Name: ______________________
Class: _________________
Date: _________
ID: A
Economics Chapter 1 Review
Matching
a.
b.
c.
d.
goods
economics
shortage
labor
e.
f.
g.
h.
land
capital
services
human capital
____
1. when consumers want more of a good or service than producers are willing to offer at a particular price
____
2. physical objects such as baseballs or umbrellas
____
3. the study of how people make decisions to satisfy their needs and wants
____
4. the effort that a person devotes to a task for which the person is paid
____
5. all natural resources used to produce goods and services
____
6. knowledge gained from education and experience
Key Terms and Concepts
Directions: Match the terms with the descriptions. Write the letter of the correct answer in the blank
provided. Not all of the choices will be used.
a.
b.
c.
d.
e.
f.
g.
h.
i.
need
want
goods
services
scarcity
shortage
entrepreneur
factors of production
land
j.
k.
l.
m.
n.
o.
p.
q.
r.
labor
capital
trade-off
opportunity cost
marginal cost
marginal benefit
economics
efficiency
underutilization
____
7. something people desire that is not necessary for survival
____
8. something essential for survival
____
9. physical objects that someone produces
____ 10. actions or activities that one person performs for another
____ 11. the study of how people seek to satisfy their needs and wants by making choices
____ 12. principle that limited amounts of goods and services are available to meet unlimited wants
____ 13. resources that are used to make goods and services
____ 14. all natural resources used to make goods and services
____ 15. effort people devote to tasks for which they are paid
1
Name: ______________________
ID: A
____ 16. person who decides how to combine resources to create goods and services
____ 17. any human-made resource that is used to produce other goods and services
____ 18. the most desirable alternative given up as the result of a decision
____ 19. the extra cost of adding one unit
____ 20. the extra benefit of adding one unit
____ 21. use of fewer resources than an economy is capable of using
____ 22. use of resources in such a way as to maximize the output of goods and services
Completion
Complete each statement.
23. Giving up one benefit in order to gain a greater benefit is a(n) ______.
24. The most desirable alternative given up as a result of a decision is the ______.
25. The extra cost of adding one unit is the ______.
26. Deciding by thinking at the margin is called _______.
27. A(n) ______ is a visual way of examining opportunity costs.
28. A graph that shows alternative ways to use an economy’s productive resources is a _______.
29. When a country’s maximum possible output is plotted on a graph, it is called the _______.
30. When an economy uses fewer production resources than it would at maximum production, it is called
_______.
31. The use of resources to maximize the output of goods and services is _______.
32. The curve usually seen in a production possibilities frontier can be explained by the _______.
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____ 33. What is the difference between a shortage and a scarcity?
a. A shortage can be temporary or long-term, but scarcity always exists.
b. A shortage results from rising prices; scarcity results from falling prices.
c. A shortage is a lack of all goods and services; scarcity concerns a single item.
d. There is no real difference between a shortage and a scarcity.
2
Name: ______________________
ID: A
Main Ideas
Directions: Write the letter of the correct answer in the blank provided.
____ 34. Which of the following is an example of a shortage?
a. Water cannot be used to irrigate one crop because it is used for another.
b. Kumquats are not available because few people want to buy them.
c. A type of doll is not available because a limited number were made.
d. Workers are not available because they have other jobs.
____ 35. All goods and services are scarce because
a. some goods cost more than others.
b. resources are limited.
c. things are either needs or wants.
d. greedy people want too many goods.
____ 36. Scarcity requires that people make trade-offs because
a. people have more wants than needs.
b. there is a limited supply of resources.
c. services are more available than goods.
d. producers rarely make enough of a good.
____ 37. Which of the following people is an entrepreneur?
a. a person who earns a lot of money as a singer or dancer
b. a person who creates a game and sells it to a game manufacturer
c. a person who starts an all-organic cleaning supplies business that employs others
d. a person who works as a highly-paid computer programmer
____ 38. One example of an entrepreneur is
a. a writer who is hired by a film studio to adapt a novel into a screenplay.
b. a secretary in a law firm that specializes in business law.
c. an ice skater who is part of a professional ice show.
d. an artist who runs a business painting murals in office buildings and restaurants.
