Unit 1: Basic Economics

_____ are things that people would like to have, while ______ are things that people need to survive.

• Needs, wants

• Necessities, demands

• Supply, demand

• Wants, needs

When people want more than a company is willing to supply, that product will experience a _______, and the price of that product will _______.

• Surplus, decrease

• Surplus, increase

• Shortage, decrease

• Shortage, increase

When companies supply more than the consumers demand, that produce will experience a _______, and the price of that product will _______.

• Surplus, decrease

• Surplus, increase

• Shortage, decrease

• Shortage, increase

What is the relationship between trade-offs and decision-making?

• a. Every decision involves a trade-off, where something is sacrificed.

• b. Trade-offs are irrelevant to making decisions.

• c. Trade-offs only apply to economic decisions.

• d. Trade-offs are only considered in long-term planning.

Which of the following best illustrates the concept of opportunity cost?

• Investing in a stock that has already lost value.

• Deciding to eat a slice of cake instead of eating a salad.

• Choosing to buy a new phone instead of saving for a vacation.

• Spending $30 on movie tickets for a movie that was not very entertaining.

Which of the following statements accurately describes marginal benefit?

• It is the cost associated with producing one more unit of a good.

• It is the additional satisfaction gained from consuming one more unit of a good or service.

• It refers to the total satisfaction from all units consumed.

• It measures the value of resources that have already been spent.

What is the Equilibrium Price?

• 1
• 2
• 3
• 4

How does marginal cost affect production decisions?

• It focuses on the additional cost incurred from producing one more unit.

• It is irrelevant to the decision-making process.

• It represents the satisfaction gained from consuming a good.

• It measures the total cost of all units produced.

Why should sunk costs be ignored in rational decision-making?

• They influence the marginal benefit of a decision.

• They are costs that cannot be recovered and do not affect future decisions.

• They are always higher than variable costs.

• They represent future costs that will be incurred.

Which of the following is a common example of a transfer payment?

• A tax refund

• A utility bill payment

• A business loan

• A Social Security benefit