1.1 and 1.2 Study Guide

Because of scarcity, every decision involves a

• Cost/benefit analysis

• Trade-off

• Marginal Cost

• Marginal Benefit

An opportunity cost is

• The best alternative that is given up when a decision is made

• The worst alternative that is given up when a decision is made

• A choice that is made when no alternative is very good

• The cost of making decision related to producing goods

Which of the following is NOT an example of the four factors of production?

• Money

• Land

• Physical Capital

• Human Capital

What does the term “scarcity” refer to in economics?

• The abundance of resources

• The unlimited wants and needs of people

• The availability of luxury goods

• The efficient allocation of resources

What is the fundamental reason scarcity exists in every society?

• Lack of resources

• Excessive production

• Technological advancement

• Government intervention

Javier is trying to decide how to spend his Saturday morning. He can either spend it playing basketball at the park or studying for an upcoming economic test. If he chooses to study for his upcoming economic test, what is the opportunity cost he is facing?

• Playing basketball at the park

• Higher economics test score

• Free time on Saturday

• There is no tradeoff

If the marginal benefit of producing an additional unit of a product is $8 and the marginal cost $6, what should the producer do?

• Produce the additional unit

• Not produce the additional unit

• Produce the unit only if the total cost is less than $8

• Keep everything the same

What is the definition of marginal benefit?

• The total benefit derived from a particular activity or decision

• The additional benefit gained from consuming one more unit of a good or service

• The cost incurred from producing one more unit of a good or service

• I don’t know

What is the definition of marginal cost?

• The total cost incurred in producing a certain quantity of goods

• The additional cost incurred from producing one more unit of a good or service

• The money I lose

• The fixed cost of production for a given quantity of goods

Microeconomics is the study of a large economy as a whole?

• True

• False