Module 1 & 2 Economics Review

3. The production possibilities table below shows the hypothetical relationship between the production of capital goods and consumer goods in an economy. What is the opportunity cost of producing the third unit of capital goods? ****

6 units of consumer goods

12. In the circular flow model, households:

buy products and sell resources

19. The basic economic problem is essentially one of deciding how to make the best use of:

limited resources to satisfy unlimited economic wants

2. The primary goal of economic activities is to: ****

make the most efficient use of scarce productive resources

6. The term scarcity in economics can refer to the fact that: ****

no country can produce enough products to satisfy everybody's economic wants.

Points C,D,E, and H are all located on the production possibility curve: come back**

possible combinations of food and clothing

7. In the circular economic flow diagram, households: come back to come back**

receive money income and supply resources.

17. The simple circular flow model shows that workers, entrepreneurs, and the owners of land and capital offer their services through:

resource markets

4. Markets in which firms sell their outputs of goods and services are called:

resource markets

5. The purpose of the ceteris paribus assumption used in economic analysis is to: ****

restrict the analysis to the effect of a single economic factor

1. Opportunity cost is best defined as:

the value of the best foregone alternative.

Which points of a production possibilities curve indicate unemployed resources?

Points A & E because the are inside the curve.

20. Which fundamental question about a competitive market system primarily focuses on technological progress and capital accumulation?

How will the system promote progress?

9. Consumer sovereignty and "dollar votes" are most related to which fundamental question about a competitive market system? **

What goods and services will be produced?

14. A basic assumption used in most economic theories is that: ****

all other things remain the same

18. The opportunity cost of a new national park is the :

alternative uses for the land and funding for the park

10. Along a production possibilities curve, and increase in the production of one type of good can be accomplished only by:

decreasing the production of the other type of good

16. Economics can best be described as the study of:

how people, institutions, and society make choices under conditions of scarcity

15. The circular flow model:

illustrates the interdependence of businesses and consumers.

8. As a consequence of the condition of scarcity:

individuals and communities have to make choices from among alternatives