Unit 15 Economics

Which situation are economists describing when they use the term scarcity?

• when one has a surplus of natural resources and/or labor
• when one does not need to make trade-offs to satisfy one's needs
• when one does not have enough resources to satisfy all of one's wants
• when one's wants and needs are fully met

How does scarcity affect the economic decisions of a society?

• It leads the society to create a command economy in which supply and demand do not set the prices of goods.
• It pushes the society to discourage its people from making trade-offs because trade-offs increase scarcity.
• It forces the society to choose how to best use its limited resources.
• It encourages the society to take actions that benefit producers rather than consumers.

Which of the following is NOT one of the three basic economic decisions every society must make?

• what goods and services to produce
• how to produce goods and services
• for whom to produce goods and services
• whether to produce goods and services

How is a market economy different from a command economy?

• Natural resources are most important in a market economy, while labor and capital are most important in a command economy.
• The interaction of supply and demand sets prices in a market economy, while the government sets prices in a command economy.
  
• Producers benefit the most from a market economy, while consumers benefit the most from a command economy.
• A market economy is for traditional methods,  a command economy is for innovation and change. When grading the question, it would appear as

Why do economic decisions require individuals, businesses, and governments to make trade-offs?

• Using the resources needed to buy or make one good or service means not having those resources to buy or make another.
• Trading goods or services for one another, rather than using paper money, is the only way to ensure a stable and predictable economy.
• The balance of power between the labor force in a society and those who own the means of production must be maintained.
• Choosing to create certain products is the only way to allocate resources in ways that meet everyone's wants and needs.

What is the correct definition of an opportunity cost?

• a cost that varies depending on the choices made by a person or group
• a cost that does not increase or decrease regardless of how circumstances may change
  
• the cost of producing one additional unit of a good or service
• the cost of choosing to do one thing rather than choosing the next best option

How can knowing the opportunity cost of buying a product affect people's economic decisions?

• It can show them how to avoid a trade-off and use the same resources to meet two needs rather than one.
• It can help them to prioritize two possible uses of their money and guide them to choose the best option.  
  
• It can force them to recognize how the decision they are about to make compares to all other possible decisions.
• It can lead them to consider the ways in which buying the product supports a flawed and unjust economic system.

How are fixed costs different from variable costs?

• Fixed costs do not change no matter how much a business produces; variable costs do change.
  Fixed costs do not change no matter how much a business produces; variable costs do change.
• Fixed costs are costs associated with capital, such as machinery; variable costs are the cost of labor.
• Fixed costs only exist in command economies; variable costs only exist in market economies.
• Fixed costs are the same for all businesses; variable costs apply to individual businesses alone.

Carol wants to buy a plot of land for $100,000. However, she cannot decide whether she wants to build a small one-story house on it or a large two-story house on it. Why should Carol build the smaller house that will cost less, assuming she wants to spend as little money as possible?

• Since the cost of the land is variable, Carol can maximize her use of it by building the smaller house.
• Since the cost of the land is high, Carol can increase the demand for it by building the smaller house.
• Since the cost of the land is fixed, Carol can limit the variable cost of construction by building the smaller house.
• Since the cost of the land is low, Carol can decrease the trade-offs she must make by building the smaller house.

What is the correct definition of a marginal analysis?

• a study that examines how command economies compare to market economies in terms of consumer satisfaction
• an economic model that compares the additional benefit of doing something with the additional cost of doing it
• an economic model that can predict how prices will behave when demand rises or falls
• a study that examines two or more possible business options to find the one that is most beneficial