Economics
Test 1
Fundamental Economic Concepts
DIRECTIONS: This is a “take-home”, open book (Economics: Principles and Practices), and open notes
test.
To best assess learning, retention, and real life application, students are strongly encouraged to
complete this test individually.
The test is due Friday, September 6, 2013 BY 2:00 p.m. Tests will not be accepted after the
deadline. Students who miss the deadline will earn a ZERO (0) on the test.
Meeting deadlines is an expectation in the workforce. Students are given ample notice of this
deadline and expected to manage their time throughout the week to meet the deadline. If a student is
absent on the day of the deadline, other arrangements must be made to ensure the test is turned in.
Students may have a parent/guardian/mentor deliver the test or email their test to the instructor by
the given deadline.
Good test taking skills require students to thoroughly read through the test, note points awarded for
each question, clarify questions with the teacher, and proofread answers. It is important to ensure
all parts of the question are completely answered.
Note: “Fill in the blank” questions are divided into three sections. Word banks are provided.
For the purposes of student learning and useful teacher feedback, the instructor retains the right to
evaluate, grade and count (for the semester grade) all or part of this assessment.
Type-written, answer-highlighted, test responses are strongly preferred.
(Total points available to earn: 131)
Short Answer (Total points: 31)
1. List the three (3) basic economic questions every society must answer. (3 pts)
1)
2)
3)
2. List the four (4) elements of economics. (4 pts)
1)
2)
3)
4)
3. How does scarcity affect your life? (2 pts)
Provide one example of an item you have had to do without because of limited resources.
Explain how you adjusted to this situation. (For example, were you able to substitute other
items for those you could not have?)
Example:
Explanation:
4. Give one (1) example of a supposedly “free” item that you see every day. Explain why the item is
not really free by stating who or what actually pays for it. (2 pts.)
5. What is the difference between a durable and a non-durable good? (1 pt)
6. Explain why the study of economics is important to the American free enterprise system. (1 pt)
7. Identify two (2) advantages and two disadvantages of a market economy. (4 pts)
Advantages
1)
2)
Disadvantages
1)
2)
8. Identify one (1) advantage and one (1) disadvantage of a command economy. (2 pts)
Advantage:
Disadvantage:
9. Describe the role of the entrepreneur. (1 pt)
10. Define microeconomics. (1 pt)
11. Define macroeconomics. (1 pt)
12. Explain a personal opportunity cost. (1 pt)
13. Why do consumers have to make trade-offs? ( 1 pt)
14. Identify a minimum of four (4) roles of government in a free enterprise economy. (4 pts)
1)
2)
3)
4)
15. List three (3) supplies (goods and services) that the State of Colorado has and offers the rest of
America. (3 pts)
1)
2)
3)
Fill in the Blank #1 (each blank worth 1 pt; total points: 25)
1. The economic way of thinking involves simplification with model building, ______________________ to
evaluate alternatives and incremental decision-making.
2. Consumers use ___________________ and _____________________ to satisfy their _______________________ and
_______________________.
3. ___________________link individuals and businesses in the circular flow of economic activity.
4. _______________________and investments in _________________________help economic growth; investments
in human capital are among the most profitable of all investments.
5. The basic economic problem of ________________ is due to the combination of people’s seemingly
unlimited wants and relative scarce resources.
6. The study of economics helps people understand how a _______________________ makes the what, how
and for whom decisions.
Fill in the Blank #2
7. Every society has a (n) ___________________, or way of allocating goods and services to satisfy the
what, how and for whom questions.
8. The entrepreneur is the individual who organizes land, capital, and labor for production in hopes
of earning a _______________________, which is the driving force in capitalism.
9. In a ______________________, the major economic decisions are made according to custom and habit.
Life in these economies tends to be stable, predictable and continuous.
10. _____________________ states that the consumer is the one who decides what goods and services to
produce.
Fill in the Blank #3
11. _____________________ is a competitive economic system in which private citizens own the factors of
production.
12. A _______________________ is a large firm that has at least four different businesses, none of which is
responsible for the majority of sales.
13. _________________________ function like a business but focus on furthering a cause or operating for the
welfare of their members.
14. _________________________ are small, easy-to-manage enterprises owned by one person.
15. Businesses can also expand through ____________________. This usually happens when the firms
want to become bigger, more efficient, acquire a new product, catch up to or eliminate a competitor,
or change its corporate identify.
16. Shareholders have ________________________ and are not held responsible for the actions or debts of
corporations.
17. ____________________________work to improve the working conditions, skill levels, and public
perceptions of their profession.
18. A ____________________________ can be an ordinary corporation or a conglomerate, but it has
manufacturing or service operations in several different countries. These organizations introduce
new technology, generate jobs, and produce tax revenues for host countries.
19. Businesses can grow by reinvesting their _________________ in plant, equipment and new
technologies.
20. __________________________ are owned by _________________________ who vote to elect the board of
directors.
Making Connections (total points: 75)
1. Identify two economic ideas you have learned that directly apply to your life.
First, identify the term or concept by name. Second, explain how it impacts your life. (25 pts)
1) Concept/Term:
Application to life:
2) Concept/Term:
Application to life:
2. Discuss an economic idea with your parent, guardian, coach or other adult mentor.
Name the person and the relationship you share with this person.
Summarize your discussion with the mentor in paragraph form (minimum of five complete
sentences).
Reflect on your conversation and write two questions you have about economics as a result of the
discussion. (25 pts)
Name of mentor:
Summary of discussion (minimum of five complete sentences)
Questions, as a result of the conversation
1)
2)
3. Research a current economic issue. (25 pts)
Print and attach the article and
write an MLA citation for the article.
Reflect and
write your opinion about the issue. Reflection must be a minimum of one paragraph (five sentences).
Word Banks for Test 1
Fundamental Economic Concepts
Fill in the Blank #1 Word Bank
Cost-benefit analysis
Free enterprise economy
Goods
Human capital
Markets
Needs
Productivity
Scarcity
Services
Wants
Fill in the Blank #2 Word Bank
Capitalism
Consumer sovereignty
Economy
Profit
Traditional economy
Fill in the Blank #3 Word Bank
Cash flows
Conglomerate
Corporations
Limited liability
Nonprofit organizations
Mergers
Multinational
Professional associations
Shareholders
Sole proprietorships