Economics
Unit I Test
Quiz Questions for
Review
• A factor of production that
includes natural resources
Land
• A factor of production that includes the
tools, equipment, and factories used in the
production of goods and services
Capital
• A factor of production that includes people
and their efforts, abilities and skills
Labor
• Factor of production that involves risk
takers in search of profits
Entrepreneurship
• Condition that arises because society does
not have enough resources to produce all
the things people would like to have
Scarcity
• An alternative choice
Trade-off
• Diagram representing various
combinations of goods and services an
economy can produce when all resources
are fully employed
Production Possibilities
Frontier
• The cost of the next best alternative when a
choice is made
Opportunity Cost
• Location or other mechanism that allows
buyers and sellers to exchange economic
products
Market
• Basic requirement for survival
Needs
• Works that are performed for someone
Services
• Which of the following is not a basic economic
question?
a. What to produce
b. When to produce
c. For whom to produce
d. How to produce
• What is the fundamental problem of economics?
a. Scarcity
b. Capital
c. The factors of production
d. Labor
• Which of the following is not a capital good?
a.
b.
c.
d.
A bulldozer at a construction site
A cash register at a clothing store
An oven at a bakery
A television for sale at an appliance store
• Which of the following best describes the relationship
between trade-offs and opportunity costs?
a. Opportunity costs are incurred when trade-offs
are made
b. Opportunity costs are the opposite of trade-offs
c. Trade-offs lower the opportunity costs of an
economic decision
d. Trade-offs occur when there are no opportunity
cost
• Imagine you decide to purchase a $50 iPod
charger for your car. Which of the following is an
opportunity cost of your decision?
a. The time you spent deciding to spend your
money on the iPod charger
b. Something else you wanted that could have
been bought with your $50
c. $50 in cash
d. The time spent making the purchase and the
tax paid on the bill
• Productivity goes up whenever
a. More resources are discovered
b. The same output is produced with fewer
inputs
c. There is movement along the production
possibilities frontier
d. The product gains additional utility
• One of Adam Smith’s most important
contributions dealt with competition and the
concept of
a. Welfare capitalism
b. The invisible hand
c. Unintended consequences
d. Conspicuous consumption
• If you are making decisions at the margin, you
are
a. Selecting either all or nothing at all
b. Confused about what to do
c. Comparing the extra benefit to the extra cost
d. All of the above
• Which of the following is an example of an
incentive?
a. Money
b. A speeding ticket
c. Extra credit grades
d. All of the above
• The study of economics is important because it
enables us to
a. Memorize past events
b. Predict future economic needs
c. Become better decision makers
d. Become good shoppers
• For a consumer, the most important reason for a
purchase is
a. Price
b. Color
c. Entertainment value
d. Utility
• Which statement is the best example of thinking
at the margin?
a. John has six shirts and is trying to decide
whether to buy a seventh
b. Mary observes that the cost of shoes is higher
than last year
c. David decides to volunteer this summer
instead of working for pay
d. Jane wants to buy a car but decides she can’t
afford the insurance
• What is the best title for the following list:
innovator, strategist, risk-taker
a. Capitalist
b. Entrepreneur
c. Investor
d. Laborer
• What does it mean to maximize utility?
a. To become as efficient as possible
b. To gain the most satisfaction possible
c. To strengthen a national infrastructure
d. To strengthen the skills of the workforce
• Which scenario best illustrates the law of
diminishing marginal utility?
a. A car breaks down more as it gets older
b. A collector of china figurines is eager to get a
new one
c. Someone who doesn’t listen to music does not
care about getting a new iPod
d. A new toy is less exciting to a child with
many toys than to a child with just a few
• Toilet paper truck drivers go on strike.
Delivery of toilet paper to Giant is nearly
stopped.
• Scarcity or shortage?
Shortage
• A newly discovered Leonardo Da Vinci
painting is discovered. It is expected to sell
for $20 million.
• Scarcity or shortage?
Scarcity
• Nursing schools are not graduating enough
qualified nurses to fill open positions at
many hospitals.
• Scarcity or shortage?
Shortage
• I want an iPhone 6 but don’t have enough
money to get one.
• Scarcity or shortage?
Shortage
• There just aren’t enough hours in a day to
complete all the work I have to do!
• Scarcity or shortage?
Scarcity
• Which factor of production is it?
• Tractor
Capital
• Which factor of production is it?
• Pizza Delivery Guy
Labor
• Which factor of production is it?
• A forest
Land
• Which factor of production is it?
• Electric car inventor
Entrepreneurship
• Which factor of production is it?
• A savings bond
Capital (financial)
• Suppose Country A produces 3,000 bicycles. Estimate the
maximum number of pairs of shoes it can produce with current
resources.
40,000 pairs of shoes
• Estimate the opportunity cost of increasing shoe production
from Point A by 10,000 pairs. Loss of 100-250 bicycles
• Estimate the opportunity cost of increasing shoe production
from Point B by 10,000 pairs Loss of 2,000 bicycles
D.
C.
• Government data show that the country is currently producing at the
level of 2,000 bicycles and 30,000 pairs of shoes. Mark that point on
the graph and label it C. Evaluate the efficiency of the economy at
Inefficient use of resources
this point.
