Lesson 6 Study Guide

Zoe has a chance to work overtime on her job or go to a concert with her friends. She chooses to work. The concert ticket she gave up is an example of what?

• opportunity cost

• interest

• principle

• consumer

Answer explanation

In economics, 'opportunity cost' is the loss of potential gain from other alternatives when one alternative is chosen. In this question, Zoe chose to work overtime instead of going to a concert. The concert ticket she gave up, or the missed chance to enjoy the concert, is the 'opportunity cost' of her decision to work.

David, James, and Liam started a lemonade stand in their neighborhood. As more kids started their own lemonade stands, this may lead to

• a rise in taxes.

• a drop in demand for their lemonade.

• an increase in the price of their lemonade.

• a decrease in their profit.

Answer explanation

The question states that David, James, and Liam started a lemonade stand. However, as other kids start their own stands, this will likely increase competition, leading to a potential decrease in their profit. More stands mean more choices for customers, which could result in fewer sales for the original stand, thereby reducing their profit.

Match the following

• The desire of a certain good or service

• supply

• The cost of what you are giving up

• Demand

• The study of how people meet their wants and needs

• producer

• The amount of a good or service that is available for use

• Opportunity Cost

• People and businesses that make and sell goods and services

• Economics

Sophia, Liam, and Priya started a lemonade stand. How can they make a profit from their business?

• They try to buy more lemons and sugar, and sell the lemonade at a lower price.

• They try to buy lemons and sugar at a lower price, and sell the lemonade at a higher price.

• They try to buy more lemons and sugar, and sell the lemonade at a higher price.

• They try to buy lemons and sugar at a higher price, and sell the lemonade at a lower price.

Answer explanation

The correct choice is for Sophia, Liam, and Priya to buy lemons and sugar at a lower price, and sell the lemonade at a higher price. This means the cost of making the lemonade is less than the price at which they sell it. Consequently, the difference between the selling price and the cost price gives them a profit, which is the main goal for any business.

Jackson, Charlotte, and Ava are discussing the economic system of a country. They describe it as a system where the market plays a significant role, but the government also has limited involvement. This system combines aspects of market, traditional, and command economies. What type of economic system are they discussing?

• Traditional Economy

• Command Economy

• Market Economy

• Mixed Economy

Answer explanation

The economic system described in the question is a Mixed Economy. This system combines elements of traditional, command, and market economies. It is characterized by a market where the market plays a significant role, but the government also has limited involvement. Thus, the correct choice is 'Mixed Economy'.

Emma, Priya, and Samuel are discussing the type of economic system in which individual consumers and producers like them make economic decisions. They believe this system is based on the principles of freedom, competition, and profit. What type of economy are they referring to?

• Traditional Economy

• Command Economy

• Market Economy

• Mixed Economy

Answer explanation

Emma, Priya, and Samuel are referring to a Market Economy. In a Market Economy, individual consumers and producers make economic decisions based on the principles of freedom, competition, and profit. This is in contrast to a Command Economy (controlled by the government), a Traditional Economy (based on customs), or a Mixed Economy (combines elements of market, command and traditional economies).

Imagine Samuel, Jackson, and James are playing a game. In this game, they have created an economic system where the government, represented by James, makes all economic decisions. What type of economy does this scenario represent?

• Traditional Economy

• Command Economy

• Market Economy

• Mixed Economy

Answer explanation

In the described game, James, acting as the government, takes control of all economic decisions. This is characteristic of a Command Economy, where the government or central authority makes all the economic decisions, meaning they decide what goods should be produced, how they should be produced, and who should receive them. Therefore, the correct answer to the question is Command Economy.

Isla, Zoe, and Samuel are planning to create a budget for their upcoming school project. According to you, which of the following would be a feature of a good budget they should consider?

• money reserved for saving

• income that is less than its expenses

• economic incentives

Answer explanation

When creating a budget for a school project, it is important to consider saving as a key feature. The option 'money reserved for saving' suggests that they should anticipate potential costs and reserve funds accordingly. This will help Isla, Zoe, and Samuel to effectively manage their expenses, ensuring they don't exceed their available resources. Therefore, this option is the correct choice for a feature of a good budget.

Priya, Abigail, and Grace are studying different types of economic systems for their social studies project. They are trying to determine which type of economic system has the highest level of government control. Can you help them?

• market economy

• traditional economy

• mixed economy

• command economy

Answer explanation

The question is about the type of economic system with the highest level of government control. The correct choice is 'command economy'. In this system, the government makes all the key economic decisions. It decides what goods should be produced, how much should be produced, and the price at which the goods will be offered for sale. Other options like market, traditional, or mixed economies do not have this level of government control.

Ava's family has been making pottery for generations. They follow the same techniques and designs that have been passed down from one generation to the next. Arjun is curious about the type of economy Ava's family is practicing. Can you help him?

• Traditional Economy

• Command Economy

• Market Economy

• Mixed Economy

Answer explanation

In a traditional economy, methods of production are usually passed down through generations, much like Ava's family's pottery practices. This is contrasted to command, market, or mixed economies, where production methods might vary based on government control, market forces, or a mix of both respectively.