Econ Chapter 1 Study Guide

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.

A

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.

A

The law of increasing costs means that when an economy increases the production of one item the a. opportunity cost goes up. b. actual cost of making the item goes down. c. actual cost goes up but the opportunity cost goes down. d. production costs will increase also.

A

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.

A

The physical capital used by a woodworker to make furniture would include a. saws and drills. b. trees and oil. c. hard work and time. d. a workshop and money.

A

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.

A

What line on a production possibilities curve shows the amounts of goods produced? a. production possibilities frontier b. opportunity cost line c. utilization of resources d. maximum possible production line

A

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.

B

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.

B

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.

B

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

B

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.

B

What happens when workers are laid off? a. decreased opportunity cost b. underutilization c. increased opportunity cost d. efficiency

B

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.

C

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.

C

An efficient economy is one that a. creates new resources through ongoing research and development. b. conserves its resources through underutilization. c. uses its resources to make the most goods and services. d. does not face the problem of scarcity.

C

The economic concept of guns or butter means that a. a person can spend money on either sports equipment or food. b. a company must decide whether to manufacture guns or butter. c. a government must decide to produce more or less military or consumer goods. d. a government can buy unlimited military and civilian goods if it is rich enough.

C

The future production possibilities frontier on this graph shows what might happen if a. resources were underutilized. b. there was a shortage of paving equipment. c. the cost of building materials went down. d. more resources went to building roads.

C

The law of increasing costs means that as production shifts from one item to another, a. the cost of production gets cheaper and cheaper. b. the cost of producing an item stays the same no matter how many are produced. c. more and more resources are necessary to increase production of the second item. d. the land costs of increasing production rise much more steeply than do the labor costs.

C

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

C

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.

C

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

C

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.

D

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.

D

What happens as production of one item switches to the production of another item? a. The cost of production decreases. b. Land costs rise more than labor costs. c. The cost of production stays the same. d. More resources are needed.

D

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.

D

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

D