Econ Unit 1 Review

Which of the following causes a production possibilities frontier to shift to the right? a. the economy grows b. the economy shrinks c. the economy stagnates d. the economy destabilizes

a. the economy grows

Explain the reason some people more than others enjoy buying a lot of shoes a. they believe the marginal benefit of owning more shoes is greater than the marginal cost b. they believe the marginal cost of owning more shoes is greater than the marginal benefit c. they believe the marginal benefit of owning more an additional shoe decreases with each purchase d. they believe the marginal cost of owning an additional shoe increases with each purchase

a. they believe the marginal benefit of owning more shoes is greater than the marginal cost

According to the circular flow model of a market economy, firms buy factors of production from a. use these factors to produce goods and services b. sell factors of production c. sell free markets to households d. use these factors to eliminate competition

a. use these factors to produce goods and services

Why do individuals, businesses, and governments make trade-offs? a. to make more money b. because resources are limited c. because large groups of people cannot easily make decisions d. to promote their values

b. because resources are limited

How does innovation promote economic growth? a. by reinforcing traditional values in a society b. by introducing new goods and services that create new markets c. by ensuring people's freedom to make their own choices d. by rewarding the development of efficient technology

b. by introducing new goods and services that create new markets

To conduct a cost/benefit analysis, a sensible person would MOST LIKELY a. compare previous costs to previous benefits b. compare marginal costs to marginal benefits c. compare known costs to unknown benefits d. compare unknown costs to known benefits

b. compare marginal costs to marginal benefits

Why are entrepreneurs important to the economy? a. they desire profits b. they promote economic growth c. they have talent and imagination d. they are willing to take risks

b. they promote economic growth

A point on a production possibilities frontier represents a. a point at which an economy is using all resources most productively b. a point at which a nation is producing only one good or service c. a point of economic growth d. a point at which the economy is being underutilized

a. a point at which an economy is using all resources most productively

Which of these would be an alternative use for farmland? a. an amusement park b. farm machinery c. skilled labor d. cash

a. an amusement park

How is a society's economic system defined? a. by how it answers the three basic economic questions b. by the decisions it makes about who consumes goods and services c. by the resources it uses to produce goods and services d. by trade-offs it accepts in order to produce goods and services

a. by how it answers the three basic economic questions

In a free market system, the concept of consumer sovereignty means that a. consumers have the power to decide through their actions what goods and services get produced b. producers are in an ongoing struggle with consumers over control of the marketplace c. government must intervene to ensure fair competition between consumers and producers d. consumers are not bound to accept the positive incentives offered by producers

a. consumers have the power to decide through their actions what goods and services get produced

An economy that maximizes its scarce resources and can deliver the right goods in the right quantity to the right people at the right price has achieved which economic goal? a. efficiency b. freedom c. security d. equity

a. efficiency

Which basic economic goal is most easily achieved in a traditional economy? a. equity b. innovation c. growth d. efficiency

a. equity

To save money, Taylor decided not to go to a concert where her favorite musician was performing. What was the opportunity cost of that decision? a. having fun at the concert b. spending time at home c. having time to study d. having extra money

a. having fun at the concert

Which of the following is a benefit that a business is likely to attain from purchasing new equipment? a. increased productivity b. better entrepreneurial knowledge c. fewer natural resources required d. lower costs

a. increased productivity

What are economists referring to when they say "choosing is refusing"? a. opportunity cost b. "Guns or butter" c. marginal cost d. thinking at the margin

a. opportunity cost

Which of the following is true about scarcity? a. scarcity affects all societies b. scarcity exists only in poor countries c. Scarce goods lead to lower prices d. scarcity of resources can be eliminated using sound economic policies

a. scarcity affects all societies

"the question remains: How many guns are necessary to maintain a high level of security for the U.S., and how much butter can the nation afford without hurting guns and vice versa?" - David Briceno The Union in the quotation above, "butter" refers to a. social welfare spending b. agricultural spending c. commercial spending d. defense spending

