Introduction to Economics

What is the basic economic problem?

• Scarcity of resources relative to unlimited wants.

• Abundance of resources for limited wants.

• Equal distribution of resources among all individuals.

• Unlimited resources available for all needs.

True or False: Scarcity means that resources are unlimited.

• Scarcity indicates that resources are evenly distributed.

• Scarcity means resources are abundant.

• False

• Scarcity refers to the overproduction of goods.

Which of the following is a factor of production? A) Money B) Land C) Time D) None of the above

• Labor

• B) Land

• Capital

• Technology

True or False: Opportunity cost is the cost of the next best alternative foregone.

• True

• Opportunity cost refers only to time lost.

• Opportunity cost is always a monetary value.

• Opportunity cost is the total cost of all alternatives.

What does GDP stand for?

• Gross Domestic Product

• Global Domestic Product

• Gross National Product

• General Domestic Product

True or False: Microeconomics deals with individual markets and consumers.

• Microeconomics studies government policies.

• Microeconomics focuses on global markets.

• Microeconomics is concerned with macroeconomic trends.

• True

Which economic system is characterized by private ownership? A) Capitalism B) Socialism C) Communism D) Feudalism

• E) Mercantilism

• F) Anarchism

• G) Oligarchy

• A) Capitalism

True or False: Inflation is a decrease in the general price level of goods and services.

• Inflation is a rise in the general price level of goods and services.

• Inflation is the same as deflation.

• Inflation refers to a stable price level of goods and services.

• False

What is the law of demand?

• As the price of a good increases, the quantity demanded decreases.

• The law of demand states that quantity supplied increases as price decreases.

• Demand remains constant regardless of price changes.

• As the price of a good decreases, the quantity demanded increases.

True or False: A budget line shows the combinations of goods that a consumer can afford.

• True

• A budget line represents the consumer's preferences.

• A budget line indicates the prices of goods only.

• A budget line shows the total income of a consumer.