Economics Test #1

Opportunity costs are important because

• individuals should consider the true costs of each alternative when making decisions

• opportunity costs are the main expenditure on most companies' balance sheet

• opportunity costs represent the costs of previous decisions that cannot be reversed

• the cost of society of some activities are greater than the costs of private balance sheets

A basic assumption of economics is that

• wants are unlimited

• means are unlimited

• incentives are irrelevant

• consumers are irrational

The amount of money that could be made by working instead of going to college is best described as

• a sunk cost

• a fixed cost

• an external cost

• an opportunity cost

Scarcity is the situation that results from

• an excessively large labor force

• a gap between imports and exports

• the irrationality of modern consumers

• limited resources and unlimited wants

The factor of production known as land includes

• human capital

• natural resources

• office buildings

• business experience

Land, labor, capital, and entrepreneurship are referred to as

• factors of production

• coincidence of wants

• goods and services

• costs and benefits

Entrepreneurs are considered a factor of production because they

• produce goods and services as wage laborers

• create new companies and foster business innovation

• own the land on which a factory or office is located

• provide financial capital by investing in various stocks

The most fundamental economic problem is

• security

• the fact the United States buys more goods from foreigners than we sell to foreigners

• health

• scarcity

Economics is best defined as the study of how people, business, governments, and societies

• make choices to cope with scarcity

• attain wealth

• choose abundance over scarcity

• use their infinite resources

Scarcity requires that people must

• trade

• compete

• cooperate

• make choices