Chapter 18

Goal Seven Test Study Guide
Chapters 18, 19, 26.2 and 26.3
Chapter 18
Define the following terms:
1. need
2. want
3. economics
4. microeconomics
5. macroeconomics
6. economic model
7. economic system
8. resource
9. scarcity
10. trade-off
11. opportunity cost
12. marginal cost
13. marginal benefit
14. cost-benefit analysis
Answer the following questions:
1. What is the difference between a want and a need? Give an example of each.
2. What is the relationship between wants/needs and resources? What do we call
this relationship?
3. What are the three basic economic questions?
4. What is an example of a cost?
5. What is an example of a trade-off?
6. What is an example of an opportunity cost?
7. What is a fixed cost?
8. What is a variable cost?
9. What is total cost?
10. What is a marginal cost?
11. What is revenue?
12. How do you calculate total revenue?
13. What is marginal revenue?
14. What does a cost-benefit analysis compare?
15. If the marginal cost outweighs the marginal benefit, what should you do?
16. If the marginal benefit outweighs the marginal cost, what should you do?
17. What is diminishing marginal benefit?
Chapter 19 and 26.2 and 26.3
Define the following terms:
1. goods
2. services
3. factors of production
4. natural resources
5. labor
6. capital
7. entrepreneur
8. Gross Domestic Product (GDP)
9. per capita GDP
10. standard of living
11. market
12. factor market
13. product market
14. productivity
15. specialization
16. division of labor
17. economic interdependence
18. capitalism
19. free enterprise
20. consumer sovereignty
21. private property rights
22. competition
23. profit
24. laissez-faire economics
Answer the following questions:
1. What are the four factors of production?
2. Give examples of two renewable natural resources.
3. Give examples of two non-renewable natural resources.
4. Give three example of labor.
5. Give three examples of capital.
6. Give three examples of entrepreneurship.
7. What are the four sectors in the United States market? What are the two major
8. Complete the Circular flow of Economic activity chart below:
Product Markets
Factor Markets
9. What is an example of specialization?
10. What is an example of division of labor?
11. What is the trade-off involved with economic interdependence?
12. What is the “invisible hand”?
13. What is a market economy?
14. What is a command economy?
15. What is socialism?
16. What is communism?
17. What is a mixed economy?
18. What is a traditional economy?
19. What is a developing economy?
20. What are five problems developing economies face?
21. What kind of economies did Russia and China have before the 1980s? What kind
of economy are they striving for now?