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WorksheetsBasic Economic Fundamentals Review
Total questions: 40
Worksheet time: 40mins
A professional basketball players' union negotiates a contract that dramatically increases all players' salaries. How would this influence the opportunity cost for a player who was considering giving up basketball to pursue a career in broadcasting?
it would not affect the opportunity cost of playing basketball or of broadcasting
it would increase the opportunity cost of continuing to play professional basketball
it would cause the production possibilities frontier to become convex
it would increase the opportunity cost of becoming a broadcaster
it should have no bearing on the player's decision from an economic standpoint
Allie is shopping when she finds a pair of running shoes priced at $90. When Allie uses her debit card to pay, it is declined because her balance is insufficient to cover the cost of the running shoes. Allie’s situation best illustrates which economic concept?
Opportunity cost
Scarcity
Unlimited resources
Trade-offs
Trade
What is a common trait that mixed and market economies share with one another?
Competition
Nationalization of business
Self-sufficiency
Dictatorship
Under which economic system would the factors of production most likely be owned by the government?
Market Economy
Command Economy
Traditional Economy
Mixed Economy
Which of these occurs in a mixed economy?
Private enterprises compete with the government for economic dominance
The government and private enterprise exist together as major economic participants
All businesses are publicly owned, but privately managed
The government directs all economic activity
Which of the following best defines the type of economy used by generations of farmers?
Market Economy
Mixed Economy
Command Economy
Traditional Economy
Which of the following often describes the economy of the United States?
Market Economy
Mixed Economy
Command Economy
Traditional Economy
Nikki owns an ice-cream parlor at the beach. During the summer months, she spends large amounts of money to maintain ice cream and cold drink supplies.
During the winter, the costs of maintaining her supply drops because she does not sell as much as the summer. Meanwhile, the rent she pays for her store space and equipment are the same year round. Which of the following is true?
The money Nikki spends on her equipment is known as variable cost
The money Nikki spends on ice-cream, cold drinks, equipment, and rent combined is her marginal cost
The money Nikki spends to keep her store stocked is her fixed cost
Nikki’s total costs minus her variable costs equal her fixed costs
Alfred is a mechanic. He hires an assistant and finds that profits increase by sixty percent. He then hires another assistant and profits increase by thirty percent. Alfred finally hires yet another assistant and finds that profits increase again, but this time only by ten percent.
He notices that his output to input ratio is decreasing. Which economic principle best describes Alfred’s situation?
The Invisible Hand
The Producer Price Index
The Law of Diminishing Returns
The Benefit of Education and Training
Which best demonstrates the characteristics of human capital?
Purchasing additional land and supplies to expand production capacity at a factory
Increasing productivity through training or education for workers
Raising the salaries of supervisors and managers purchasing stock in several corporations
Harvesting a crop of wheat to produce larger amounts of bread to feed the homeless
Henry Ford, founder of the Ford Automotive Company, is credited with creating the assembly line. The assembly line gave each worker one task at which they could work and improve their skills. What economic concept is Ford credited with creating?
Utilizing human capital
Reducing supply shortages
Improving the efficiency of workers
Creating a highly specialized workforce
Why would the owner of an automobile dealership likely invest in training for his or her employees?
To lower the tax burden on the dealership by receiving tax credits for training of his or her workers
To promote a positive public image that shows the employer cares about employee advancement and education
To increase the productivity of salespeople at the dealership and ultimately increase profit margins
To comply with federal requirements established by the Equal Opportunity Employment Commission.
Which of the following best relates to the output associated with the division of labor?
Breaking a job into smaller tasks
Comparative advantage of production
Greater productivity
Human-made resources in a good or service
Why would the owner of a business assign teams to perform several specific tasks in that business?
To increase productivity through efficiency of labor
To create higher wages and salaries for workers
To increase the profit margins of his or her business by twenty percent
To improve the working conditions of his or her employees and meet OSHA requirements
Roy attends college. He gives up his ability to earn money in a job to attend college. Which of the following best exemplifies Roy’s lost earnings?
Trade-offs
Opportunity Costs
Marginal Costs
Marginal Benefits
Which of the following best refers to the cost of producing each additional unit of a particular product?
Fixed Cost
Total Cost
Marginal Cost
Variable Cost
Which of the following best refers to what business people consider the costs that can change depending on circumstances?
Fixed Cost
Total Cost
Marginal Cost
Variable Cost
How would one best describe the opportunity cost associated with investments in the stock market?
The investor gets a chance to earn profits in a company through stock purchase
The money spent on stocks can no longer earn interest in another asset
The opportunity of wealth has been used due to the financial crisis of 2008
The stock’s purchaser assumed full liability for the company’s costs
Samantha’s parents pay for her piano lessons. Instead of going to a movie, Samantha plays the piano at her lesson on Saturday. What type of cost best refers to the situation for Samantha?
Marginal Cost
Fixed Cost
Opportunity Cost
Residual Cost
Which of the following commonly refers to an individual who purchases goods and services?
The end user of a good/service
The retailer of a good/service
The provider of a good/service
The consumer of a good/service
Which best describes the groups affected by scarcity in the United States?
Only Economic professors, high school students, and those who study Economics.
Poor and indigent families.
All households who consume the good that is scarce (directly or indirectly).
The United States is not subject to scarcity. There is a large amount of supply in the United States, unlike many third world nations.