____ 39. Which of the following lists of factors of production would an economist categorize as land?
a. factories, office buildings, assembly lines, workers
b. farm fields, tractors, pesticides, fertilizers
c. dams, bridges, rock quarries, oil wells
d. iron ore, natural gas, fertile soil, water
____ 40. Which of the following is an example of using physical capital to save time and money?
a. hiring more workers to do a job
b. building extra space in a factory to simplify production
c. switching from oil to coal to make production cheaper
d. lowering workers’ wages to increase profits
____ 41. Which of the following are factors of production?
a. capital and land
b. scarcity and shortages
c. technology and productivity
d. economics and business decisions
3
Name: ______________________
ID: A
____ 42. A factory building is an example of which factor of production?
a. human capital
b. physical capital
c. land
d. labor
____ 43. Which of the following is an example of a firm trying to increase its human capital?
a. building a company cafeteria
b. hiring more part-time workers
c. paying for employees’ education
d. leasing cars for employees
____ 44. The
a.
b.
c.
d.
physical capital used by a woodworker to make furniture would include
saws and drills.
trees and oil.
hard work and time.
a workshop and money.
____ 45. Human capital includes
a. the salary paid to an accountant.
b. the knowledge a taxi driver has of the city streets.
c. the machinery run by a seamstress to weave cloth.
d. the equipment used by a doctor to cure a patient.
____ 46. The
a.
b.
c.
d.
economic concept of guns or butter means that
a person can spend money on either sports equipment or food.
a company must decide whether to manufacture guns or butter.
a government must decide to produce more or less military or consumer goods.
a government can buy unlimited military and civilian goods if it is rich enough.
____ 47. If you choose between two summer jobs, the one you do not choose is the ______ of your decision.
a. trade-off
b. opportunity cost
c. decision at the margin
d. opportunity at the margin
____ 48. Every decision involves trade-offs because
a. everyone has to make decisions.
b. everyone’s resources are limited.
c. some people have more money than others.
d. some decisions are made for business, others for society.
____ 49. The government of a country must make a decision between increasing military spending and subsidizing
wheat farmers. This is an example of
a. a guns or butter issue.
b. decision-making at the margin.
c. underutilization of resources.
d. the law of increasing costs.
4
Name: ______________________
ID: A
____ 50. You bought two new CDs with the last $30 in your checking account, and your next payday is on
Monday. What is the opportunity cost of these CDs?
a. the difference between the cost to produce the CDs and the price you paid for them
b. the $30 check that you wrote for the CDs
c. the night out with your friends that you miss because you can’t afford it now
d. the satisfaction of knowing you are the first of your friends to have these CDs
____ 51. Making a decision at the margin is possible only in situations where
a. the available opportunity costs are unclear or complicated.
b. the available alternatives can be divided into increments.
c. there are more than three different types of alternatives to consider.
d. there are differences in the amount of time each alternative will consume.
____ 52. A decision is made at the margin when each alternative considers
a. a different trade-off than the others.
b. where the most costly alternative will be.
c. what the “all or nothing” alternative will be.
d. cost and benefit ranked in progressive units.
____ 53. When a theater owner considers whether to install another row of seating, she is
a. underutilizing her resources.
b. experiencing a shortage.
c. using human capital.
d. thinking at the margin.
____ 54. Which of the following is the kind of decision that can be made at the margin?
a. whether or not to hire new workers
b. whether or not to go on a vacation
c. whether or not to build an extra room on a home
d. whether to have a dog or a cat as a pet
____ 55. What can a decision-making grid do?
a. tell you the right decision to make
b. show you every possible consequence of your decision
c. help you determine some of the opportunity costs for your decision
d. show you every possible benefit of your decision
5
Name: ______________________
Options
Work 1 hour
Work 2 hours
Work 3 hours
Work 4 hours
Work 5 hours
Decision Making
Benefits
1 hour’s pay
2 hours’ pay
3 hours’ pay
4 hours’ pay
5 hours’ pay
ID: A
at the Margin
Opportunity Costs
1 hour of study or recreation time
2 hours of study or recreation time
3 hours of study or recreation time
4 hours of study or recreation time
5 hours of study or recreation time
____ 56. Jed has one hour available after school each weekday. The rest of the afternoon is taken up by other
activities. He is evaluating what to do with those 5 hours. According to the chart, which option has the
least benefit?
