Economics Vocab Quiz Set 1

Lily and Kathleen both want to buy the latest smartphone, but they only have a limited amount of money. What is the basic economic problem they are facing due to their unlimited wants and limited resources?

• Inflation

• Scarcity

• Opportunity Cost

• Specialization

Answer explanation

The basic economic problem is scarcity, which arises because resources are limited while human wants are unlimited. This imbalance forces societies to make choices about how to allocate their finite resources effectively.

Christian is deciding between going to a concert or working an extra shift at his job. Which term describes the value of the next best alternative when he makes his decision?

• Incentives

• Opportunity Cost

• Supply

• Demand

Answer explanation

The term 'Opportunity Cost' refers to the value of the next best alternative that is forgone when a decision is made. It highlights the trade-offs involved in any choice.

Matt and Penelope are opening a small coffee shop. They want to understand how their pricing and product choices will affect their business. What is the primary focus of microeconomics in this scenario?

• The behavior of the economy as a whole

• The behavior of individual consumers, firms, and markets

• The study of government policies

• The study of international trade

Answer explanation

The primary focus of microeconomics is on the behavior of individual consumers, firms, and markets. It analyzes how these entities make decisions and interact, unlike macroeconomics, which looks at the economy as a whole.

CJ and Christian are discussing different economic systems. CJ argues that the system characterized by private ownership of the means of production is the most efficient. Which economic system is CJ referring to?

• Communism

• Socialism

• Capitalism

• Feudalism

Answer explanation

Capitalism is characterized by private ownership of the means of production, allowing individuals and businesses to operate for profit. In contrast, communism and socialism advocate for collective or state ownership.

What is the role of tariffs in international trade?

• To decrease the price of imported goods

• To increase the price of imported goods

• To eliminate imports

• To promote exports

Answer explanation

Tariffs are taxes imposed on imported goods, which increase their prices. This makes domestic products more competitive, discouraging imports and protecting local industries.

Simon is deciding whether to spend his Saturday working overtime or going hiking with friends. Explain how opportunity cost can affect his decision-making in this scenario.

• It allows Simon to have unlimited resources.

• It helps Simon understand the trade-offs involved in his choices.

• It eliminates the need for Simon to make choices.

• It ensures that all of Simon's resources are used efficiently.

Answer explanation

Opportunity cost helps individuals understand the trade-offs involved in their choices by highlighting what they must give up when selecting one option over another, leading to more informed decision-making.

Lily and Kendall are shopping for groceries. How do incentives influence their purchasing decisions in a market economy?

• They discourage Lily and Kendall from making purchases.

• They have no effect on Lily and Kendall's behavior.

• They motivate Lily and Kendall to make certain purchasing decisions.

• They ensure that Lily and Kendall make the same choices.

Answer explanation

Incentives play a crucial role in shaping consumer behavior by motivating them to make specific purchasing decisions. They can encourage consumers to buy certain products or services based on perceived benefits.

Imagine Kody and Matt are two friends who decide to start a business. Kody is excellent at baking bread, while Matt is great at making cheese. Describe the concept of comparative advantage and its importance in their business partnership.

• It refers to producing goods at a higher cost than others.

• It allows Kody and Matt to benefit from their partnership by specializing in what they do most efficiently.

• It discourages Kody and Matt from working together.

• It ensures that Kody and Matt produce the same products.

Answer explanation

Comparative advantage is the ability of a country to produce goods more efficiently than others. This concept is crucial in international trade as it allows countries to specialize in their strengths, leading to mutual benefits from trade.

Matt and Jaydin are discussing international trade. Matt says that imports are goods sold to other countries, while exports are goods bought from other countries. Jaydin disagrees. What is the correct explanation?

• Imports are goods sold to other countries, while exports are goods bought from other countries.

• Imports are goods bought from other countries, while exports are goods sold to other countries.

• Imports and exports are the same.

• Imports are services, while exports are goods.

Answer explanation

Imports refer to goods bought from other countries, while exports are goods sold to other countries. This distinction is crucial for understanding international trade.

In a classroom project, Zach and Kody are tasked with creating a model of an economic system. They decide to represent an economic system where the government owns and controls most resources and means of production. Which economic system are they representing?

• Capitalism

• Socialism

• Communism

• Feudalism

Answer explanation

Communism is an economic system where the government owns and controls most resources and means of production, aiming for a classless society. In contrast, capitalism allows private ownership, and socialism involves some government control but not to the extent of communism.