Fundamental Economic Concepts

In economics, rational decisions occur when

• suppliers lower their prices to increase demand
• marginal benefits of an action equal or exceed the marginal costs
• a budget is used for spending and saving decisions
• command economies answer the three basic questions

Which is a human resource that Ms. Johnson could use for her art gallery?

• Light fixtures to help display the artwork.
• A security system to protect the artwork.
• Knowledge of trends in modern art.
• A series of paintings by a prominent local artist.

Which is a fundamental questions every society must answer?

• What goods and services are to be produced?
• How are the goods and services to be produced?
• Who will get the goods and services that are produced?
• All of the above

Choices often have to be made because productive resources are limited while wants and needs are limited. This situation is known as

• scarcity
• surplus
• budgeting
• borrowing

A and B both wash cars and change oil. Currently, each man washes and changes oil by himself, but the process takes lots of time. they would MOST LIKELY improve their efficiency if

• A & B wash a car and chang eoil together
• A washes car while B changes oil
• A washes B car while B washes A's car
• A and B reduce the number of cars they wash

Susan offers to trade her old iPod for Claudia's cell phone and Claudia accepts. Assuming both products work perfectly, we can conclude that

• Claudia is now happier than Susan.
• neither party has gained because the exchange was fraudulent
• both people have gained because the exchange was voluntary and non-fraudulent
• Susan places the same value on cell phones as she does for iPods

Investing heavily in new capital equipment and technology is MOST related to

• supply and demand
• opportunity costs
• economic growth
• economic freedom

Which BEST describes productivity?

• the interaction of buyers and sellers
• the relationship of inputs and outputs
• producing at high opportunity costs
• trading based on absolute advantage

Competition and free enterprise are most common in which type of economic system?

• traditional
• market
• communist
• planned

Economic growth is often tied to investment in machinery, new technology, and education of the population. This is because

• these items lead to a greater productivity of inputs
• the only way to measure economic growth is to observe change sin these factors
• investment in these items are sole determinant of output
• all of these items improve captal resources