Unit 1 Test

Multiple Choice

Which of the following best describes scarcity?

• Having unlimited resources
  
  

• Having excess production capacity

• The condition of not having enough resources to produce desired items

• The distribution of wealth in society

Categorize

Options (17)

Air

Water

Food

Shelter

Clothing

Healthcare

Education

Safety

Luxury car

Designer clothes

Latest smartphone

Travel experiences

Gourmet food

High-end electronics

Spa treatments

Fashion accessories

Categorize Needs and Wants

Needs

Wants

Multiple Choice

What distinguishes a good from a service?

• A good is tangible and can be owned; a service is intangible and involves an activity.
• A good is intangible and cannot be touched.
• A service can be owned and transferred like a good.
• A good is always more expensive than a service.

Categorize

Options (16)

Pl

Apple

Book

Chair

Laptop

Shoes

Table

Watch

Consulting

Cleaning

Delivery

Repair

Tutoring

Gardening

Photography

Catering

Categorize Goods vs Services

Good

Services

Multiple Choice

How long must an item last to be classified as a durable good?

• Exactly two years
• At least five months

• At least three years
• Less than one year

Multiple Choice

What is a capital good?

• Money used for investments

• Tools or machinery used to produce other products

• Goods sold directly to consumers

• Products with high monetary value

Multiple Choice

According to Adam Smith, what two factors are necessary for something to have value?

• Popularity and tradition
• Quality and abundance
• Utility and scarcity
• Price and demand

Multiple Choice

Which statement best explains utility?

• The monetary worth of an item

• The capacity to be useful and provide satisfaction

• The scarcity of a product

• The transferability of goods

Multiple Choice

What explains the paradox of value regarding water and diamonds?

• a. Diamonds are more beautiful than water

• b. Water is more abundant and less scarce than diamonds

• c. Diamonds have more utility than water

• d. Water cannot be transferred like diamonds

Multiple Choice

What defines wealth in economic terms?

• The accumulation of services

• The value of all assets and liabilities

• The accumulation of tangible, scarce, utility-related products

• The total amount of money owned

Multiple Choice

Which statement about services is correct?

• Services cannot have value

• Services are always more expensive than goods

• Services can have value despite being intangible

• Services are considered part of wealth

What does a production possibilities curve illustrate?

All combinations of two different products or categories of products with fixed resources.

Contraction

Underutilization

Scarcity

Growth

Efficiency

What could have caused this shift?

Any technology change or productivity increase that only increases the production of Good A

Take a look at the PPC to the right. Answer the questions regarding the outward shift on the Y axis

What happened to the opportunity cost of producing Good A?
It decreased (It became less 'expensive' to produce relative to producing Good B)

Take a look at the PPC to the right. Answer the questions regarding the outward shift on the Y axis

What happened to the opportunity cost of producing Good B?
It increased (It became more 'expensive' to produce relative to producing Good B)

Take a look at the PPC to the right. Answer the questions regarding the outward shift on the Y axis

Moving from point A to Point B?

16 capital goods (see a decrease in capital goods, movement along Y Axis)
(31-15=16)

Take a look at the PPC; calculate the Opportunity cost (what is lost) for different changes in production.

Moving from Point A to Point C

24 consumer goods (see a decrease in consumer goods, movement along X Axis) (24-0=24)

Take a look at the PPC; calculate the Opportunity cost (what is lost) for different changes in production.

Moving from Point A to Point D

31 Capital Goods
(see a decrease in capital goods, movement along Y Axis) (31-0=31)

Explain the difference between these two production possibilities curves.

Increasing opportunity costs (Concave- bowed outward)

What type of opportunity cost does this show?

Constant Opportunity Cost (Straight line)

What type of opportunity costs are shown here?

The resources used to produce good A are not perfectly adaptable to the production of good B

What does the shape say about the resources used in the production of these goods?

The resources used to produce good A are perfectly adaptable to the production of good B

What does the shape say about the resources used in the production of these goods?

• the opportunity cost of a choice is the value of the best alternative forgone

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Opportunity Cost Definitions

• Opportunity cost is the forgone benefit that would have been derived from an option other than the one that was chosen.

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Opportunity Cost Definitions

Opportunity Cost

The basic economic problem is scarcity. Wants are unlimited and resources are finite, so choices have to be made. When a choice is made there is going to be an opportunity cost.

The aim is to ensure that people have the lowest opportunity cost possible after making a decision. Here are a few examples to help you understand and identiity the opportunity cost.

Poll

You have $150, which would you buy, chocolate bar or potato chips?

For example, if you only have $150 and you go to a shop, you can buy either a chocolate bar or potato chips. The scarcity of the resource (the money) means a choice has to be made between the chocolate and the crisps.

If your choice is the chocolate bar, the opportunity cost is the potato chips and all satisfaction and benefits from eating it.

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​Opportunity Cost

Poll

You have two hours of free time after school. Will you read a book or watch a movie?

If you only have two hours of free time after school, you can either read your favourite book or watch a movie. The scarcity of the resource (time) means a choice has to be made between the book or watching a movie.

