EPF Unit 1

Which reason explains the need for economic choices?

• Consumer wants are limited and resources are scarce

• Consumer wants are unlimited and resources are scarce

• Services are unlimited and quantities demanded are unlimited.

• Consumer wants are limited and resources are limited.

Use the chart to the left to answer the question.

• 1 – Communism, 3 – Socialism

• 2 – Socialism, 3 – Communism

• 1 – Socialism, 3 – Communism

• 1 – Communism, 2 – Socialism

Use the passage to help answer the question below.

 

One important benefit of competition is a boost to innovation. Competition among companies can spur the invention of new or better products, or more efficient processes. Firms may race to be the first to market a new or different technology. Innovation also benefits consumers with new and better products, helps drive economic growth and increases standards of living. Products that are commonplace today once were technological breakthroughs: cars, planes, phones, televisions, the personal computer, and modern medicines all show how innovation can change your life, and increase prosperity.

 

“FTC Fact Sheet: How Competition Works”

Federal Trade Commission

Based on the text, why is innovation an important factor in decision-making in a market economy?

• It encourages producers to limit the quantity of goods and services they produce.

• It encourages producers to improve their products to increase their profits.

• It encourages the government to lower corporate taxes to increase production.

• It encourages consumers to buy more products, even if prices are higher.

Which would best explain why a store has a surplus of soft drinks?

• The price is not constant

• The price is at equilibrium

• The price is too high

• The price is too low.

Which of the following economic activities are people free to do under the free enterprise system?

• not pay taxes

• own a state-operated business

• engage in predatory competition

• start their own business

Which statement BEST explains the movement from S1 to S2 shown on this graph?

• higher costs for natural resources

• an increase in workers’ salaries

• technological improvements in production

• a decline in the production of a substitute good

Which is not a factor of production?

• Land

• Labor

• Capital

• Government

A computer store owner pays her salespeople a fixed hourly wage. She has also decided to pay those employees 5% of the revenue for any sale they make.

Which statement BEST explains the reason behind this decision?

• Employees will be encouraged to attend training classes.

• Employees will be motivated to be more productive at work

• Employees will be prevented from being overly competitive.

• Employees will be discouraged from selling substandard goods.

Based on the diagram, what is the difference in how economic decisions are made in a mixed economy and a market economy?

• Consumers make all economic decisions in a mixed economy, while the government makes all economic decisions in a market economy.

• Government and consumers make economic decisions in a mixed economy, while consumers make economic decisions in a market economy.

• Consumers make economic decisions in a mixed economy, while consumers and government make economic decisions in a market economy.

• Government makes all economic decisions in a mixed economy, while consumers make all economic decisions in a market economy

The amount of a good or service that consumers are willing to buy at a particular price is defined as

• marginal utility.

• final product

• quantity demanded

• personal savings.