EPF.1 Test Review

Which statement best describes scarcity in economics?

• A temporary shortage of luxury goods in the market

• The fundamental economic problem where unlimited wants exceed limited resources

• A situation that only affects developing nations

• The inability to produce technological goods

When a city government decides to spend $10 billion on building a aircraft carrier instead of renovating schools, this is an example of:

• Scarcity

• Trade Off

• Opportunity Cost

• Marginal Cost

What is the primary reason that businesses must make choices about resource allocation?

• Government regulations require it

• To maximize shareholder profits only

• Resources are unlimited but expensive

• Scarcity forces them to prioritize certain activities over others

Which of the following best describes an unintended consequence?

• A planned outcome of an economic decision

• The immediate result of a government policy

• An unexpected result that occurs after making a choice

• The cost of producing goods and services

Long-run unintended consequences often occur because:

• Decision-makers always lack information

• The economy is constantly changing

• Complex systems can produce unexpected results over time

• Government regulations are too strict

Which statement best explains why all economic choices involve trade-offs?

• Because resources are infinite

• Because governments regulate all decisions

• Because scarcity requires giving up one thing to get another

• Because businesses always seek maximum profit

In a market economy, what is the primary role of government according to Adam Smith?

• Setting prices for all goods and services

• Owning and operating major industries

• Enforcing contracts and providing public infrastructure

• Controlling all aspects of trade and commerce

What best describes entrepreneurs in the production process?

• They only focus on managing existing businesses

• They avoid all forms of business risks

• They are risk-takers who organize resources and develop new products

• They only provide physical labor

Human capital differs from physical capital in that it refers to:

• Natural resources used in production

• Tools and machinery used in manufacturing

• The skills and knowledge acquired through education and experience

• Raw materials found in nature

Which economic system relies primarily on government or central authority to make all economic decisions?

• Command

• Market

• Traditional

• Mixed