a. working 1 hour
b. working 2 hours
c. working 4 hours
d. working 5 hours
____ 57. If Jed uses the grid to decide to earn the maximum pay, what will be the trade-off?
a. There won’t be any trade-off, only benefits.
b. He will add another hour to the available time to use for study.
c. He will have a balance of work and study or recreation time.
d. There will be no time for study or recreation.
____ 58. A production possibilities curve shows the relationship between the production of
a. farm goods and factory goods.
b. two types of farm goods.
c. two types of factory goods.
d. any two categories of goods.
6
Name: ______________________
ID: A
Directions: Use the graph below to answer questions 22 and 23.
____ 59. 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.
____ 60. The line on a production possibilities curve showing the relative amounts of two types of goods produced
using all resources is called the
a. production possibilities frontier.
b. opportunity cost line.
c. utilization of resources.
d. maximum possible production line.
7
Name: ______________________
____ 61. The
a.
b.
c.
d.
ID: A
future production possibilities frontier on this graph shows what might happen if
resources were underutilized.
there was a shortage of paving equipment.
the cost of building materials went down.
more resources went to building roads.
____ 62. Increasing the number of laborers in an economy generally causes a(n)
a. increase in the production possibilities curve.
b. decrease in the production possibilities curve.
c. increase in the opportunity cost of production.
d. decrease in the opportunity cost of production.
____ 63. An
a.
b.
c.
d.
economy that is producing the maximum amount of goods and services is considered
efficient.
underutilized.
growing.
trading off.
____ 64. An
a.
b.
c.
d.
efficient economy is one that
creates new resources through ongoing research and development.
conserves its resources through underutilization.
uses its resources to make the most goods and services.
does not face the problem of scarcity.
____ 65. A region’s production possibilities curve might show underutilization of resources if the region
experienced
a. tax increases.
b. an influx of immigrant labor.
c. a large flood.
d. growth of its industries.
____ 66. A company that makes baseball caps is underutilizing its resources. What does this mean?
a. The company is running more efficiently than its competitors.
b. The company is paying its employees less than it should be.
c. The company is making caps when it could be making t-shirts instead.
d. The company is producing fewer caps than it could be.
____ 67. The
a.
b.
c.
d.
law of increasing costs means that as production shifts from one item to another,
the cost of production gets cheaper and cheaper.
the cost of producing an item stays the same no matter how many are produced.
more and more resources are necessary to increase production of the second item.
the land costs of increasing production rise much more steeply than do the labor
costs.
____ 68. The
a.
b.
c.
d.
law of increasing costs means that when an economy increases the production of one item the
opportunity cost goes up.
actual cost of making the item goes down.
actual cost goes up but the opportunity cost goes down.
production costs will increase also.
8
Name: ______________________
ID: A
____ 69. The community of Desertville traditionally produces a large number of tires and a small amount of kiwi
fruit. Kiwis are becoming increasingly popular, and Desertville has decided to expand kiwi cultivation and
decrease tire manufacturing. According to the law of increasing costs,
a. the opportunity cost of producing tires will increase.
b. the opportunity cost of producing kiwis will increase.
c. the opportunity cost of producing tires will decrease.
d. the opportunity cost of producing kiwis will decrease.
____ 70. 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.
Short Answer: You MUST answer TWO QUESTIONS for FIVE POINTS EACH. Additional correct
answers earn one point of extra credit.
71. In your own words, describe what entrepreneurs do.
72. Why is a “guns or butter” decision an example of a trade-off?
Critical Thinking and Writing
Directions: Use complete sentences to answer the questions below.
