Unit 1 EPF Study Guide - Spring25

Opportunity Cost is best defined as:

• A) The cost of producing a good.
• B) The value of the next best alternative forgone.
• C) The expenses incurred in a transaction.
• D) The price difference between goods.

Which of the following best defines a Market Economy?

• Option 1A) An economy where the government makes all economic decisions.
• B) An economy based on supply and demand with minimal government intervention.
• C) An economy that combines elements of both capitalism and socialism.
• D) An economy that relies heavily on barter systems.

Per capita GDP is defined as:

• A) The total GDP of a country divided by its population.
• B) The GDP of a country without inflation adjustments.
• C) The GDP of a country during a recession.
• D) The GDP of a country at its peak.

In a Command Economy, economic decisions are made by:

• A) Individual consumers and producers.
• B) A central authority or government.
• C) Market forces.
• D) Private businesses.

A Mixed Economy combines:

• A) Socialism and communism.
• B) Elements of both market and command economies.
• C) Only government ownership of resources.
• D) Barter systems and market forces.

The Law of Demand states that:

• A) As prices increase, demand decreases.
• B) Demand remains constant regardless of price.
• C) Higher prices lead to higher demand.
• D) Demand is not affected by consumer preferences.

Demand Elasticity measures:

• A) The sensitivity of quantity demanded to price changes.
• B) The total demand in an economy.
• C) The fixed nature of demand regardless of price.
• D) The relationship between demand and supply.

The Equilibrium Price is:

• A) The price where supply exceeds demand.
• B) The price at which quantity supplied equals quantity demanded.
• C) The highest price consumers are willing to pay.
• D) The price set by the government.

Supply Elasticity refers to:

• A) How much the quantity supplied changes in response to price changes.
• B) The total supply in a market.
• C) The fixed nature of supply.
• D) The government control over supply.

The Law of Supply indicates that:

• A) As prices increase, the quantity supplied decreases.
• B) There is no relationship between price and quantity supplied.
• C) Higher prices lead to higher quantity supplied.
• D) Supply is always inelastic.