If your choice is the movie, the opportunity cost is the enjoyment or knowledge that you would have gained from reading the book.

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​Opportunity Cost

Poll

You are the government, and due to your limited resources (money, land, workers, etc.), you can either build a new school or a new hospital. What would you build?

You are the government, and due to your limited resources (money, land, workers, etc.), you can either build a new school or a new hospital. If your choice is the school, the opportunity cost is the hospital and all the benefits that would have come from it, including fewer illnesses, fewer deaths, better care for sick people, and so on.

​

​Opportunity Cost

You are the government, and due to your limited resources (money, land, workers, etc.), you can either build a new school or a new hospital. If your choice is the school, the opportunity cost is the hospital and all the benefits that would have come from it, including fewer illnesses, fewer deaths, better care for sick people, and so on.

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​Opportunity Cost

Poll

You have 20 acres of land that you can either farm or rent to your neighbour. What would you do?

If you choice to farm the land, the opportunity cost is the income foregone by not renting it to a neighbour.
If the cash rental rate is $200 per acre, the opportunity cost (income foregone) by farming the land and not renting it to the neighbour is $4,000 ($200 x 20 acres.)

​Opportunity Cost

Let's see if you can identify the opportunity cost in the following scenarios

Multiple Choice

What is opportunity cost?

• your choice
• what you give up to make a choice

Multiple Choice

A popular bakery has only a few ingredients left to make their products.  They could bake muffins or cookies, but they can’t make both.  The bakers decide to make cookies for their customers.  What is the opportunity cost of their decision?

• muffins 
• cookies 

Multiple Choice

The Welch family has saved some money.  They can spend it on a vacation to the Grand Canyon or build a swimming pool in their back yard.  They decide to spend the money on a swimming pool.  What is the opportunity cost of their decision?

• vacation 
• swimming pool 

Multiple Choice

A deposit of shale oil is discovered in an area of farming. The following estimates are made for ten years.

● If the land is used only for farming, it would yield income after tax of $10 billion.

● If the land is used only for shale oil extraction, it would yield income after tax of $40 billion.

What is the opportunity cost of using the land only for farming?

• $25 billion

• $30 billion

• $35 billion

• $40 billion

Multiple Choice

When "wants are greater than the resources available to satisfy them," it is called...

• Scarcity

• Needs

• Opportunity Cost

• None of these answers

Multiple Choice

Because of scarcity, people are forced to make _________ about how to use resources.

• Choices

• Opportunities

• Houses

• Desires

Multiple Choice

You win a football match ticket worth $100. You can either go to the match or exchange the ticket for $100. What is the opportunity cost if you choose to go to the match?

• $100

• Staying home and watching TV

• Going to the match

• There is no opportunity cost

Multiple Choice

Amber was shopping at the mall. She had $80 to spend. She found three items she liked: $75 for a pair of shoes, $70 for a jacket, and $62 for a dress. After shopping for a couple hours, she decided to borrow a pair of shoes from her cousin and to buy the jacket for $70. What was her opportunity cost?

• Shoes

• Jacket

• Dress

• Purse

Factors of Production!

Land, Labor Capital (Human & Physical)

Multiple Choice

Is this land, labor, or capital?

• Land

• Labor

• Capital

Multiple Choice

Is this land, labor, or capital?

• land

• labor

• capital

Multiple Choice

Is this land, labor, or capital?

• land

• labor

• capital

Multiple Choice

Which image is the example of the definition of entrepreneurship?

Let's start with land.

• Raw materials/natural resources

• Literally, the LAND on which you build a restaurant. A factory. A business.

More examples of "land" in economics

• Water

• Air

• Forests/Trees

• Things that grow (plants/crops)

• Animals

• Minerals

Labor

• the actual work that goes into creating a good or service

• Physical effort.

Open Ended

In this image, what is the LABOR?

Open Ended

In this image, what is the LABOR?

Capital

• Man Made TOOLS used to produce goods and services.

• KNOWLEDGE and SKILLS acquired via education and experience that make it possible for humans to produce goods and services.

Open Ended

In this image, what is the capital?

Human Capital

• The knowledge and skills people bring to the table.

• Training, education, experience.

Physical Capital

• Tangible items used to make goods and services

• TOOLS

• Buildings

• Computers/Machines

• Money used for investment (Capital Contributions, for example)

Physical Capital

• Tangible items used to make goods and services

• TOOLS

• Buildings

• Computers/Machines

• Money used for investment (Capital Contributions, for example)

Multiple Select

Which of the following is physical capital? (check all that apply)

• A medical degree

• Stock ownership of a company

• 25+ years experience as a helicopter mechanic

• An excavator

• A delivery truck

Multiple Select

Which of the following is human capital?

• A medical degree

• An x-ray machine

• 25+ years of experience as a helicopter mechanic

• A calculator

• Ability to type 55+ words per minute

Entrepreneurship

• The ideas to create new goods and services

• The ideas needed to create existing goods and services in a better way.