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WorksheetsFundamentals of Economics Review
Total questions: 79
Worksheet time: 40mins
What is a true statement about scarcity?
Scarcity is a result of producing too little.
Scarcity is finite.
Overproduction will inevitably lead to scarcity.
All things are scarce except for our wants and needs.
Which describes human capital?
Buildings and tools
Skills and knowledge
Land and labor
Slowing or stopping production
How does specialization relate to voluntary exchange?
There is enough division of labor in one nation to make trading pointless.
Trading weakens us by making us dependent on other nations.
When we become overly specialized, exchange ceases to be voluntary.
Specialization enables us to make decisions about what is best to produce and what is best to trade.
What does this graph demonstrate?
Trade-offs for producing guns and butter utilizing all resources at maximum capacity.
Trade-offs for producing guns and butter utilizing all resources at minimum capacity.
That a nation can produce both guns and butter with no trade-offs.
That a nation should focus on guns and import butter.
The curved line running through points B, D, and C is the
Curve of Trade-Offs.
Law of Diminishing Return.
Margin of Production Projections.
Production Possibility Frontier.
What would happen to the curved line if a new piece of technology that made production of guns and butter more efficient?
It would shift to the left.
It would straighten out.
It would shift to the right.
It would be unnecessary.
Point A represents
Capacity
Inefficiency
Overproduction
Marginal Cost
The business cycle is best described as a
Nation’s Gross Domestic Product.
Nation’s Gross Domestic Product Per Capita.
Period of expansion followed by contraction.
State of constant expansion.
A benefit of technology is that it
Increases a nation’s productivity.
Makes certain jobs obsolete.
Decreases a nation’s GDP.
Slows or stops production.
Each of these is a principle of free enterprise except
Private Property.
Voluntary Exchange.
Legal Equality.
Public Welfare.
A role of government in the United States economy is to
Redistribute income.
Provide public goods and services.
Resolve market failures.
All of the above.
What is one way a government can foster human capital?
Improving the nation’s infrastructure.
Providing additional funding for education.
Maintaining better police protection.
Deregulating the coal industry.
One way a business can incentivize increased output is by
Paying all employees equally.
Focusing on producing fewer products.
Paying those who work harder more.
Increasing the work week by one day.
What is an international public good?
Peace
Tariffs
Trade Wars
National Parks
If an industry is posing a potential threat to the environment, a government will most likely
Deregulate the industry.
Take over the industry.
Outlaw the industry.
Impose regulations on the industry.
Which is not one of the three key economic questions?
How should goods and service be produced?
Why do we produce goods and services?
What goods and services should be produced?
Who consumes the goods and services?
In which type of economic system is consumer sovereignty most valued?
Command
Traditional
Mixed
Free Market
In which type of economic system do firms, consumers, and the government answer the key economic questions?
Command
Traditional
Mixed
Free Market
This type of economy is the most susceptible to natural disasters.
Command
Traditional
Mixed
Free Market
Which economic system most values the goal of freedom?
Command
Traditional
Mixed
Free Market
Which economic system most values security and safety nets?
Command
Traditional
Mixed
Free Market
What is necessary to ensure increased standards of living?
Innovation
Stagnation
Security
Equity
Most economic systems exist on a continuum between
Mixed and Traditional
Mixed and Command
Command and Free Market
Traditional and Free Market
Adam Smith’s concept of the invisible hand is best described as
Interaction between buyers and sellers.
The self-regulating nature of the market.
The development of the division of labor.
The opposite of self-interest.
Which type of market does this circular model represent?
Command
Traditional
Mixed
Free Market
Households can best be described as
Businesses.
Corporations.
Consumers.
Government.
Wages, salaries, benefits, and goods and services are part of the
Product Market.
Consumer Market.
Working Market.
Product and consumer Market.
Which type of market does this circular model represent?
Command
Traditional
Mixed
Free Market
Which entity(ies) are responsible for income?
Government and Households
Businesses and Government
Households and Businesses
Only Businesses
A person who starts up and takes on the risk of a business
Wants
Entrepreneur
Scarcity
Natural Resources
Voluntary Exchange
Raw materials from nature that are used to produce goods
Wants
Entrepreneur
Scarcity
Natural Resources
Voluntary Exchange
Desires that can be satisfied by consuming a good or service
Wants
Entrepreneur
Scarcity
Natural Resources
Voluntary Exchange
The principle that people may decide what, when, and how they want to buy and sell
Wants
Entrepreneur
Scarcity
Natural Resources
Voluntary Exchange
The limited nature of society's resources
Wants
Entrepreneur
Scarcity
Natural Resources
Voluntary Exchange
The specific economic resources used in producing goods and services
Inputs
Marginal Benefits
Opportunity Costs
Invisible Hand
Physical Capital
The most desirable alternative given up as the result of a decision
Inputs
Marginal Benefits
Opportunity Costs
Invisible Hand
Physical Capital
The human-made objects used to create other goods and services
Inputs
Marginal Benefits
Opportunity Costs
Invisible Hand
Physical Capital
Phrase coined by Adam Smith to refer to the self-regulating nature of a free marketplace.
Inputs
Marginal Benefits
Opportunity Costs
Invisible Hand
Physical Capital
The additional benefit associated with an action.
Inputs
Marginal Benefits
Opportunity Costs
Invisible Hand
Physical Capital
A penalty that discourages a behavior
Traditional Economy
Marginal Benefits
Negative Incentive
Positive Incentive
The methods societies use to produce and distribute resources.
Opportunity Cost
Marginal Cost
Economic Systems
Physical Capital
The value of a particular product compared to the amount of labor needed to make it.
Productivity
Production Possibility Frontier
Specialization
Marginal Cost
The study of scarcity and choice
Economics
Scarcity
Economic Systems
Productivity
An economic system in which the government controls a country's economy.
