Unit 1 Econ Test

Which of the following is a characteristic of a market economy?

A profit motive makes individuals more willing to accept innovation.

If Miryam chose to spend an afternoon studying instead of earning money at her job, which value represents her lost income?

opportunity cost

Use the information to answer the question. A chemical factory saves money by illegally dumping waste. Which BEST describes how this activity hurts a free enterprise system?

C. It creates an unfair advantage over other factories.

Use the information below to answer the question. Which idea BEST explains this news headline?

C. Limited capital resources require producers to weigh the benefits of alternatives.

Which economic term describes the trade-off that would occur from extracting natural gas from an area instead of protecting existing endangered wildlife in that area?

opportunity cost

Read the passage. Then answer the question that follows. Kamari works at Lexi's Lawn Decor. He specializes in carving large statues of wildlife out of wood. Each statue takes Kamari about three weeks to complete because he carves each one by hand. The owner of the lawn store, Lexi, is worried because the store is not making enough money. Kamari's statues are some of the most popular products at the store, and are usually sold within hours of being completed. What can Lexi do to increase Kamari's productivity and make the store more profitable?

she can buy power tools so Kamari can carve faster.

Read the text from Adam Smith's The Wealth of Nations. Then answer the question that follows. To take an example, therefore, from a very trifling manufacture . . . the trade of the pin-maker; a workman not educated to this business . . . nor acquainted with the use of the machinery employed in it . . . could scarce, perhaps, with his utmost industry, make one pin in a day, and certainly could not make twenty. But in the way in which this business is now carried on, not only the whole work is a peculiar trade, but it is divided into a number of branches, of which the greater part are likewise peculiar trades.In the excerpt, Smith is referring to the benefits of which of the following economic practices? Select all that apply. A. inflation B. incentives C. specialization D. division of labor E. balance of trade

specialization and division of labor

Read the text from Adam Smith's The Wealth of Nations. Then answer the question that follows. To take an example, therefore, from a very trifling manufacture . . . the trade of the pin-maker; a workman not educated to this business . . . nor acquainted with the use of the machinery employed in it . . . could scarce, perhaps, with his utmost industry, make one pin in a day, and certainly could not make twenty. But in the way in which this business is now carried on, not only the whole work is a peculiar trade, but it is divided into a number of branches, of which the greater part are likewise peculiar trades. In the excerpt, Smith is referring to the benefits of which economic practice?

specialization?

Entrepreneurs seeking to start a new business face risk because of which of the following?

the amount of personal time and money that is required

Jorah is a sword collector. He often travels to conventions and fairs to buy rare swords for his collection, which can be expensive. If Jorah knows that a vendor at a convention in Oldtown will be selling a rare sword he wants, Jorah will travel to the convention if

the marginal benefit of buying the rare sword exceeds the marginal cost of traveling to the convention.

Economists say that scarcity is a "relative concept." This means that

the scarcity of resources can change if wants or amounts of available resources change.

Why does the U.S. government enforce antitrust laws?

to ensure competition in the marketplace

Use the list below to answer the question. • What to produce? • How to produce? • For whom to produce? Which BEST describes how these economic questions are answered in the United States?

by the interaction of buyers and sellers

In a pure free market economy, price

is the strongest allocative mechanism.

Use the information to answer the question. While financial incentives are effective in motivating both buyers and sellers in the marketplace, nonfinancial incentives are often more effective in encouraging employee creativity over time in the workplace. Based on this information, which incentive will MOST likely have a long-term impact on the creativity of the workforce?

lowered interest rates

No government has the assets to supply everything its citizens might want or need. What does this basic economic fact force governments to do?

make choices among goods and services currently on the market

Which answer choice correctly states the relationship between inputs, outputs, and changes in the level of productivity?

An increase in productivity results when more goods can be produced using the same amount of inputs.

Look at the graph. Then answer the question that follows. In which of the following scenarios would the production possibilities curve shift from A1 to A2?

Athens, GA, experiences a massive influx of businesses and laborers after a business report in a major newspaper mentions the city as a growing economic power in the state.

Which of the following is the distinguishing advantage of a controlled economy?

B. It promotes the efficient use of resources.

Look at the production possibilities frontier for cars and computers. Then answer the question that follows. In which situation is the opportunity cost of producing additional computers the lowest?

