Basic Economic Fundamentals Review

A professional basketball players' union negotiates a contract that dramatically increases all players' salaries. How would this influence the opportunity cost for a player who was considering giving up basketball to pursue a career in broadcasting?

• it would not affect the opportunity cost of playing basketball or of broadcasting

• it would increase the opportunity cost of continuing to play professional basketball

• it would cause the production possibilities frontier to become convex

• it would increase the opportunity cost of becoming a broadcaster

• it should have no bearing on the player's decision from an economic standpoint

Allie is shopping when she finds a pair of running shoes priced at $90. When Allie uses her debit card to pay, it is declined because her balance is insufficient to cover the cost of the running shoes. Allie’s situation best illustrates which economic concept?

• Opportunity cost

• Scarcity

• Unlimited resources

• Trade-offs

• Trade

What is a common trait that mixed and market economies share with one another?

• Competition

• Nationalization of business

• Self-sufficiency

• Dictatorship

Under which economic system would the factors of production most likely be owned by the government?

• Market Economy

• Command Economy

• Traditional Economy

• Mixed Economy

Which of these occurs in a mixed economy?

• Private enterprises compete with the government for economic dominance

• The government and private enterprise exist together as major economic participants

• All businesses are publicly owned, but privately managed

• The government directs all economic activity

Which of the following best defines the type of economy used by generations of farmers?

• Market Economy

• Mixed Economy

• Command Economy

• Traditional Economy

Which of the following often describes the economy of the United States?

• Market Economy

• Mixed Economy

• Command Economy

• Traditional Economy

Nikki owns an ice-cream parlor at the beach. During the summer months, she spends large amounts of money to maintain ice cream and cold drink supplies.

During the winter, the costs of maintaining her supply drops because she does not sell as much as the summer. Meanwhile, the rent she pays for her store space and equipment are the same year round. Which of the following is true?

• The money Nikki spends on her equipment is known as variable cost

• The money Nikki spends on ice-cream, cold drinks, equipment, and rent combined is her marginal cost

• The money Nikki spends to keep her store stocked is her fixed cost

• Nikki’s total costs minus her variable costs equal her fixed costs

Alfred is a mechanic. He hires an assistant and finds that profits increase by sixty percent. He then hires another assistant and profits increase by thirty percent. Alfred finally hires yet another assistant and finds that profits increase again, but this time only by ten percent.

He notices that his output to input ratio is decreasing. Which economic principle best describes Alfred’s situation?

• The Invisible Hand

• The Producer Price Index

• The Law of Diminishing Returns

• The Benefit of Education and Training

Which best demonstrates the characteristics of human capital?

• Purchasing additional land and supplies to expand production capacity at a factory

• Increasing productivity through training or education for workers

• Raising the salaries of supervisors and managers purchasing stock in several corporations

• Harvesting a crop of wheat to produce larger amounts of bread to feed the homeless