Econ Unit 1 Review

This factor of production is illustrated in the form of a factory and forklifts for a new business.

• Wants

• Trade-offs

• Market

• Land

• Capital

Answer explanation

The factor of production illustrated by a factory and forklifts represents 'Capital'. Capital includes physical assets like machinery and buildings used in the production process, essential for a new business.

Refers to any alternative uses of money or time.

• Wants

• Trade-offs

• Market

• Land

• Opportunity Cost

Answer explanation

Opportunity cost refers to the value of the next best alternative forgone when making a decision, highlighting the trade-offs involved in using money or time.

Consumers and privately owned businesses make economic decisions.

• Wants

• Trade-offs

• Market

• Land

• Free Enterprise

Answer explanation

The correct answer is 'Free Enterprise' because it refers to an economic system where consumers and privately owned businesses make decisions about production and consumption, emphasizing individual choice and competition.

Which of the following clichés highlights the fact that when providing a good or service, there are always alternative uses for its productive resources that are given up?

• “There is no such thing as a free lunch.”

• “Buy low, sell high.”

• “The love of money is the root of all evil.”

• “Live within your means.”

Answer explanation

The cliché "There is no such thing as a free lunch" emphasizes that every choice has an opportunity cost, meaning resources used for one purpose cannot be used for another, highlighting the trade-offs in providing goods or services.

The basic economic problem facing ALL societies is...

• Wealth

• Labor Shortages

• Productivity

• Scarcity

Answer explanation

The basic economic problem for all societies is scarcity, which refers to the limited resources available to meet unlimited wants and needs. This fundamental issue drives economic decision-making and resource allocation.

Which of the following terms means the highest valued alternative given up when a person chooses to engage in an activity?

• dollar cost

• opportunity cost

• cost-benefit analysis

• stop-loss

Answer explanation

The term 'opportunity cost' refers to the highest valued alternative that is forgone when a choice is made. It highlights the trade-off involved in decision-making, making it the correct answer.

Which of the following people ultimately determines the products that a free enterprise economy produces?

• Consumers

• Congress

• Local Government

• Property owners

Answer explanation

In a free enterprise economy, consumers ultimately determine the products produced by their purchasing choices. Their demand drives businesses to create goods and services that meet their needs.

What term describes an economic system in which basic economic decisions are decided by a central authority, as was done in the old Soviet Union?

• traditional economy

• market economy

• command economy

• black market economy

Answer explanation

A command economy is characterized by a central authority making all basic economic decisions, as seen in the old Soviet Union. This contrasts with market economies, where decisions are driven by supply and demand.

Actions in one part of the country or world that have an economic impact on what happens elsewhere are examples of

• economic interdependence

• opportunity costs

• trade-offs

• specialization

Answer explanation

Economic interdependence refers to how actions in one region affect economies elsewhere. This concept highlights the interconnectedness of global economies, making it the correct choice for the question.

Adam Smith presented a framework in which he stated that markets were most efficient at allocating resources when influenced by the competition of individual buyers and sellers based on a profit-motive driven by rational self-interest. What did he call this?

• Welfare Capitalism

• The Invisible Hand

• Dictatorship of the Proletariat

• Conspicuous Consumption

Answer explanation

Adam Smith referred to the concept of markets being guided by individual self-interest and competition as 'The Invisible Hand'. This metaphor illustrates how personal profit motives can lead to efficient resource allocation.