1.06 Unit Exam Foundations of Economics

Which statement best defines the term economics?

• Economics is the study of the production and distribution of goods and services.

• Economics is the study of government programs supporting peace treaties.

• Economics is the study of money.

• Economics is the study of relationships among society.

What would an economist say motivates a man who builds chairs and sells them to the public?

• greed

• self-interest

• law of diminishing returns

• laissez faire

Which theory did Adam Smith develop that led him to be known as the father of economics?

• He promotes the idea that people care too much about the needs of society.

• He helps economists to study the effects of pollution on economic systems.

• He explains population growth and its impact on deteriorating resources.

• He states that when people act in their own self-interests, it results in an efficient use of resources in a free market.

While shopping you discover that your favorite department store has lowered the price on a hot, new MP3 player that you wanted to buy. You rush into the store, only to find that they are sold out.

Which concept this scenario illustrate?

• laissez faire

• law of diminishing returns

• shortage

• scarcity

Which example of factors of production will cause a decrease in the production of wheat?

• poor soil nutrition

• an increase in irrigation

• a more efficient tractor

• the addition of more farm employees

A new Japanese restaurant opens two blocks from your home. The owner, Reiko, is a personal friend of yours. You don't particularly like Japanese food, but you decide to go anyway; however, there is nothing on the menu that sounds appealing. Unfortunately, it turns out that most of the people in your town don't like Japanese cuisine either. Reiko confides that business is not good, but she isn't sure what to do from an economic standpoint.

What would most likely describe Adam Smith's perspective on this problem?

• Reiko should close the restaurant and find a different career.

• Reiko should lay off workers and do everything herself to save money.

• Reiko should add other ethnic foods to the menu and offer discounts to attract more people to her restaurant.

• Reiko should ask the government for assistance.

What about the amounts of resources causes people to make choices?

• They are unlimited.

• They are limited.

• They remain unchanged.

• They are undetermined.

What is not an economic right or responsibility?

• deciding where to live

• choosing an occupation

• paying taxes

• being happy

When someone makes a choice, what are all the other alternatives that are given up by making that choice called?

• opportunity costs

• cast-offs

• diminishing costs

• trade-offs

What is the most attractive trade-off as the result of a decision called?

• opportunity cost

• ultimate trade-off

• diminishing cost

• cast-off