73. How does a production possibilities curve illustrate the law of increasing costs?
9
Name: ______________________
ID: A
74. If an economy’s production possibilities curve indicates that the economy is working at its most efficient
level, is this proof that an economy is growing over time?
75. How do resources and technology affect a country’s production possibilities?
10
ID: A
Economics Chapter 1 Review
Answer Section
MATCHING
1. ANS: C
PTS: 2
DIF: L3
REF: A.3
OBJ: 1.1.1 Explain why scarcity and choice are the basis of economics
STA: G.2
TOP: Economic Systems | Shortage
2. ANS: A
PTS: 2
DIF: L3
REF: A.3
OBJ: 1.1.1 Explain why scarcity and choice are the basis of economics
STA: G.2
TOP: Economic Systems | Goods
3. ANS: B
PTS: 2
DIF: L3
REF: A.4
OBJ: 1.1.1 Explain why scarcity and choice are the basis of economics
STA: G.2
TOP: Economic Systems | Economics
4. ANS: D
PTS: 2
DIF: L3
REF: A.5
OBJ: 1.1.3 Define the three factors of production and the differences between physical and human
capital.
TOP: Economic Systems | Labor
5. ANS: E
PTS: 2
DIF: L3
REF: A.5
OBJ: 3.1.3 Identify the constitutional protections that underlie free enterprise.
STA: B.1| B.2
TOP: Economic Systems | Land
6. ANS: H
PTS: 2
DIF: L3
REF: A.6
OBJ: 1.1.3 Define the three factors of production and the differences between physical and human
capital.
TOP: Economic Systems | Human Capital
7. ANS:
OBJ:
STA:
8. ANS:
OBJ:
STA:
9. ANS:
OBJ:
STA:
10. ANS:
OBJ:
STA:
11. ANS:
OBJ:
STA:
12. ANS:
OBJ:
STA:
13. ANS:
OBJ:
STA:
B
1.1.1
G.2
A
1.1.1
G.2
C
1.1.1
G.2
D
1.1.1
G.2
P
1.1.1
G.2
E
1.1.4
G.2
H
1.1.2
F.7
PTS: 2
DIF: L3
REF: A.3
Explain why scarcity and choice are the basis of economics
TOP: Economic Choices | Scarcity and Choice
PTS: 2
DIF: L3
REF: A.3
Explain why scarcity and choice are the basis of economics
TOP: Economic Choices | Scarcity and Choice
PTS: 2
DIF: L3
REF: A.3
Explain why scarcity and choice are the basis of economics
TOP: Economic Choices | Scarcity and Choice
PTS: 2
DIF: L3
REF: A.3
Explain why scarcity and choice are the basis of economics
TOP: Economic Choices | Scarcity and Choice
PTS: 2
DIF: L3
REF: A.4
Explain why scarcity and choice are the basis of economics
TOP: Economic Choices | Scarcity and Choice
PTS: 2
DIF: L3
REF: A.4
Explain how scarcity affects the factors of production
TOP: Economic Choices | Scarcity and Choice
PTS: 2
DIF: L3
REF: A.5
Describe what entrepreneurs do
NAT: 9.4| 14.0
TOP: Economic Choices | Entrepreneurs
1
ID: A
14. ANS: I
PTS: 2
DIF: L3
REF: A.5
OBJ: 1.1.3 Define the three factors of production and the differences between physical and human
capital.
TOP: Economic Choices | Land
15. ANS: J
PTS: 2
DIF: L3
REF: A.5
OBJ: 1.1.3 Define the three factors of production and the differences between physical and human
capital.
TOP: Economic Choices | Labor
16. ANS: G
PTS: 2
DIF: L3
REF: A.5
OBJ: 1.1.2 Describe what entrepreneurs do
NAT: 9.4| 14.0
STA: F.7
TOP: Economic Choices | Entrepreneurs
17. ANS: K
PTS: 2
DIF: L3
REF: A.6
OBJ: 1.1.3 Define the three factors of production and the differences between physical and human
capital.
