Topic 3 - Economics and Private Enterprise Test Prep

What is the definition of opportunity cost?

• The amount of money spent on a particular choice.
• The loss of potential gain from other alternatives when one alternative is chosen.
• The benefits gained from a chosen option.
• The total cost of a decision made.

What is the primary reason inflation affects consumer behavior?

• It makes products more desirable.
• It increases the availability of goods.
• It leads consumers to economize and reduce spending.
• It has no effect on consumer choices.

When faced with limited resources, what must societies decide?

• How to satisfy all wants equally.
• Which wants to prioritize based on available resources.
• How to eliminate scarcity.
• Which resources to waste.

Which type of economic utility refers to the usefulness of a product based on its form?

• Place utility
• Time utility
• Task utility
• Form utility

How can businesses prepare for market risk?

• By avoiding all investments
• By ignoring economic trends
• By creating a proforma
• By focusing only on internal risks

Which of the following best describes pure risk?

• Involves only speculative investments
• Involves multiple business opportunities
• Involves only loss or no change
• Involves gain, loss, or no change

How does speculative risk differ from pure risk?

• It can lead to gain, loss, or no change
• It is always insurable
• It is predictable and manageable
• It only involves loss

What is market risk primarily associated with?

• Individual company performance
• Broad macroeconomic factors
• Specific industry changes
• Technological advancements

Why is risk mitigation important for entrepreneurs?

• It eliminates all business risks
• It focuses only on speculative risks
• It helps identify and prepare for risks
• It guarantees business success

How do market, margin, and mission interact in evaluating business opportunities?

• They are independent factors.
• They are only relevant in the planning stage.
• They determine the business's location.
• They create a balanced business model.