Economics Final Review

How does scarcity influence choice in a mixed market economy such as that of the United States?

• Scarcity requires consumers to make choices about what they want

• Scarcity eliminates choice from economic decision making

• Scarcity makes goods and services less desirable

• Scarcity increases both cost and benefits

Entrepreneurs take significant financial risks in order to start new businesses. Their success depends on their ability to be creative and develop novel approaches to business. As such, entrepreneurs can BEST be described as individuals who develop innovative methods of

• resolving market failures

• increasing human capital

• improving the experiences of consumers

• bringing together the factors of production

What basic comparison must entrepreneurs make when starting a new enterprise?

• level of demand versus level of supply

• personal investment versus outside investment

• expected benefits versus expected costs

• expected competition versus expected regulation

If Langston chooses to attend the large university across the state, what should be considered part of the opportunity cost of this decision?

• the bachelor's degree in logistics he would earn after four years

• the higher amount of tuition and fees he would pay at the small college

• the time he could have spent on vacation at home instead of traveling

• the generous financial aid package he would receive from the large university

When a consumer is choosing between purchasing two different items with the same price, he or she will MOST LIKELY purchase the item with the maximum

• marginal cost.

• marginal benefit.

• absolute advantage.

• comparative advantage.

A producer, Company X, sees a significant increase in demand for its most popular product, the Widget. What incentive does this development offer Company X?

• Consumers will be more willing to pay higher prices for the Widget.

• Profits for Company X will increase as high demand lowers the costs of production.

• The amount of competition faced by Company X is likely to decrease.

• The government will reduce regulations on the Widget because it is in high demand.

Brazil is responsible for about one-third of all coffee production in the world. In order to take advantage of economic specialization, nations with different climates that want quality coffee should

• visit Brazil and learn how to grow coffee themselves.

• grow tea and other caffeinated alternatives to coffee.

• produce commodities that Brazil needs and trade them for coffee.

• become more self-sufficient so they will not need to rely on Brazil's coffee.

French traders exploring the St. Lawrence River in colonial America encountered trappers from the Huron and Algonquin nations who possessed a variety of furs to trade. The French offered jewelry, beads, and other goods but the American Indians would only trade for firearms. The French explorers agreed to provide arms in exchange for furs, a relationship that lasted for many years. Is this an example of voluntary trade? Why or why not?

• Yes, because the French were able to acquire furs.

• Yes, because both parties were satisfied with the trade.

• No, because the goods that were traded were not of equal value.

• No, because the American Indians limited what they would trade for.

In a market economy, the strongest incentive for entrepreneurship is the opportunity to

• support projects for the public good.

• gain personal prestige and fame.

• determine regulatory and tax policies.

• earn a profit on investments.

Which government action would address the concerns in this excerpt?

• decreasing corporate taxes

• privatizing commercial industries

• distributing resources to individuals

• implementing workplace safety laws