Econ Test 1 Review

Economics is best defined as (a)

• scientific study of supply and demand.

• study of efforts to satisfy seemingly unlimited wants with scarce resources.

• limited description of economic activities.

• extended application of cost-benefit analysis

Scarcity results from the fact that

• people’s wants exceed the resources to satisfy them.

• people’s wants exceed the resources to satisfy them.

• we cannot answer all the major economic questions.

• there are plenty of resources to fulfill all peoples needs and wants

The study of economics is important because it enables us to

• describe our standard of living.

• increase our consumption of consumer goods.

• become better decision makers.

• determine what goods ought to be produced.

Which of the following best describes the relationship between trade-offs and opportunity costs?

• Opportunity costs are incurred when trade-offs are made.

• Opportunity costs are the opposite of trade-offs.

• Trade-offs lower the opportunity costs of an economic decision.

• Trade-offs occur when there are not opportunity costs.

Entrepreneurs are considered the driving force in an economy because they

• own a great deal of land.

• start new businesses.

• are the greatest number of people in an economy.

• provide most of the labor.

Comparative advantage is defined as a situation in which one person can produce

• more of all goods than another person

• a good for a lower dollar cost than another person

• a good for a lower opportunity cost than another person

• all goods for lower opportunity costs than another person

Positive economics is concerned with ____, while normative economics focuses on _____.

• solving economic problems, explaining economic problems

• cause and effect relationships; explanation of the way things should be

• large scale economic problems; individual economic problems

• comparing opportunity costs; comparing the use of resources

Which group of people ultimately determines the products that a free enterprise economy produces?

• congress

• local government

• property owners

• consumers

The purpose of government in a command economy is to

• ensure the availability of consumer products.

• make major economic decisions.

• encourage entrepreneurs.

• promote economic freedom.

A market economy

• does not provide for everyone's basic needs.

• permits extensive government intervention.

• limits the choices of goods and services available.

• offers a high degree of certainty for its workers.