Economy: Chapter 1

Economics is the study of how people . . . calculate their income tax. choose from limited resources to meet their needs. respond to war and drought. gain knowledge and skills from study and experience.

choose from limited resources to meet their needs.

All the goods and services we produce are ____________ . expensive. scarce. recyclable. efficiently produced.

scarce.

The purpose of a production possibilities graph is to . . . show alternative ways to use an economy's resources. show how a factory can use its workers in different ways. give engineers a new way of deciding how to build manufacturing plants. tell farmers how many watermelons to plant.

show alternative ways to use an economy's resources.

Which is not a factor of production? a woman who makes a quilt the cotton cloth and thread used in the quilt the children whom the woman supports with her labor the wood frame on which the quilt is sewn

the children whom the woman supports with her labor

Giving up one alternative for another is called ____________ . underutilization. a trade-off. human capital. efficiency.

a trade-off.

Thinking at the margins means deciding about . . . maximizing goods and services. investing with borrowed money. adding or subtracting one additional unit of some resource. increasing or decreasing technical know-how.

adding or subtracting one additional unit of some resource.

Using resources in such a way as to maximize the production of goods and services is called ____________ . efficiency. underutilization. thinking at the margins. growth.

efficiency.

Each point on a production possibilities curve shows ____________ . efficient utilization of resources. underutilization of resources. the potential for future growth. the relationship of shortage to scarcity.

efficient utilization of resources.

The resources used to make goods and services are called ____________ . factors of production. the gross national product. the production possibilities frontier. opportunity costs.

factors of production.

Countries often have to choose between producing military or consumer goods, a trade-off economists call ____________ . export or import. a free market economy. farm goods or factory goods. guns or butter.

guns or butter.

Economists refer to land, labor, and capital as the factors of production. Land in this context refers to natural resources. Given this definition, which is not land? water oil forests highways

highways

The skills and knowledge gained by a worker through education and experience are ____________ . production possibilities. physical capital. human capital. entrepreneurial.

human capital.

A country's production possibilities will grow if it . . . produces more guns than butter. lowers its opportunity costs. makes more trade-offs. increases its resources.

increases its resources.

Scarcity always exists because . . . machines and people are inefficient. changes have occurred in global weather patterns. our needs and wants are not limited, but our resources are limited. there are more poor people than rich people.

our needs and wants are not limited, but our resources are limited.

Shortages occur when . . . many people are unemployed. interest rates go up. people have trouble supplying the goods and services at current prices. the United States imports more than it exports.

people have trouble supplying the goods and services at current prices.

Entrepreneurs are people who . . . help settle labor disputes. work on the floor of the stock exchange. put together land, labor, and capital to create new businesses. produce all of a country's guns and butter.

put together land, labor, and capital to create new businesses.

Which is not an example of capital at a book printing company? the office building where the printing company is located the paper on which books are printed the oil used to heat the factory the men and women who work in the accounting office

the office building where the printing company is located

Which is not capital? the paint used by a housepainter the computer used by an accountant the person whose photograph is snapped by the candid photographer the state house where state government is conducted

the person whose photograph is snapped by the candid photographer

If Karen gets up early and studies three hours for her test, she likely is to get an A. If she sleeps in, she probably will get a C. What is the opportunity cost of sleeping in? three additional hours of sleep an A a C three additional hours of study

three additional hours of study

Which decision cannot be made at the margin? whether to spend the day on Saturday watching movies or going hiking whether to spend your two-week vacation at the beach or in town whether to order a pepperoni or a cheese pizza whether to move from Boston to Chicago

whether to spend your two-week vacation at the beach or in town