Production
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