TOP: Economic Choices | Capital
18. ANS: M
PTS: 2
DIF: L3
REF: A.9
OBJ: 1.2.2 Summarize the concept of opportunity cost.
STA: G.3
TOP: Economic Choices | Opportunity Cost
19. ANS: N
PTS: 2
DIF: L3
REF: A.11
OBJ: 1.2.3 Describe how people make decisions by thinking at the margin.
NAT: 2.1| 2.2| 2.3 TOP: Economic Choices | Margin
20. ANS: O
PTS: 2
DIF: L3
REF: A.11
OBJ: 1.2.3 Describe how people make decisions by thinking at the margin.
NAT: 2.1| 2.2| 2.3 TOP: Economic Choices | Margin
21. ANS: R
PTS: 2
DIF: L3
REF: A.15
OBJ: 1.3.3 Explain why a country's production possibilities depend on its resources and technology.
TOP: Economic Choices | Efficiency
22. ANS: Q
PTS: 2
DIF: L3
REF: A.15
OBJ: 1.3.3 Explain why a country's production possibilities depend on its resources and technology.
TOP: Economic Choices | Efficiency
COMPLETION
23. ANS: trade-off
PTS:
OBJ:
TOP:
24. ANS:
2
DIF: L3
REF: A.8
1.2.1 Explain why every decision involves trade-offs
Economic Systems | Trade-offs
opportunity cost
PTS:
OBJ:
TOP:
25. ANS:
2
DIF: L3
REF: A.9
1.2.2 Summarize the concept of opportunity cost.
Economic Systems | Opportunity Cost
marginal benefit
STA: G.3
STA: G.3
PTS: 2
DIF: L3
REF: A.11
OBJ: 1.2.3 Describe how people make decisions by thinking at the margin.
NAT: 2.1| 2.2| 2.3 TOP: Economic Systems | Marginal Cost
2
ID: A
26. ANS: cost/benefit analysis
PTS:
OBJ:
NAT:
27. ANS:
2
DIF: L3
REF: A.11
1.2.3 Describe how people make decisions by thinking at the margin.
2.1| 2.2| 2.3 TOP: Economic Systems | Cost-Benefit Analysis
decision-making grid
PTS:
OBJ:
KEY:
28. ANS:
2
DIF: L3
REF: A.11
1.2.2 Summarize the concept of opportunity cost.
Economic Systems | Opportunity Cost
production possibilities curve
PTS:
OBJ:
TOP:
29. ANS:
2
DIF: L3
REF: A.13
1.3.1 Interpret a production possibilities curve.
Economic Systems | Production Possibilities Curves
production possibilities frontier
PTS:
OBJ:
TOP:
30. ANS:
2
DIF: L3
REF: A.14
1.3.2 Explain how production possibilities curves show efficiency, growth, and cost.
Economic Systems | Production Possibilities Frontier
underutilization
PTS:
OBJ:
TOP:
31. ANS:
2
DIF: L3
REF: A.15
1.3.2 Explain how production possibilities curves show efficiency, growth, and cost.
Economic Systems | Underutilization
efficiency
PTS:
OBJ:
TOP:
32. ANS:
2
DIF: L3
REF: A.15
1.3.2 Explain how production possibilities curves show efficiency, growth, and cost.
Economic Systems | Efficiency
law of increasing costs
STA: G.3
PTS: 2
DIF: L3
REF: A.18
OBJ: 1.3.2 Explain how production possibilities curves show efficiency, growth, and cost.
TOP: Economic Systems | Law of Increasing Costs
MULTIPLE CHOICE
33. ANS: A
Unlike shortages, scarcity always exists.
PTS: 3
DIF: L3
REF: A.4
OBJ: 1.1.1 Explain why scarcity and choice are the basis of economics
STA: G.2
TOP: Economic Systems | Scarcity vs. Shortage
3
ID: A
34. ANS: C
A shortage occurs when consumers want more of a good or service than producers are willing to make
available at a particular price.
PTS: 3
DIF: L3
REF: A.4
OBJ: 1.1.1 Explain why scarcity and choice are the basis of economics
STA: G.2
TOP: Economic Choices | Shortages
35. ANS: B
People’s wants are unlimited, but resources to make goods and services to fulfill those wants are always
limited.