A clothing company manufacturers 500 anniversary editions of a shirt. Since there are so few shirts to sell, what effect will this likely have on the price of the shirt?
The price will remain constant
The price will be high
The price will be low
The price fluctuates
Producers have an incentive to produce what consumers want, because this will make them money. What commonly refers to this economic phenomenon?
Free Choice of Market
Open Opportunity of Market
Profit Motive
Perfect Competition
What best refers to the use of current resources that could be spent immediately for some greater benefit at a later time?
Productivity
Capital Good
Diminishing Returns
Investment
Which one of the following would most likely earn the highest wage/salary?
An unskilled blue collar worker
A skilled white collar worker
Someone who graduated from high school and has little additional training
Someone who works as a hired hand on a farm
Which of the following best describes fulfilling a purchase of four new pairs of a highly sought-after shoe?
Good
Service
Want
Need
What best refers to entrepreneurship in a capitalist economy?
Maximizing manpower needed to produce goods and services
Using all the goods and services in production
Minimizing the social and economic risk in government
Making a profit by taking a risk to satisfy a perceived market need
What term best refers to an item that is necessary for survival?
Scarcity
Shortage
Need
Want
Which of the following best describes factors of production?
The resources necessary to produce goods and services
The number of steps it takes to make a product
The mathematical equations that determine GDP
The goods and services that a country produces
Which factor of production best relates to computers, trucks, hammers, and other man-made materials?
Capital
Entrepreneurship
Labor
Land
What refers to the study of how firms, nations, and individuals best allocate their limited resources?
Circular Economic Activity
Economics
Factoring Production
Supply and Demand Analysis
Suppose DVD players are a normal good and are exchanged in a competitive market. All else equal, what will be the impact of an increase in household income?
The increase the equilibrium quantity and increase the price.
The decrease the equilibrium quantity and increase the price.
The increase the equilibrium price, but the change in quantity is ambiguous.
The decrease the equilibrium quantity and decrease the price.
The increase the equilibrium quantity but the change in price is ambiguous.
Use the given production possibilities curve to answer the following question. A city government received a million grant to build swimming pools and skating rinks for youth. Based on the data provided in the graph, what is the opportunity cost of building one swimming pool?
0.50 skating rink
0.50 swimming pool
2 skating rinks
2 swimming pools
5 skating rinks
Use the graphs to answer the following question. The shape of a PPC illustrates the type of opportunity costs involved in production. What type of costs do PPC1 and PPC2 illustrate?
PPC1 illustrates constant opportunity costs and PPC2 illustrates increasing opportunity costs.
PPC1 illustrates constant opportunity costs and PPC2 illustrates decreasing opportunity costs.
PPC1 illustrates increasing opportunity costs and PPC2 illustrates decreasing opportunity costs.
PPC1 illustrates increasing opportunity costs and PPC2 illustrates constant opportunity costs.
PPC1 illustrates decreasing opportunity costs and PPC2 illustrates constant opportunity costs.
The table shows the daily production possibilities for China and Malaysia in producing trucks and coffee using the same amount of resources. Based on the data provided, which of the following terms of trade are mutually beneficial for the two countries?
1 ton of coffee for 3 trucks
1 ton of coffee for 4 trucks
1 ton of coffee for 5 trucks
1 truck for 1 ton of coffee
1 truck for 5 tons of coffee
The table shows the landscaping productivity of Simone and Irina during an eight hour workday. Simone can mow twelve lawns or trim twenty four trees in eight hours. Irina can mow nine lawns or trim twelve trees in eight hours. Based on the information in the table, which of the following is true?
Irina has an absolute advantage in mowing lawns.
Irina has an absolute advantage in trimming trees.
Irina has a comparative advantage in trimming trees.
Simone has an absolute advantage in trimming trees and mowing lawns.
Simone has a comparative advantage in trimming trees and mowing lawns.
Country X is a major buyer of Country Y’s grains. Assume Country X’s government announced an increase in taxes on its imports of Country Y’s grains effective next month. How will this news likely affect consumers’ demand for grains in Country X?
It will increase now because the tax on imported grains will increase the future price of grains.
It will decrease now because the tax on imported grains will increase the future price of grains.
It will not change now because the tax on imported grains will increase the future price of grains.
It will increase now because the tax on imported grains will increase the current price of grains.
It will decrease now because the tax on imported grains will increase the current price of grains.
Which of the following changes will increase the demand for bicycles?
An increase in the price of bicycle helmets, a complementary good.
An increase in the price of scooters, a substitute good.
A decrease in the price of bicycles.
A decrease in consumers’ income.
A decrease in the number of buyers
Which of the following will increase the market supply for new automobiles?
An increase in the price of steel, an input in the production of automobiles.
An increase in taxes on automobile manufacturers.
An increase in subsidies to automobile manufacturers.
An increase in consumers’ income.
An increase in the price of gasoline, a complementary good.
Two nations sign a trade agreement expecting to enjoy mutual gains from the trade of a certain good. How will this event likely affect the supply of the good in the two nations?
This event will likely cause a decrease in the quantity supplied of the good in both nations.
This event will likely cause an increase in the quantity supplied of the good in both nations.
This event will likely cause a decrease in the supply of the good in both nations.
This event will likely cause an increase in the supply of the good in both nations.
This event will likely have no effect on the good in either nation
