Fundamental Concepts- Economics Practice test

Which of the following best defines economics?

• When unlimited wants exceed limited productive resources.

• The resources needed to create and sell products for profit.

• The choices individuals, businesses, and governments make with scarce resources.

• Input resources compared to output resources.

Which of the following best defines scarcity?

• When unlimited wants exceed limited productive resources.

• The resource needed to create and sell products.

• The choices individuals, businesses, and nations make with scarce resources.

• The input vs. output resources needed to create a product efficiently.

Which of the following best defines productive resources?

• They are when unlimited wants exceed supply.

• They are the capital needed to create and sell products for profit.

• They are the choices people make with scarce resources.

• They are the ratio between input and output resources.

Check all that are correct about productive resources.

• A finished product sold for profit is considered a productive resource.

• Physical capital, or man made equipment, is a productive resource.

• Natural resources, like minerals, land, and water, are considered to be a productive resource.

• Human capital or labor is considered to be a productive resource.

• Entrepreneurship or taking financial risk to gain profit is a skill that is considered a productive resource.

Check all that are motivations for entrepreneurship.

• The desire to gain profit from starting a business.

• The desire to create new jobs for the economy.

• The desire to improve society by enriching the economy and making new jobs.

• The desire to create a new product to sell.

• The desire to pay taxes to federal, state, and local governments.

Which of the following best defines opportunity cost?

• The premier option you choose when confronted with scarcity.

• The next best alternative option that you lose out on.

• The profit you gain from each financial decision.

• What you sacrifice and gain from making an economic decision.

Check all that are true about rational decision making.

• Having greater or equal marginal benefit to cost produces a rational decision.

• Having a greater marginal cost than benefit means you have made a rational economic decision.

• Having greater marginal cost than benefit in an economic decision means you have made an irrational decision.

• A decision can still be rational if your marginal cost is equal to marginal benefit.

A sports drink company has hired many local workers and enriched the water supply with needed electrolytes. As a result, the government provides a subsidy of 20,000 dollars to the business. This is an example of a...

• rational decision

• irrational decision

• positive incentive

• negative incentive

A paper mill has failed to manage its waste from production and has polluted the city. as a result, the local government charges them a pollution tax. This is an example of...

• A positive incentive

• A negative incentive

• A rational decision

• An irrational decision

You run a shoe company and produce 40 tons of shoes for sale per month. You decide to produce 1 additional ton and lose profit. This would be an example of...

• An irrational decision

• A rational decision

• A negative incentive

• A positive incentive