a. social welfare spending

An opportunity cost is a. the best alternative that is given up when a decision is made b. the worst alternative that is given up when a decision is made c. a choice that is made when no alternative is very good d. the cost of making decisions related to producing goods

a. the best alternative that is given up when a decision is made

the points on a production possibilities frontier all represent a. the efficient use of resources b. the cost of using resources c. underutilization of resources d. different types of resources

a. the efficient use of resources

Which economic goal reflects the desire of individuals to make their own choices about owning property or becoming entrepreneurs? a. efficiency b. freedom c. security d. equity

b. freedom

Someone taking a course in Web design is affecting what factor of production? a. entrepreneurship b. human capital c. land d. physical capital

b. human capital

What role does competition among producers play in a free market? a. it allows firms to produce what consumers want while increasing prices b. it causes firms to produce what consumers want while moderating prices c. it encourages firms to produce goods consumers would never demand on their own d. it forces consumers to pay high prices for what they want

b. it causes firms to produce what consumers want while moderating prices

Why is there scarcity even in an affluent country like the United States? a. entrepreneurs are scarce and companies need leaders b. resources are limited but wants are unlimited c. some people are poor while others are wealthy d. wants are limited but needs are unlimited

b. resources are limited but wants are unlimited

In which of these situations would a manufacturer decide to produce more units? a. the marginal cost is greater than the marginal benefit b. the marginal cost is less than the marginal benefit c. the marginal benefit is less than the marginal cost d. the marginal benefit is equal to the marginal cost

b. the marginal cost is less than the marginal benefit

How do self-interest and competition affect the free market? a. they work together to keep prices high b. they work together to regulate supply, demand, and prices c. they represent the opposing interests of consumers and producers d. they help level the playing field between efficient and inefficient producers

b. they work together to regulate supply, demand, and prices

Because of scarcity, every decision involves a a. cost/benefit analysis b. trade-off c. marginal cost d. marginal benefit

b. trade-off

Why does a free market economy result in the availability of a wide variety of goods and services? a. because consumers have incentives to meet producers' desires b. because markets reward producers who can produce a large variety of products c. because producers have incentives to meet consumers' desires for variety d. because the government tells producers what to make

c. because producers have incentives to meet consumers' desires for variety

A person is considered an entrepreneur because she a. has earned millions of dollars b. has many employees who work for her c. combined resources to create new products d. was a woman who succeeded in a male dominated industry

c. combined resources to create new products

Key advantages of free market economic systems include a. rising prices, specialization, negative incentives, and multiple markets b. online markets, producer sovereignty, self-interested consumers, and low prices c. economic efficiency, economic freedom, economic growth, and variety of goods d. positive incentives, negative incentives, specialized consumers, and efficient labor

c. economic efficiency, economic freedom, economic growth, and variety of goods

Drawing a production possibilities curve helps a country's economists determine a. which goods the country can produce b. which resources should be used to produce goods c. how the production of one good affects the production of another d. how many factories and how much farmland the country should have

c. how the production of one good affects the production of another

Why are more technology companies based in the San Francisco Bay Area than in any other part of the country? a. the production possibilities frontier has shifted to the left elsewhere b. other areas are underutilizing their resources c. its resources are best suited to produce high-tech goods d. the economy is weaker in other areas of the country

c. its resources are best suited to produce high-tech goods

A sales clerk represents which factor of production? a. entrepreneur b. capital c. labor d. land

c. labor

What are the three factors of production? a. needs, wants, choices b. workers, management, entrepreneurs c. land, labor, capital d. human capital, physical capital, intellectual capital

c. land, labor, capital

A basketball coach is performing a cost/benefit analysis in order to determine if more hours of practice would help the team score more points. The coach's action is an example of a. individual trade-offs b. opportunity cost c. marginal thinking d. marginal benefit

c. marginal thinking

Which of the following is an example of scarcity rather than shortage? a. extremely hot temperatures lead to increased air-conditioner use and power outages b. there aren't enough software engineers to fill all the job openings in Silicon Valley c. newly discovered Van Gogh paintings are put up for auction and sell for millions d. during the holiday season, an outfitter runs out of skis

c. newly discovered Van Gogh paintings are put up for auction and sell for millions

