Economics 1

Opportunity cost is best defined as:

• Marginal cost minus marginal benefit

• The time spent on an economic activity

• The value of the best forgone alternative

• The money cost of an economic decision

Which of the following is a factor of production?

• Money

• Interest

• Rent

• Capital

In a command system:

• Self-interest guides and commands individuals to pursue actions that lead them toward achieving their goals

• The head of each family decides what to do with the family’s resources

• The government makes production and allocation decisions

• Market traders command what outputs are produced and how they are allocated

Which is one of the three fundamental questions that need to be dealt with in any economic system?

• What makes the rate of unemployment low?

• Who will be the richest group in the economy?

• What goods and services will be produced?

• How high should the prices of goods and services be?

Which of the following is a normative economic statement?

• The Federal budget surplus rose by 10 billion dollars

• A fall in the unemployment rate is expected next month

• A trade deficit of 20 billion dollars will harm the economy

• The Federal funds rate was reduced by half a percentage point

As a consequence of the problem of scarcity:

• There is never enough of anything

• Individuals have to make choices from among alternatives

• Production has to be planned by government

• Things which are plentiful have relatively high prices

The key economic concept that serves as the basis for the study of economics is:

• Inflation

• Unemployment

• Money

• Scarcity

Things which are essential to maintain life are referred to as...

• needs

• goods

• services

• wants

Who are the people that decide to by things

• economist

• consumers

• producers

• managers

Consumers...

• buy things

• make things

• Want things

• need things