Economics
Review Chapter 1 test
1. Value Worth that can be expressed by consumers in dollar and cents
2. Wealth Sum of those economic products that are tangible, scarce, useful, and transferable
3. Economics Study of how people try to satisfy their needs and wants through the use of limited
4.
5.
6.
7.
8.
9.
resources
Labor People with all their efforts, abilities, and skills
Capital Tools, equipment, machinery, and factories used in production of goods and services
Trade offs Alternative choices made by consumers in the marketplace
Scarcity Condition of not having enough resources to produce all the things people want
Standard of living Quality of life based on the possession of the necessities and luxuries that
make life easier
Opportunity Cost: Cost of the nest best alternative use of money, time, or resources when one
choice is made rather than another
Good Item that is economically useful or that satisfies an economic want
10.
11. What are the 3 basic Economic questions?
a.
b.
c.
What to produce?
How to produce?
To whom to produce?
12. What are the four factors of production?
a.
b.
c.
Land
Labor
Capital
Entrepreneurs
d.
13. Give 4 examples of Capital goods
a. Machine that build cars
b. Mixer at a bakery
c. Bulldozer at a construction site
d. Computer at a school
14. The four areas of study of Economics are _____________. (in the chapter it talks
about the SCOPE of Economics)
a. Description
i. GDP: dollar value of all final goods and services produced within a countries
boarders
ii. Need to know what the World around looks like
b. Analysis
i. Why are prices of some items high while others are low?
ii. Why things work and how things happen
c. Explanation
i. Communication of knowledge to others
d. Prediction
i. Rise and fall of Income
ii. Make best decision: what is, what tends to be, and what may happen?
15. If a resource has value it also has to have ______________ and _____________.
a. Value = Scarce + Utility
16. What is the paradox of value? Explain using the example of water and diamonds.
a. Contradiction between necessities and value The situation in which some necessities
have little value while some non-necessities have a much higher value
b. Water is a need but cost less than diamonds that are a wont
17. What is a service? List three examples
a.
b.
Work that is preformed by someone for someone
Banks, grocery stores, hair cut
18. What are goods? List three examples
a. Item that is economically useful or satisfies an economic want
b.
19.
Car, T.V., Blow Dryer
Specialization
a.
a.
FOP can perform tasks that they can do more efficiently than others
Performing one task relatively more efficiently than another
20. Economic Interdependence
a. We rely and others and others rely on us to provide goods and services that we consume
i. Cars are built in the US but parts may be made in another country
21. Division of Labor
a. Assembly line production
22. What are decision making grids and what are they used for in Economics?
a. Trade-offs are the alternative choices people face in making an economic decision. A
b.
decision-making grid lists the advantages and disadvantages of each choice.
Alternative choices of action
23. What is opportunity cost? Explain using Homework and Time with friends
a. Opportunity cost is the cost of the next best alternative among a person’s choices. The
b.
opportunity cost is the money, time, or resources a person gives up, or sacrifices, to make
his final choice.
By staying home to study for an economics test the opportunity cost is the time spent
with friends. However, the benefits of studying for the test out way the cost.
24. What is the relationship between Trade-offs and opportunity cost?
a. Opportunity cost are incurred when trade-offs are made
25. What are the characteristics of the Production possibility Frontier?
a. It shows the combinations of goods and/or services that can be produced when all
b.
26.
What does the Study of Economics help people with?
a.
27.
productive resources are used. The line on the graph represents the full potential—the
frontier—when the economy employs all of these productive resources.
it illustrates the concept of opportunity cost; it is used by economists as a tool for
description and analysis; it indicates the ideal production levels for goods and services
Become better decision makers
Economic Decision Making
a.
b.
c.
Building simple models
Using cost-benefit analysis
Taking small, incremental steps
28. Review the Circular flow of economics and be able to explain how it “works.”
Individuals provide Labor (a factor of production) to the factor market; business look to the factor market
to hire labor; once hired individuals work to provide services or produce goods for the product market; the
product market provides goods and services to the individuals to purchase.
Businesses pay for the factors of product(resource) i.e. paying labor for their services; individuals then
spending their income in the product market to purchase goods and services; Money paid for goods and
services and “returned” to the businesses for goods and services provided
29. Using the figures on Page 23 in your book (PPF) discuss the following
a. When you are producing goods on the red line (letter A, B, or C)…what
does that mean?
b. Using graph A: What could cause production to move form point b to e?
c. Using graph A: can Production move from point a to d? why or why not
Companies producing on the red
line are producing at max.
production using all the resources
provided
Companies producing at letter e
are not using resources
efficiently. The opportunity cost
is what they could be producing
The only way for companies to
produce at letter d their must be
economic growth.