Computer production is increased from point A to point B

Incentives are benefits that motivate people to take certain actions. In economic terms, this is usually related to the actions of buyers and sellers in response to activity in the marketplace. Based on this information, which answer choice illustrates an incentive for sellers?

D. If demand for a particular good is rising, an incentive is created for sellers to lower the price of that good.

Which of the following BEST illustrates the economic concept of scarcity?

Dan wants a bag of chips and a cola. Each costs one dollar. Dan has just $1.50.

Why does the marginal benefit of a diamond nearly always exceed the marginal benefit of a bottle of water?

Diamonds are much more scarce than water, so the marginal benefit of diamonds are much higher.

Read the passage and then answer the question that follows. From the time he was a little boy, Jamal dreamed of owning his own land. He graduated from college, got a good job, and saved up enough money to buy 100 acres of rural land. He picked out the perfect spot on the land to build a little home and hired a plumbing company to come out and dig a well. As the plumbers were digging, they struck oil! Jamal could not believe his luck, but the owner of the plumbing company claimed that the oil belonged to him since his workers found it. Because the United States has a market economy, which of the following statements is correct?

Jamal can expect the government to enforce his property rights.

Use the table below to answer the question. Production Costs Number of Units of Output Total Cost (dollars) ? 0 100 0 1 180 80 2 250 70 3 310 60 4 360 50 Which column heading should replace the question mark?

Marginal Cost

The additional positive value one receives from undertaking one more unit of an action is

Marginal benefit

Which of the following terms can be defined as the opportunity cost of producing one additional unit of a good or service?

Marginal cost

If producing one more unit of good would cause a firm to earn a smaller profit, what would the firm do if it made a rational decision?

Not produce the additional unit.

Which phrase BEST completes this diagram? / \ ??????? making investments and taking risks

Raising capital through public ownership

Which factor BEST completes the below list? Factors Affecting Wage Differences Among Jobs • Levels of education and training required • Cost of living in different geographic locations • Value of the goods and services produced • ?

Supply and demand for labor

In the past year, many employees have left Company A to work at Company B. Hiring Packages Company A Company B End-of-year bonus Two additional sick days $200 Employee of the Month Award On-site child care Opportunity for overtime work On-site fitness center Which of the following BEST explains this trend?

The employees value non-monetary incentives.

A market economy is an economic system in which major economic decisions, such as those involving the production and distribution of goods, are dictated by supply and demand. Why might political freedom thrive in a market economy?

The government provides most social services, which makes people more likely to trust the government.???

Which change would LEAST impact a worker's productivity?

The number of workers employed increases.

Use the information below to answer the question. Business Data for Westside Warehousing, Inc. • Business Opened: March 2009 • Total Investment: $1.2 million • Total Revenue: $310,000 • Net Loss: $890,000 • Business Closed: August 2010 Which statement BEST explains this investment?

The opportunity for profit motivates financial risks.

Why are education and the transportation infrastructure provided by US state and federal governments rather than the private sector?

They are needed by all people and may not be affordable if produced by the private sector.

Which of the following is NOT true of incentives's role in a free market economy?

They may lead to both higher production and higher consumption.

Which statement about voluntary trade is true?

Voluntary trade involves two parties, both of which agree freely to making a trade.

When an automobile manufacturer builds 200,000 units of its top selling model, the company is responding mainly to which question?

What to produce?

Companies that invest in the new technologies associated with social media seek growth resulting from

a broader customer base

Assigning workers one task that is to be performed repeatedly is referred to as

a division of labor.

What is a capital resource?

a good used as a means of production

What are productive resources?

anything involved in the production of goods and services

In which economic system can entrepreneurship BEST thrive?

capitalism????

In some economies, the government makes all economic decisions regarding how to deal with issues of scarcity. This is called

command distribution.

Use the passage below to answer the question. David bought a used car from a local car dealership. Soon after David bought the car, it broke down. David took it to a repair shop. The mechanic told David the car had severe engine problems and had more mileage than the dealer had claimed. David tried to return the car to the dealership, but the owner refused to give David his money back. Which action would MOST likely result in David getting his money back?

contacting the Department of Revenue

Which outcome would MOST likely occur after a significant increase in the minimum wage?

greater productivity in labor-intensive industries

A new company employee is an example of which kind of productive resource?

human resource

Which of the following changes in supply and demand will lead a product to become more scarce?

increased demand, decreased supply