WorksheetsBasic Economic Concepts
Total questions: 15
Worksheet time: 7mins
Economics is BEST defined as the study of ________
how human beings respond to incentives to meet their needs and wants
how businesses enrich themselves at the expense of ordinary citizens
how money circulates through the economy
how government officials regulate individual economic behavior
Define "incentive."
The cost of producing a good or service
The fact that human wants are unlimited but resources are limited
Something that motivates someone to do or not do something
The price charged for a good or service
Which of the following is NOT an example of someone responding to an incentive?
Alyza buys more candy because the price went down.
Seeing that restaurants are making a lot of profit in his area, Jesse decides to open a new restaurant.
When the government raises the gas tax by 50%, Jeremiah decides to drive less.
Jose falls asleep because he is tired.
In economics, "scarcity" is best defined as the idea that ________.
people respond to incentives
human wants are greater than available resources
a higher price decreases the quantity demanded
supply and demand determine equilibrium prices
opportunity costs are less than monetary costs
Because of the problem of scarcity, ______________.
supply equals demand
prices are above equilibrium
socialism is superior to capitalism
people must make choices about how to use their resources
the government must impose high taxes on the citizenry
"Opportunity cost" is best defined as _____________.
the value of the the second-best alternative that is given up when one alternative is chosen
the cost of investing in a business opportunity
the cost of producing a particular good or service
the money that must be paid to do something
Esteban makes $300 per day at his job. He decides to take an unpaid day off of work to go to a Rangers game. He pays $100 total for the ticket, parking, transportation to and from the game, and concessions at the game. What is the value of Esteban's total "opportunity cost" of attending the game?
$100
$200
$300
$400
$500
_____________ advantage refers to the ability of an individual or group to do something better overall than another individual or group.
Absolute
Comparative
Competitive
Superior
Product
______________ advantage refers to the ability of an individual or group to do something at a lower opportunity cost than another individual or group
Absolute
Competitive
Comparative
Product
Opportunity Cost
With the same number of labor hours, Guatemala can produce 100 bananas or 100 papayas, while Honduras can produce 50 bananas or 25 papayas. Which country has the absolute advantage in producing bananas and why?
Guatemala because it can make more bananas
Guatemala because its opportunity cost is lower
Honduras because it can make more bananas
Honduras because its opportunity cost is lower
With the same number of labor hours, Guatemala can produce 100 bananas or 100 papayas, while Honduras can produce 50 bananas or 25 papayas. Which country has the comparative advantage in producing bananas and why?
Guatemala because it can make more bananas
Guatemala because its opportunity cost is lower
Honduras because it can make more bananas
Honduras because its opportunity cost is lower
A country that has an absolute advantage in producing everything cannot benefit from trading with any other country.
True
False
With the same number of labor hours, Guatemala can produce 100 bananas or 100 papayas, while Honduras can produce 50 bananas or 25 papayas. To maximize the combined number of fruits produced, _____
Guatemala should produce both fruits while Honduras produces nothing
Honduras should produce both fruits while Guatemala produces nothing
Guatemala should produce bananas; Honduras should produce papayas
Guatemala should produce papayas; Honduras should produce bananas
Which of the following is NOT a characteristic of a free market capitalist economy?
people are allowed to own property and decide what to do with it
businesses compete against each other in the hopes of earning profit
all businesses are owned and operated by the government
wealth and income are distributed unequally; there are some rich people and some poor people
government plays a limited role in the economy
Which of the following is NOT a characteristic of a socialist planned economy?
the government owns and controls the means of production
the government determines what to produce and how to produce it
wealth and income are distributed equally
intense competition between businesses encourages innovation and inefficiency
