Chapter 1 Quiz

The most desirable alternative somebody gives up as the result of a decision is called

• thinking at the margin

• opportunity cost

• a trade off

• scarcity

The process of deciding whether to use one more unit of a resource is called

• diminishing marginal utility

• Says' Law

• Thinking at the margin

• The economic method

The economic principle which states that as production shifts from making one good to another, more and more resources are needed to increase production of the second good is called

• underutilization

• the production possibilities frontier

• the law of increasing costs

• marginal benefit

Which of the following is NOT a factor of production?

• Land

• Capital

• Money

• Labor

What is the difference between scarcity and a shortage?

• Scarcity always exists while shortages are temporary

• Scarcity results from falling prices

• Scarcity only concerns a single item

• There is no difference between the two

The economic concept of guns or butter means that

• a person can spend money on either sports equipment or food.

• a company must decide whether to manufacture guns or butter.

• a government must decide to produce more or less military or consumer goods.

• a government can buy unlimited military and civilian goods if it is rich enough.

Every decision involves trade-offs because

• everyone has to make decisions.

• everyone’s resources are limited.

• some people have more money than others.

• some decisions are made for business, others for society.

On the Production Possibilities Curve pictured here, what would the A represent?

• An efficient use of resources

• An unattainable production possibility

• Underutilization of resources in production

• A growth in production

Why would you want to create a production possibilities curve?

• to show the different ways a country's resources can be used

• to show the benefit of using technology in production

• the reduce scarcity of resources

• to increase worker productivity

Which of the following is an example of physical capital?

• natural resources used in production of goods

• the workers whose labor helps produce goods

• the money an entrepreneur invests in a business

• the equipment and tools used to manufacture goods