Econ Unit 1 Practice Test

Which of the following best captures the idea of the fundamental economic problem?

• Lack of demand for limited resources.

• Limited resources and unlimited wants.

• Limited wants and limited resources.

• Unlimited resources and unlimited wants.

• Infinite resources and limited wants.

Answer explanation

The unlimited wants of humans results in the problem of scarcity, which any economic system must address.

What does it mean to say that a resource is scarce?

• A society does not have enough money to purchase this resource.

• Nobody wants to buy this resource.

• There is an unlimited amount of the resource available.

• There is not enough of this resource to satisfy all the wants and needs of a society.

• The resource is no longer available.

Answer explanation

Scarcity refers to the conflict that arises from competition over a society's limited resources.

What are the four categories of resources?

• Machines, technology, minerals, and energy resources

• Land resources, labor, capital goods, and entrepreneurship

• Information technology, physical capital, financial capital, and high skilled workers

• High skilled workers, low skilled workers, knowledge workers, and service sector workers

• Forest, minerals, ocean, and energy resources

Answer explanation

Natural resources (land), workers (labor), technology (capital) and entrepreneurial ability are the four resources that any economic system must allocate.

A trade-off is

• always in the social interest

• the benefit you receive from an increase in an activity

• giving up one thing to get something else

• the key to reconciling self-interest and social interest

The sacrifice involved when you choose a particular course of action is called the:

• Alternative

• Consumer cost

• Opportunity cost

• Producer cost

Economic growth can be shown by:

• An inward shift of the production possibility frontier

• A movement downward the production possibility frontier

• A movement up the production possibility frontier

• An outward shift of the production possibility frontier

Why must every nation answer the three fundamental economic questions?

• Because of increased international trade and cooperation.
• Because of the problem of scarcity.
• Because rich nations must subsidise the development of poor nations.
• Because some nations are more successful than others.

A point outside a production possibilities curve reflects:

• the law of increasing costs.
• the economy cannot attain that point with the given state of technology and number of resources.
• less than full use of resources and technology.
• economic efficiency.

The table shows the production possibilities for a country. Based on the table, which of the following production combinations is a possibility?

• 28 pizzas and 5 pairs of shoes

• 3 pairs of shoes and 23 pizzas

• 2 pairs of shoes and 20 pizzas

• 4 pairs of shoes and 15 pizzas

What is the production possibilities curve?

• a graph that shows how much an economy can produce between 2 goods
• how much money something is
• the opportunity one has to give up in order to gain something else
• land, labor, capital, entrepreneurs