TEST – UNIT ONE / HONORS ECONOMICS
DEFINE THE FOLLOWING TERMS COMPLETELY:
1. Economics2. Factors of Production (define and list)3. Opportunity Cost4. Scarcity5. CapitalMULTIPLE CHOICES:
6. Opportunity Cost can best be described as which of the following?
a.
b.
c.
d.
the money cost of a good or service
the money cost plus interest on money borrowed to buy a good or service
the cost of the resources used to produce a good or service
the value of the best alternative forgone when the alternative at hand is
chosen.
7. A recurring theme in Economics is:
a.
b.
c.
d.
people have unlimited wants in the face of limited resources
there are unlimited resources
our country is rich; we just don’t realize it
people have limited wants in the face of limited resources
8. Scarcity
a.
b.
c.
d.
e.
ensures people become satisfied with less than they want
exists only during a recession
exists only in some countries
affects only poor people
requires people to make choices
9. Which of the following would cause an outward shift in the Production
Possibilities Curve?
a. an increase in unemployment
b. an increase in inflation
c. an increase in capital equipment d. a decrease in natural resources
10. Jane wins $100,000 in the lottery and immediately uses her winnings to open a
Krispy Kreme franchise. Her direct cost, for the first year, is $50,000.
Alternatively, Jane could have placed her lottery winnings in a savings account
earning 10% annual interest. The opportunity cost of Jane’s decision is
a.
b.
c.
d.
e.
$60,000
$50,000
$160,000
$110,000
$55,000
11. The total cost of attending college
a. includes only college-related expenses
b. is the sum of the costs of tuition, books, and meals
c. would not include other options that were sacrificed due to the decision to
attend college
d. would not include the lost opportunity to travel
e. is the sum of college related expenses and opportunity cost
12. When we speak of the problem of production we are really asking the big
question
a.
b.
c.
d.
what?
how?
where?
for whom?
13. Which of the following questions is mainly concerned with distribution?
a.
b.
c.
d.
How?
What?
Where?
For whom?
14. Coal in the ground may best be classified as which factor of production?
a.
b.
c.
d.
natural resources
labor
management
capital
15. A Production Possibilities Curve shows
a.
b.
c.
d.
the outer limits of production
the sacrifice needed if one good is substituted for another
what the frontier of production can be if all resources are used efficiently
all of the above
16. An economic system can best be characterized as
a. a complete set of plans on how goods and services should be produced
b. guidelines for determining wages, prices, and interest payments
c. the principles a nation adopts in answering the central economic problem
of scarcity and the related fundamental questions
d. a set of rules for determining the relationship between groups
17. Ronnie waits one hour in line to buy a ticket to a concert starring Kiss and Poison.
The opportunity cost of buying the $28 ticket
is Ronnie’s best alternative use of the $28.
is Ronnie’s best alternative use of the one hour it took to wait in line
is the value of the $28 to the ticket agent
is Ronnie’s best alternative use of both the $28 and the one hour spent in
line
e. cannot be measured because there is no opportunity cost associated with
consumption
a.
b.
c.
d.
18. A market economy best solves the economic problem of scarcity by
a.
b.
c.
d.
having the government plan the production and consumption of a society
having producers plan the production and consumption of a society
having consumers plan the production and consumption of a society
allowing producers and consumers to use their own self-interest to
determine the production and consumption of a society
e. allowing the government to regulate the production and consumption of a
society.
Questions 19 and 20 refer to the following table
Type of Production
Alternatives
A
B
C
D
E
Units of wheat
0
4
8
12
16
Automobiles
40
34
26
16
0
19 The opportunity cost of each additional unit of wheat in terms of automobiles
a.
b.
c.
d.
e.
remains constant
increases as more wheat is produced
decreases as more wheat is produced
increases then decreases as more wheat is produced
decreases then increases as more wheat is produced
19. According to the production alternatives, a combination of 12 units of wheat and
18 automobiles is
a.
b.
c.
d.
e.
attainable, but involves an inefficient use of society’s resources
attainable, but would not be in the best interest of the farmers
attainable, but would not be in the best interest of the automobile industry
not attainable, because wheat and automobiles are not substitutes
not attainable, because there are not enough resources to produce this
combination of goods
TRUE OR FALSE
20. Although air and water are in great abundance and we may not always pay for
them directly, it would not suit the economist to call them free goods.
21. In Economics, the question How? Concerns itself with the distribution of wealth.
22. To an author, pen and paper would be considered capital among the factors of
production.
23. It is fair to say that all countries have mixed economies but different emphasis.
24. A nation that is using its resources fully and efficiently is producing at its
production possibilities frontier.
25. A breakthrough in solar energy reducing energy costs by 20 percent does nothing
to increase the production possibilities curve because money saved will be used
for something else.
26. According to economic analysis, in making a decision, an individual compares the
benefits expected from one option with the benefits expected from other options.
27. If you have a choice between consuming bundle X or bundle Y, the opportunity
cost of consuming bundle X is bundle Y.
28. The opportunity cost of going to the movies is always the same for everyone.
29. Scarcity is the result of an unfair distribution of income.
30. CREATE A PRODUCTION POSSIBILITIES CURVE FROM THE
FOLLOWING DATA
Necessities (million tons)
A
B
C
D
E
F
G
600
550
500
400
300
150
0
Luxuries (million tons)
0
40
55
80
90
100
110
31. If my country moves from combination G to combination D, what is the
opportunity cost?
32. If my country moves from combination B to combination E, what is my
opportunity cost?
MULTIPLE CHOICE
33. Which of the following explains an outward movement of the production
possibilities curve?
a.
b.
c.
d.
An increase in the labor force
More efficient use of resources
New, inexpensive sources of energy
All of the above
34. The opportunity cost of taking a course in economics in college is
a.
b.
c.
d.
the tuition for the course
the tuition for the course plus the books
all the costs paid to the college
none of the above