PTS: 3
DIF: L3
REF: A.4
OBJ: 1.1.4 Explain how scarcity affects the factors of production
STA: G.2
TOP: Economic Choices | Scarcity and Choice
36. ANS: B
Scarcity exists because all resources are limited.
PTS: 5
DIF: L4
REF: A.4
OBJ: 1.1.1 Explain why scarcity and choice are the basis of economics
STA: G.2
TOP: Economic Choices | Scarcity
37. ANS: C
Entrepreneurs start their own businesses.
PTS: 3
DIF: L3
REF: A.5
OBJ: 1.1.2 Describe what entrepreneurs do
NAT: 9.4| 14.0
STA: F.7
TOP: Economic Systems | Entrepreneurs
38. ANS: D
Entrepreneurs are people who decide how to combine resources to create new goods and services. Anyone
who opens a business, like the artist, is an entrepreneur.
PTS: 3
DIF: L3
REF: A.5
OBJ: 1.1.2 Describe what entrepreneurs do
NAT: 9.4| 14.0
STA: F.7
TOP: Economic Choices | Entrepreneurs
39. ANS: D
Economists use the term land to refer to all natural resources used to produce goods and services.
PTS: 3
DIF: L3
REF: A.5
OBJ: 1.1.3 Define the three factors of production and the differences between physical and human
capital.
TOP: Economic Choices | Land
40. ANS: B
Physical capital includes buildings, such as a factory.
PTS: 3
DIF: L3
REF: A.6
OBJ: 1.1.3 Define the three factors of production and the differences between physical and human
capital.
TOP: Economic Systems | Physical Capital
4
ID: A
41. ANS: A
The factors of production are land, labor, and capital.
PTS: 3
DIF: L3
REF: A.6
OBJ: 1.1.3 Define the three factors of production and the differences between physical and human
capital.
TOP: Economic Systems | Factors of Production
42. ANS: B
Human-made objects used to create other goods and services are physical capital.
PTS: 3
DIF: L3
REF: A.6
OBJ: 1.1.3 Define the three factors of production and the differences between physical and human
capital.
TOP: Economic Choices | Capital
43. ANS: C
Education increases skills and thereby increases human capital.
PTS: 3
DIF: L3
REF: A.6
OBJ: 1.1.4 Explain how scarcity affects the factors of production
STA: G.2
TOP: Economic Choices | Human Capital
44. ANS: A
Human-made objects used to create other goods and services are physical capital.
PTS: 3
DIF: L3
REF: A.6
OBJ: 1.1.3 Define the three factors of production and the differences between physical and human
capital.
TOP: Economic Choices | Capital
45. ANS: B
Human capital is defined as the knowledge and skills a worker gains through education and experience.
PTS: 3
DIF: L3
REF: A.6
OBJ: 1.1.3 Define the three factors of production and the differences between physical and human
capital.
TOP: Economic Choices | Capital
46. ANS: C
The term guns or butter refers to the choice between spending money on military or domestic needs.
PTS: 3
DIF: L3
REF: A.9
OBJ: 1.2.1 Explain why every decision involves trade-offs
STA: G.3
TOP: Economic Systems | Opportunity Cost
47. ANS: B
Opportunity cost is the most desirable alternative not chosen when a decision is made.
PTS:
OBJ:
TOP:
48. ANS:
Every
3
DIF: L3
REF: A.9
1.2.2 Summarize the concept of opportunity cost.
STA: G.3
Economic Systems | Opportunity Cost
B
decision involves trade-offs because scarcity always exists.
PTS: 3
DIF: L3
REF: A.9
OBJ: 1.1.1 Explain why scarcity and choice are the basis of economics
STA: G.2
TOP: Economic Systems | Trade-offs
5
ID: A
49. ANS: A
Economists and politicians use the term “guns or butter” to describe a country’s choice of spending
money on military or domestic needs.