• Suppose you are an adviser for economic development. Your nation
is currently employing all of its labor and resources. The govt wants
to increase production to 4,000 bicycles and 40,000 pairs of shoes
per year. Mark that point D. Can a govt do that? Not possible at the moment
• Society’s way of coordinating the
production and consumption of goods
and services
Economic System
• People have to rely on others for most
of their goods and services they want
Economic
Interdependence
• The condition that exists when one
party can produce a good or service
using fewer resources than another
Absolute Advantage
• Development of skills or knowledge,
becoming an expert in a particular
activity
Specialization
• The direct exchange of goods and
services without money
Barter
• Income earned from sale or rent of a
factor of production
Factor Payment
• The condition where one party can
produce a good or service at a lower
opportunity cost than another
Comparative Advantage
• The fairness with which an economy
distributes it resources and wealth
Economic Equity
• Economic system in which the means
of production are mostly privately
owned and operated for profit
Free enterprise system
• Economic system where decisions are
made by the government
Command economy
• An economic system in which
economic decisions are left up to
individual producers and consumers
Market economy
• An economic system in which both
the government and individuals play
important roles in production and
consumption
Mixed economy
• The allocation of separate tasks to
different people
Division of Labor
• An economic system in which
decisions about production and
consumption are based on custom and
tradition
Traditional economy
• Willingly trading one item for another
in which both parties expect to gain
Voluntary exchange
• The three fundamental economic questions are
what to produce,
__________________________to produce, and
for whom to produce.
a. Why
b. How
c. When
d. Where
• Which of these economic goals is most important
in a traditional economy?
a. Growth
b. Stability
c. Freedom
d. Efficiency
• Which kind of economy is most common today?
a. Command
b. Market
c. Mixed
d. Traditional
• A variety of goods and services is characteristic of
a. A traditional economy
b. A market economy
c. A command economy
d. All economic systems
• The American economic system can be
described as having
a. A command economy
b. Quota system
c. Traditional system
d. Free enterprise system
• Which of the following is NOT considered an
economic goal
a. Economic efficiency
b. Price stability
c. Economic growth
d. Entrepreneurship
• Under capitalism, an incentive to work,
save, and invest is due to
a. The Social Security system
b. Voluntary exchange
c. Consumer Sovereignty
d. The ability to own private property
• In which of the following economic systems is
the “factors of production” privately owned?
a.
b.
c.
d.
Mixed
Command
Traditional
Communist
• In a market economy, what is the government’s
role?
a.
b.
c.
d.
Decides what goods are manufactured
Owns and operates major industries
Encourage competition among businesses
Sets prices on goods and services
• Which is the best example of a transfer payment?
a. Social Security Check
b. Police officer’s paycheck
c. Fee for renting a park facility
d. Moving expense reimbursement
• There is a country in which the government owns
all the industries, businesses, and farms. The
government sets production and wages. The
government provides all education, childcare,
and medical care for all the people. What type of
economy does this describe?
a. Traditional
b. Command
c. Mixed
d. Market
• Which is the best example of specialization?
a. A surf shop lowers the price on swimsuits.
b. A dry cleaner spends extra time on grease
spots.
c. An assistant in a tailoring shop only replaces
zippers.
d. An online clothing outlet offers customized
monograms.
• In a voluntary exchange, why do people give
something up?
a. to increase their self-sufficiency
b. to get something they want more
c. to allocate scarce resources fairly
d. to comply with state requirements
• By using the distribution of labor, people benefit
because
a. it increases how fast things are created
b. it increases the quality of things created
c. it increases peoples standard of living
d. all of the above are correct
• How is it that specialization increases trade?
a. By making people only able to do one thing,
therefore needing to trade for others
b. By making people able to make multiple
things, then needing to trade them away
c. By making people desire all the goods in the
world that they can make themselves
d. By making people specializing in only
wanting to trade one product
• Which of the following is not a strength of a
market economy?
a. It can adjust to change over time
b. It gives producers and consumers a great deal
of freedom
c. It has decentralized decision-making
d. It supports all of its people equally
• All of the following are weaknesses of a command
economy except that it
a. Requires a large decision-making bureaucracy
b. Provides few incentives for people to work
hard
c. Lacks the flexibility to deal with minor
problems
d. Can change direction drastically in a short
time
• Which of the following is likely to occur in a
traditional economy
a. A new factory opens to produce computer
chips
b. A father teaches his son how to clear land for
crops
c. A new clothing fashion increases the profits
of textile mills
d. A large government agency decides to build
more warships
• What type of economy collapsed in the
communist bloc countries of Eastern Europe and
the Soviet Union?
a. A traditional economy
b. A command economy
c. A market economy
d. A free enterprise economy
• Who would you most likely find participating in
a market economy?
a. A government official deciding how much
wheat to plant this season
b. A teenage girl deciding how to spend the
extra money she earned working overtime
c. A hunter deciding where to hunt to provide
his family with a meal that night
d. A worker deciding to leave his job early
because the production quota has been met
• Which of the following is not a major economic
goal of the U.S.?
a. Economic interdependence
b. Economic security
c. Economic growth
d. Economic efficiency
• Economic goals are important because they
a. Tell us what and how to produce
b. Answer the for whom to produce question
c. Serve as benchmarks that help people
determine if an economic system meets their
needs
d. Tell the government what kinds of
regulations are needed
• Which is an example of economic growth?
a. When a new ball bearing plant opens, 1,500
jobs are created
b. The price of vegetables increase sharply in
the spring
c. An employer is fined for refusing to hire
women to fill new job openings
d. A man decides to quit working as a waiter
and begin a career in marketing
• Why is economic growth an important goal of the
United States?
a. Americans have a strong sense of fairness
b. Economic growth leads to price stability
c. Americans have discovered that economic
growth is the only way to achieve economic
equity
d. Economic growth is needed to better satisfy
the wants and needs of a growing population
• What are the origins of the seven major economic
goals of the U.S.?
a. An official list prepared by the federal
government
b. The results of elections
c. A combination of the beliefs and statements
of American consumers, business people, and
government officials
d. Passages from the major documents of
America’s history, including the Constitution