Which statement best describes opportunity cost? a. opportunity cost is the value in dollars of a trade-off b. opportunity cost is the best choice in a decision c. opportunity cost is the best alternative decision d. opportunity cost is all the alternatives not chosen in a decision

c. opportunity cost is the best alternative decision

Which of the following courses of action makes the MOST sense in today's world for manual laborers who have been replaced by robots? a.look for work in farming, hunting, or fishing b. write to members of Congress to complain about their former employer c. seek training in the latest technology related to a type of work they enjoy d. open their own manufacturing plant that employs manual laborers, not robots

c. seek training in the latest technology related to a type of work they enjoy

Which of the following is an explanation of what Adam Smith called the "invisible hand" of the marketplace? a. advertising causes consumers to desire products that they otherwise would not want b. government regulations influence the decisions of consumers and producers in the market c. self- interest, competition, and incentives promote smoothly running markets d. unforeseen events disturb supplies of goods and services and affect prices in the marketplace

c. self- interest, competition, and incentives promote smoothly running markets

What is the term used to describe a temporary low supply of a good or service? a. need b. scarcity c. shortage. d. want

c. shortage

Why do markets exist? a. to allow people to earn money b. to concentrate the productive efforts of individuals c. to allow people to exchange goods and services d. to increase profits for business owners

c. to allow people to exchange goods and services

The phrase "guns or butter" expresses the idea that a. individuals, businesses, and governments all face trade-offs b. factor resources are limited c. government decisions involve opportunity cost d. government decisions involve trade-offs between military and domestic needs

d. government decisions involve trade-offs between military and domestic needs

A country has two main products: hats and grapes. The country decides to start making more and more hats and fewer and fewer grapes. Why does the opportunity cost of making hats increase as more and more hats are produced? a. grapes can be grown more efficiently than hats can be manufactured b. the best resources for producing grapes are least suited to making hats c. increasing the country's production of hats maximizes its output of goods and services d. producing more hats and fewer grapes shifts the production possibilities curve to the left

d. producing more hats and fewer grapes shifts the production possibilities curve to the left

In the debate over guns vs. butter, which of the following is an example of butter? a. military planes b. commercial planes c. private factories d. schools

d. schools

Production possibilities curves are important tools for a. demonstrating which products will sell better than others b. comparing costs and profits of producing goods and services c. determining the underutilization of an economy's resources d. showing ways to use an economy's productive resources

d. showing ways to use an economy's productive resources

Which of the following describes the benefits of specialization in a free market? a. specialization leads to higher prices b. specialization leads to decreased competition among producers c. specialization leads to lower overall output d. specialization leads to efficient use of capital, land, and labor

d. specialization leads to efficient use of capital, land, and labor

In 1991, for a short time, Iraq invaded Kuwait and seized its oil fields. During that time, what impact, if any, did the invasion have on Iraq's production possibilities curve? a. the production possibilities frontier remained stable b. the production possibilities frontier reached its maximum c. the production possibilities frontier shifted to the left d. the production possibilities frontier shifted to the right

d. the production possibilities frontier shifted to the right

What are the three basic economic questions all societies must answer? a. Who gets to produce goods and services, who gets to consume them, and who collects the profits? b. why should goods and services be produced, when should they be produced, and how should they be produced? c. where should goods and services be produced, who should sell them, and who should get the profits? d. what goods and services should be produced, how should they be produced, and who will consume them?

d. what goods and services should be produced, how should they be produced, and who will consume them?

The distribution of income received in the form of rent, wages, or interest is the main factor that determines a. how goods and services are produced b. where goods and services are consumed c. who produces goods and services d. who consumes goods and services

d. who consumes goods and services