PTS: 3
DIF: L3
REF: A.9
OBJ: 1.2.1 Explain why every decision involves trade-offs
STA: G.3
TOP: Economic Choices | Trade-Offs
50. ANS: C
The most desirable alternative somebody gives up as the result of a decision is the opportunity cost.
PTS: 5
DIF: L4
REF: A.9
OBJ: 1.2.2 Summarize the concept of opportunity cost.
STA: G.3
TOP: Economic Choices | Opportunity Cost
51. ANS: B
Thinking at the margin means making decisions about adding or subtracting one unit.
PTS: 3
DIF: L3
REF: A.11
OBJ: 1.2.3 Describe how people make decisions by thinking at the margin.
NAT: 2.1| 2.2| 2.3 TOP: Economic Systems | Thinking at the Margin
52. ANS: D
Making decisions at the margin means deciding whether to add or subtract progressive units.
PTS: 3
DIF: L3
REF: A.11
OBJ: 1.1.3 Define the three factors of production and the differences between physical and human
capital.
TOP: Economic Systems | Thinking at the Margin
53. ANS: D
Thinking at the margin describes decisions about the cost and benefit of providing more or less of a good
or service.
PTS: 3
DIF: L3
REF: A.11
OBJ: 1.2.3 Describe how people make decisions by thinking at the margin.
NAT: 2.1| 2.2| 2.3 TOP: Economic Choices | Margin
54. ANS: A
Thinking at the margin describes decisions on how much more or less one should do economically.
PTS: 3
DIF: L3
REF: A.11
OBJ: 1.2.3 Describe how people make decisions by thinking at the margin.
NAT: 2.1| 2.2| 2.3 TOP: Economic Choices | Margin
55. ANS: C
A decision-making grid shows the opportunity costs for the possible choices a person can make.
PTS: 3
DIF: L3
REF: A.11
OBJ: 1.2.2 Summarize the concept of opportunity cost.
TOP: Economic Choices | Decision-Making Grids
6
STA: G.3
ID: A
56. ANS: A
A benefit is what a person gains from a decision. In this case, working one hour has the least benefit
because it offers the least amount of pay.
PTS: 3
DIF: L3
REF: A.11
OBJ: 1.2.1 Explain why every decision involves trade-offs
STA: G.3
TOP: Economic Choices | Benefits
57. ANS: D
If Jed chooses to work during all five hours, there will be no time left for other activities.
PTS: 5
DIF: L4
REF: A.11
OBJ: 1.2.1 Explain why every decision involves trade-offs
STA: G.3
TOP: Economic Choices | Trade-Offs
58. ANS: D
A production possibilities curve is a graph that shows alternative ways to use an economy’s productive
resources.
PTS: 3
DIF: L3
REF: A.13
OBJ: 1.3.1 Interpret a production possibilities curve.
TOP: Economic Systems | Production Possibilities Curves
59. ANS: B
Without a change in resources, the number of roads must decrease in order for the number of schools to
increase.
PTS: 5
DIF: L4
REF: A.13
OBJ: 1.3.1 Interpret a production possibilities curve.
TOP: Economic Choices | Production Possibilities
60. ANS: A
The production possibilities frontier shows the maximum combination of two types of goods that can be
produced using all resources.
PTS: 3
DIF: L3
REF: A.14
OBJ: 1.3.1 Interpret a production possibilities curve.
TOP: Economic Systems | Production Possibilities Curves
61. ANS: C
The production possibilities frontier would shift to the right if there was an increase in one of the factors
of production.
PTS:
OBJ:
TOP:
62. ANS:
A rise
5
DIF: L4
REF: A.14
1.3.1 Interpret a production possibilities curve.
Economic Choices | Production Possibilities
A
in a factor of production increases the maximum amount of goods an economy can produce.
PTS: 3
DIF: L3
REF: A.15
OBJ: 1.3.2 Explain how production possibilities curves show efficiency, growth, and cost.
TOP: Economic Systems | Production Capacity
7
ID: A
63. ANS: A
An economy is producing efficiently when it is producing the maximum amount of goods and services
that its production resources allow.
