Unit 7 Civics Review

Unit 7 Civics Review

Unit Review

Multiple Choice

Robert moved from an apartment building to a house. He now has to decide between maintaining his own yard or hiring a professional landscaping service. Which of the following can Robert use to make a wise decision?

• free-market system

• economic decision making-model

• the "invisible hand"

• factors of production

Multiple Choice

George has just saved enough money to buy the car he's dreamed of. He puts down $5000 in cash and finances the rest through his local credit union. George's car is what?

• a consumer good

• a capital good

• a production cost

• a renewable resource

Multiple Choice

In order for Jamie to paint one additional portrait, it will cost her $50.00. The good news is that, if she paints it, she can probably sell it for $250.00. Which of the following equals Jamie's marginal cost?

• $50

• $200

• $250

• $300

Multiple Choice

David decides to start his own business. He opens a shop that manufactures sports equipment. He pays Frank an hourly wage to make baseball bats and Gene a salary to manage his finances. Three days after his grand opening, he is ecstatic because Mike, who runs the town's parks and recreation departments, call him and orders equipment for 6 little league baseball teams. Which of the following statements is true?

• David is a producer. Frank is labor, Gene is the entrepreneur of the business, and Mike has just orders capital goods.

• David is a producer, Frank and Gene are consumers, and Mike has just made an investment.

• David is the entrepreneur, Frank and Gene are both labor, and Mike is a consumer.

• Frank and Gene are both entrepreneurs, David is the owner, and Mike has just made a capital investment.

Multiple Choice

Thorndike Corporation has just finished a year of record profits. Rather than use the resources to immediately raise production, they decide to purchase land and materials to build a new plant and purchase of updated technology. Thorndike's actions represented what?

• failure to recognize opportunity costs

• capital investment

• consumer investment

• investment in human capital

Multiple Choice

Trent is a diabetic. One day, while on vacation, he goes to buy insulin which he needs to keep his medical condition in check. Next to the pharmacy, he notices a surf shop with the exact pair of designer sunglasses he's been wanting to buy. Trent has enough money for his insulin and a cheap pair of sunglasses, but he cannot afford both the insulin and the designer glasses. Which of the following statements is true?

• Trent must choose between his two needs.

• Trent is experiencing a scarcity of insulin.

• Trent is experiencing a scarcity of money.

• Trent must buy either the cheap or the designer sunglasses.

Multiple Choice

Michelle opens up a new beauty salon. She purchases all of the chairs, hair dryers, scissors, etc. that she needs. She also purchases enough shampoo and other beauty products to get her through the first month, and will purchase more as she needs them. As time goes on, Michelle finds that she has to purchase more of these products and that her supplier raises the price every third or fourth purchase. Fortunately, Michelle is still doing well enough that she can pay the increase in price and still make a profit. Enough profit, in fact, that she concludes it is in her best interst to hire a second hairdresser named Lisa. Which of the following statements is NOT true?

• By offering to pay for Lisa to take additional courses in hair styling, Michelle is making an investment in human capital.

• Michelle's chairs, scissors, and hair dryers are fixed costs while her shampoo and beauty products are variable costs.

• Michelle is an entrepreneur who has considered the trade-offs to hiring an employee and determined that the benefits of hiring Lisa outweigh the costs.

• Michelle's marginal cost of cutting an additional customer's hair is greater than the potential profit. Therefore, it makes sense to hire Lisa.

Multiple Choice

Which of the following statements would Adam Smith most DISAGREE with?

• "When economy suffers, the only role government should play is to spend and cut taxes. Anything more interferes with the most desirable economic outcome."

• "Leave the economy alone! Let the desires of producers to profit and the desire of consumers to buy goods for as little as possible take the market off its natural course."

• "The invisible hand can be trusted to steer the market without the interference of government."

• "Laissez-faire economics is a good thing."

Multiple Choice

The island of Mogo is ruled by a king and a council of five elders. The king and this council determine what the islanders need and what can be produced. They also determine at what price things will be sold. Although they allow some people to own private property, they are strict about how such property can be used. It sounds like Mogo has what kind of market?

• free-market

• mixed market that is predominantly command

• command market only

• true communist market

Multiple Choice

Adrian is an economist at Burnfield University. When asked a question about the US market, she replies that what products are produce will ultimately be decided by what the public buys. In other words, she believes that it is the US public's demand and willingness to pay for certain goods that will control production, rather than the producers themselves. Adrian obviously believes in what?

• the power of consumer sovereignty

• the power of capital investment

• the benefit of command economies

• the philosophies of Marx