Mixed Economy
Traditional Economy
Command Economy
Free Market Economy
An economy consisting of mostly subsistence agriculture.
Traditional Economy
Natural Resources
Positive Incentive
Marginal Benefits
People who work to produce goods and services
Human Resources
Command Economy
Outputs
Entrepreneur
A reward or other enticement that encourages a behavior
Traditional Economy
Positive Incentives
Natural Resources
Negative Incentives
The products and/or services that an organization produces
Productivity
Wants
Inputs
Outputs
Basic requirements for human survival
Economics
Needs
Inputs
Wants
Land, labor, and capital; the three groups of resources that are used to make all goods and services
Factors of Production
Natural Resources
Production Possibilities Frontier
Traditional Economy
Market-based economic system with limited government involvement
Command Economy
Free Market Economy
Mixed Economy
Marginal Cost
The development of skills in a specific kind of work; division of labor
Marginal Cost
Physical Capital
Opportunity Cost
Specialization
An economic system in which resources are primarily owned and controlled by the private sector
Mixed Economy
Command Economy
Free Market Economy
Traditional Economy
The cost added by producing one additional unit of a product or service.
Marginal Benefit
Opportunity Cost
Physical Capital
Marginal Cost
The line on a production possibilities graph that shows the maximum possible output
Opportunity Cost
Production Possibilities Frontier
Productivity
Voluntary Exchange
What is the current Federal Minimum Wage set at?
$12
$7.25
$15
$11.15
In theory, how would most companies respond to a raise in minimum wages? Choose all that apply.
eliminate workers
raise prices
hire more workers
keep everything the same
Minimum Wage is the ____________ rate per hour that a worker may be paid, as required by law.
top
maximum
highest
lowest
What is the main factor contributing to the growing wealth gap in the US?
Gains at the top 1%
Decreased taxes on the wealthy
Lack of opportunities for the poor
Decreased social welfare programs
The value of the next best alternative that is given up
Opportunity Cause and Effect
Opportunity Cost
Scarcity
All the above
Your friend spends all night playing video games instead of studying for this quiz. What is the opportunity cost?
Playing video games
More time spent studying
Eating noodles
Voting in an election
What principle states that if the marginal benefits of an action are greater than the marginal costs, the action should be undertaken?
Opportunity cost principle
Consequence principle
Marginal analysis principle
Scarcity principle
If you're trying to decide whether or not to eat one more chicken strip, you're utilizing the concept of
marginal cost
Economics tells us that over time, utility decreases. This is known as
What is the definition of scarcity in economics?
The unlimited availability of resources
The limited nature of society’s resources
The process of making goods and services
The increase in consumer demand
Which term describes the value of the next best alternative that is given up when a choice is made?
Marginal utility
Opportunity cost
Scarcity
Cost-benefit
What does marginal utility refer to?
The total satisfaction from all units consumed
The additional satisfaction from consuming one more unit of a good
The cost of producing goods
The loss from not choosing an alternative
Which principle states that as more units of a product are consumed, the additional satisfaction derived from each additional unit declines?
Law of supply
Law of demand
Law of diminishing returns
Law of opportunity cost
What is the interdependence principle in economics?
People are unable to make choices without consulting someone else first.
Your best choice depends on your other choices, external developments, and expectations.
You must make choices independently, without any input from others.
You are the only person who knows what they best choice is for you regardless of external factors.
Which of the following best describes a cost-benefit analysis?
Comparing the total costs of two different products
Weighing the expected costs and benefits of an action to make a decision
Calculating the price of a product
Listing all possible alternatives
Diamonds are considered scarce resources because
they are very rare.
there is a finite amount available.
one country is hoarding the world's diamond supply.
they are expensive.
A student spends 2 hours studying for an economics test instead of going to a movie. What is the opportunity cost of studying?
The knowledge gained from studying
The price of the movie ticket
The enjoyment missed from not watching the movie
The time spent studying
If the marginal utility of eating a second slice of pizza is less than the first, which economic law does this demonstrate?
Law of demand
Law of diminishing returns
Law of supply
Law of opportunity cost
A factory hires more workers but keeps the number of machines the same. After a certain point, each additional worker produces less output than the previous one. What concept does this scenario illustrate?
Marginal utility
Law of diminishing returns
Opportunity cost
Cost-benefit analysis
A business is deciding whether to launch a new product. They estimate the costs and the expected profits. Which economic principle are they applying?
Scarcity
Marginal utility
Cost-benefit analysis
Interdependence
A consumer is deciding between buying a $10 movie ticket or a $10 meal. If the consumer chooses the movie, what is the opportunity cost?
The $10 spent on the ticket
The enjoyment of the meal not chosen
The time spent at the movie
The cost of both options
A company is considering producing one more unit of a product. The marginal cost is 8 and the marginal benefit is 10. What should the company do, and why?
Produce the unit, because the marginal benefit exceeds the marginal cost
Not produce the unit, because the marginal cost is higher
Produce the unit, because cost and benefit are equal
Not produce the unit, because marginal utility is negative
A farmer notices that after a certain number of workers are hired, each new worker adds less to total output than the previous one. How should the farmer use this information to make future hiring decisions?
Continue hiring without considering output
Stop hiring when the cost of hiring exceeds the value of additional output
Hire as many workers as possible
Only hire workers if total output decreases
A student is considering whether to spend an extra hour studying for a test or to use that hour to work at a part-time job earning $15. If the extra hour of studying is expected to improve the test score only slightly, how should the student use cost-benefit analysis to make a decision?
Choose to study, regardless of the benefit
Compare the value of the improved test score to the $15 that could be earned
Always choose to work for the money
Ignore opportunity cost in the decision
