Economics Unit 1 Test Review

Why might some historians consider Adam Smith one of the most influential people in history?

• He taught that all people should be economic equals.

• He introduced a way of thinking about economic ideas.

• He argued for a larger role for the government in the economy.

• He wrote the economic argument for American independence.

Which of these statements is an example of normative economics?

• "Taxes ought to be lowered."

• "Inflation is higher this year."

• "The bond market is in decline."

• "Speculation caused a recession."

A limitation of using graphs to represent relationships is that they

• must be presented in a small space.

• typically show the less important variables.

• omit factors other than those being graphed.

• simplify concepts and do not take into account complex situations.

What are the factors of production?

• goods and services

• risk and opportunity

• land, labor, and capital

• wages, salaries, and profits

Ocean waves can be used to generate energy. Ocean waves are considered which type of resource?

• capital

• nonrenewable

• perpetual

• renewable

Which of these items is a measure of productivity?

• years of education

• bushels of corn per acre

• number of workers employed

• dollars invested in new equipment

Why are trade offs necessary?

• Resources are limited.

• Every product has flaws.

• People want different things.

• Advertisers promote products.

Which scenario best illustrates the law of diminishing marginal utility?

• A. A car breaks down more often as it gets older.

• B. A collector of china figurines is eager to get a new one.

• C. Someone who doesn't listen to music does not care about getting a new download.

• D. A new toy is less exciting to a child with many toys than to a child with just a few.

The three fundamental economic questions are what , ______________, and for whom to produce.

Which of these economic goals is most important in a traditional economy?

• A. growth

• B. stability

• C. freedom

• D. efficiency