Unit One - Economics RC_Pages 4_8

What does the study of economics focus on in terms of resource allocation and decision-making?

• Making choices when faced with a limited supply of resources

• Producing unlimited goods and services

• Satisfying all needs and wants

• Creating an affluent society

Answer explanation

The study of economics is primarily about making choices when faced with a limited supply of resources. It's not about producing unlimited goods or satisfying all needs and wants, as resources are always limited. Nor is it about creating an affluent society, although that could be a result of good economic decisions. The essence of economics is understanding how to allocate scarce resources to meet the most needs or wants.

Identify which of the following options represents a basic need for survival.

• Video games

• Stylish haircuts

• Food

• Newest smartphone model

Answer explanation

The question asks for an example of a 'need'. Among the given options, 'Food' is the correct choice. This is because needs are basic requirements for survival, such as food, water, and shelter. While video games, stylish haircuts, and the newest smartphone model can be desired, they are not essential for survival and are therefore considered 'wants', not 'needs'.

What are goods?

• Actions or activities that one person performs for another

• Physical objects that someone produces

• Essential items for survival

• Desires that are not necessary for survival

Answer explanation

The question asks about the definition of 'goods'. The correct answer is 'Physical objects that someone produces'. This is because 'goods' in economic terms refer to tangible commodities or items that are produced and can be physically touched or held, as opposed to services which are intangible.

How would you define 'scarcity' in the context of economic resources?

• When consumers want more of a good or service than producers are willing to make available

• The limited supply of resources to meet unlimited wants

• The study of how people seek to satisfy their needs and wants

• The same thing as shortage

Answer explanation

Scarcity refers to the basic economic problem of having seemingly unlimited human wants in a world with limited resources. It is the limited supply of resources to meet unlimited wants. The other options do not accurately define scarcity.

"What role do entrepreneurs play in the creation of new goods and services that drive economic growth?

• Deciding how to combine resources to create new goods and services

• Providing medical care and haircuts

• Assembling factors of production

• Fixing an aging school building or hiring more firefighters

Answer explanation

Entrepreneurs play a crucial role in economic growth by deciding how to combine resources to create new goods and services. They innovate, take risks, and create new markets, which leads to job creation, increased productivity, and economic expansion. The other options do not directly relate to the role of entrepreneurs in fueling economic growth.

Identify the three primary factors of production in economics.

• Land, labor, and capital

• Water, mineral resources, and skilled labor

• Physical capital, human capital, and entrepreneurship

• Goods, services, and scarcity

Answer explanation

The three economic factors of production are land, labor, and capital. Land refers to natural resources, labor to human effort, and capital to machinery or equipment. The other options, while containing elements of the factors of production, do not accurately represent the universally recognized trio.

In economics, how is the term 'land' defined?

• All natural resources used to produce goods and services

• The effort people devote to tasks for which they are paid

• Human-made resources used to create other goods and services

• Acquired knowledge and skills

Answer explanation

In economics, the term 'land' refers to all natural resources used to produce goods and services. It doesn't refer to human effort, human-made resources, or acquired knowledge and skills. Instead, it encompasses resources like minerals, water, and soil that are utilized in the production process.

How is 'labor' defined in the context of economics?

• All natural resources used to produce goods and services

• The effort people devote to tasks for which they are paid

• Human-made resources used to create other goods and services

• Acquired knowledge and skills

Answer explanation

Labor refers to the effort that people put into tasks they are paid for. It doesn't refer to natural resources used in production, human-made resources, or acquired knowledge and skills. In this context, the question is asking about the definition of labor, and the correct answer is 'The effort people devote to tasks for which they are paid'.

In economic terms, how is 'capital' defined?

• All natural resources used to produce goods and services

• The effort people devote to tasks for which they are paid

• Human-made resources used to create other goods and services

• Acquired knowledge and skills

Answer explanation

Capital refers to human-made resources that are used in the production of other goods and services. It does not refer to natural resources, the effort people put into paid tasks, or acquired knowledge and skills. Therefore, the correct answer to the question is 'Human-made resources used to create other goods and services'.

Which of the following best describes 'physical capital' in economics?

• All natural resources used to produce goods and services

• The effort people devote to tasks for which they are paid

• Human-made resources used to create other goods and services

• Objects used to create goods or to supply services

Answer explanation

Physical capital refers to objects used to create goods or to supply services. These objects are human-made resources that play a crucial role in the production process. The other options, such as natural resources and human effort, are different types of capital and do not specifically define physical capital.