PTS: 3
DIF: L3
REF: A.15
OBJ: 1.3.2 Explain how production possibilities curves show efficiency, growth, and cost.
TOP: Economic Systems | Efficiency
64. ANS: C
An efficient economy uses resources in such a way as to maximize the output of goods and services.
PTS: 3
DIF: L3
REF: A.15
OBJ: 1.3.2 Explain how production possibilities curves show efficiency, growth, and cost.
TOP: Economic Choices | Efficiency
65. ANS: C
A natural disaster such as a flood could cause a region’s output to go down until the damage is repaired.
PTS: 3
DIF: L3
REF: A.15
OBJ: 1.3.1 Interpret a production possibilities curve.
TOP: Economic Choices | Underutilization
66. ANS: D
Underutilization is the use of fewer resources than an economy is capable of using.
PTS: 3
DIF: L3
REF: A.15
OBJ: 1.3.3 Explain why a country's production possibilities depend on its resources and technology.
TOP: Economic Choices | Efficiency
67. ANS: C
The law of increasing costs states that as production shifts from making one good or service to another,
more and more resources are needed to increase production of the second good or service.
PTS: 3
DIF: L3
REF: A.17
OBJ: 1.3.2 Explain how production possibilities curves show efficiency, growth, and cost.
TOP: Economic Systems | Law of Increasing Costs
68. ANS: A
According to the law of increasing costs, as production shifts from making one item to another, more
and more resources are necessary to increase production of the second item. Therefore, the opportunity
cost increases.
PTS: 3
DIF: L3
REF: A.17
OBJ: 1.3.2 Explain how production possibilities curves show efficiency, growth, and cost.
TOP: Economic Choices | Cost
69. ANS: B
The law of increasing costs states that as production shifts from making one item to another, more and
more resources are necessary to increase production of the second item. Therefore, the opportunity cost
increases.
PTS: 3
DIF: L3
REF: A.17
OBJ: 1.3.2 Explain how production possibilities curves show efficiency, growth, and cost.
TOP: Economic Choices | Cost
8
ID: A
70. ANS: C
Technology is the process used to create goods and services. It usually increases efficiency of workers.
PTS: 3
DIF: L3
REF: A.18
OBJ: 1.3.3 Explain why a country's production possibilities depend on its resources and technology.
TOP: Economic Choices | Technology
SHORT ANSWER
71. ANS:
Possible response: They take risks to start new businesses or develop new methods of doing things that
help boost the economy. They gather the factors of production.
PTS: 5
DIF: L3
REF: A.5
OBJ: 1.1.2 Describe what entrepreneurs do
NAT: 9.4| 14.0
STA: F.7
TOP: Economic Choices | Entrepreneurs
72. ANS:
When a government makes a “guns or butter” decision, it makes a choice between military or domestic
spending. In choosing, the government trades off one type of benefit for another.
PTS: 5
DIF: L3
REF: A.9
OBJ: 1.2.1 Explain why every decision involves trade-offs
STA: G.3
TOP: Economic Choices | Trade-Offs
73. ANS:
As you move along the production possibilities curve from the middle toward either end, you trade off
more and more for less and less added output. This increasing cost that is not proportional to the
increased output shows up on the graph as a curved line.
PTS: 7
DIF: L4
REF: A.13
OBJ: 1.3.2 Explain how production possibilities curves show efficiency, growth, and cost.
TOP: Economic Choices | Production Possibilities
74. ANS:
No. A production possibilities curve is a snapshot. An economy could be maximizing its production or
output of goods and services at a point in time, but events can move the curve in either direction over
time.
PTS: 7
DIF: L4
REF: A.15
OBJ: 1.3.2 Explain how production possibilities curves show efficiency, growth, and cost.
TOP: Economic Choices | Efficiency
75. ANS:
A country can only produce as much as its resources will allow. Technology can help make production
more efficient.
PTS: 5
DIF: L3
REF: A.18
OBJ: 1.3.3 Explain why a country's production possibilities depend on its resources and technology.
TOP: Economic Choices | Resources
9