Understanding Economic Choices and Systems

What is scarcity?

• Having too many resources to use

• The condition of having unlimited wants but limited resources

• A situation where everyone has everything they need

• The process of making goods and services

What is opportunity cost?

• The total amount of money spent on a purchase

• The cost of producing a good in a factory

• The value of the next best alternative given up when making a choice

• The price of a product in the marketplace

What is human capital?

• The physical tools and machines used in production

• The money a business uses to buy supplies

• The knowledge, skills, and education that workers possess

• The natural resources used to make products

Which of the following is an example of a free-market economy?

• The government owns all businesses and decides what to produce

• Individuals and businesses make their own economic decisions with little government interference

• The government controls all prices and wages

• Resources are distributed equally among all citizens by the government

In a command economy, who makes the major economic decisions?

• Individual consumers

• Private businesses

• The government (central authority)

• International trade organizations

Which of the following best describes innovation?

• Repeating the same production methods year after year

• The introduction of new ideas, methods, or products that improve efficiency or quality

• Reducing the number of workers in a factory

• Buying goods from other countries

What does productivity measure?

• The number of workers employed in a country

• The amount of output produced per unit of input

• The total taxes collected by the government

• The number of goods imported from other countries

Which of the following is an example of a mixed economy?

• A country where the government controls all production and distribution

• A country where only private businesses operate with no government involvement

• A country where both private businesses and the government play roles in the economy

• A country that relies entirely on bartering for trade

Which of the following is an example of a consumer making an economic choice due to scarcity?

• A student decides to buy a video game instead of saving money for a new book

• A factory produces more goods than it can sell

• A government prints more money to pay its debts

• A business hires more workers during a busy season

A student has $20 and must choose between buying a book for school or a new video game. If the student buys the book, what is the opportunity cost?

• The opportunity cost is the book

• The opportunity cost is the video game

• The opportunity cost is $20

• There is no opportunity cost because the student made the right choice