WorksheetsUnit 1: Basic Economics
Total questions: 53
Worksheet time: 28mins
_____ are things that people would like to have, while ______ are things that people need to survive.
Needs, wants
Necessities, demands
Supply, demand
Wants, needs
When people want more than a company is willing to supply, that product will experience a _______, and the price of that product will _______.
Surplus, decrease
Surplus, increase
Shortage, decrease
Shortage, increase
When companies supply more than the consumers demand, that produce will experience a _______, and the price of that product will _______.
Surplus, decrease
Surplus, increase
Shortage, decrease
Shortage, increase
What is the relationship between trade-offs and decision-making?
a. Every decision involves a trade-off, where something is sacrificed.
b. Trade-offs are irrelevant to making decisions.
c. Trade-offs only apply to economic decisions.
d. Trade-offs are only considered in long-term planning.
Which of the following best illustrates the concept of opportunity cost?
Investing in a stock that has already lost value.
Deciding to eat a slice of cake instead of eating a salad.
Choosing to buy a new phone instead of saving for a vacation.
Spending $30 on movie tickets for a movie that was not very entertaining.
Which of the following statements accurately describes marginal benefit?
It is the cost associated with producing one more unit of a good.
It is the additional satisfaction gained from consuming one more unit of a good or service.
It refers to the total satisfaction from all units consumed.
It measures the value of resources that have already been spent.
How does marginal cost affect production decisions?
It focuses on the additional cost incurred from producing one more unit.
It is irrelevant to the decision-making process.
It represents the satisfaction gained from consuming a good.
It measures the total cost of all units produced.
Why should sunk costs be ignored in rational decision-making?
They influence the marginal benefit of a decision.
They are costs that cannot be recovered and do not affect future decisions.
They are always higher than variable costs.
They represent future costs that will be incurred.
Which of the following is a common example of a transfer payment?
A tax refund
A utility bill payment
A business loan
A Social Security benefit
In a market economy, the government usually operates with a hands-off approach, allowing businesses to do as they wish to produce products. This is known as
Governmental interference.
Fiscal policy.
Laissez-faire economics.
Monetary policy.
In a market economy, what primarily drives the production of goods and services?
Government regulations and policies.
Consumer demand and supply dynamics.
Cultural traditions and historical practices.
The availability of natural resources.
Which of the following best describes how a command economy allocates resources?
According to cultural traditions and customs.
By individual entrepreneurs seeking profit.
Based on government directives and planning.
Through market competition and consumer choice.
Which of the following best describes the role of land in the factors of production?
It refers to human effort in the production process.
It includes all natural resources used to produce goods.
It consists of tools and equipment used in production.
It is the ability to innovate and create new products.
Which of the following factors of production includes physical and mental human effort?
Land
Capital
Labor
Entrepreneurship
What does efficiency in an economy refer to?
The ability to innovate new products.
Fairness in resource distribution.
Government control over production.
Maximizing output with minimal waste.
In a traditional economy, how are resources typically allocated?
Through government planning.
According to customs and traditions.
Based on supply and demand.
By entrepreneurs seeking profit.
What does the term “invisible hand” refer to in a market economy?
The visible effects of economic policies.
The physical resources used in production.
The natural self-regulation of the market.
Government intervention in the economy.
Which of the following is not true about mutually-beneficial exchange?
Both parties benefit from the exchange of goods, making both parties better-off from trade.
Preference differences have no real impact on the decision of an individual, firm, or nation to trade.
Individuals, firms, or nations differ in their valuation of goods and services.
Increasing the size of the market increases trade and wealth.
All of the following are benefits of specialization except which one?
Specialization saves time.
Specialization increases worker skill and productivity.
Specialization slows the development of tools and innovation because one worker focuses on a specific part of the production of a whole product.
Specialization leads to the creation of more complex items.
Comparative advantage occurs when an individual (or country) carries out an economic activity with a lower ________ than another individual (or country).
Trade Surplus
Price
Rate of Exchange
Opportunity Cost
Goods that a nation produces and sends/sells to another nation are called
Exports.
Imports.
Quotas.
Embargoes.
Ideally, nations want to operate with a trade surplus. This means that they
Export more than they import.
Import more than they export.
Balance their imports and exports.
Protect home industries with quotas.
Which of the following is not considered a protectionist economic practice?
Tariff
Embargo
Free Trade
Quota
The largest trading bloc and common market in the world today is the
European Union.
North American Free Trade Agreement.
Association of Southeastern Asian Nations.
US-Mexico-Canada Agreement.
Which of the following trade agreements does the U.S. currently participate in?
European Union.
North American Free Trade Agreement.
Association of Southeastern Asian Nations.
US-Mexico-Canada Agreement.
The firm decides to produce tennis shoes for athletes
Business Sector
Public Sector
Non-profit Sector
Government Sector
Part Two – Circular Flow of Economic Activity: For questions 44-51, determine whether the situation described is happening in the Business Sector, Consumer Sector, Factor Market, or Product Market. 27. The household decides to sell his labor to the factory for $10/hour
Factor Market
Business Sector
Consumer Sector
Product Market
The factors of production are bought and sold to make shoes
Factor Market
Product Market
Stock Market
Labor Union
For questions 44-51, determine whether the situation described is happening in the Business Sector, Consumer Sector, Factor Market, or Product Market. Shoes are made in a factory using the factors of production
Business Sector
Consumer Sector
Factor Market
Product Market
30. The firm decides to sell the shoes for $80/pair ________________________________
The firm
The customer
The supplier
The manufacturer
31. The firm decides to spend $10 million on advertising the shoes ________________________________
The firm
The government
The customers
The competitors
32. The household decides what to purchase with the wages earned ________________________________
The household
The government
The company
The bank
33. The household purchases the shoes at the store ________________________________
The household
The factory
The government
The bank
Part Three – Economic Systems: For questions 34-44, identify each economic system that is described below as a traditional, command, market, or mixed economy. 34. Usually a communist or socialist system
Command
Traditional
Market
Mixed
Private citizens own and control the factors of production
market
command
traditional
mixed
Part Three – Economic Systems: For questions 34-44, identify each economic system that is described below as a traditional, command, market, or mixed economy. 36. World changes have little effect on the economy
traditional
command
market
mixed
Prices are based directly on the “Invisible Hand”
market
government
tradition
command
Goal is for wealth to be distributed equally among citizens
command
market
traditional
mixed
Practice laissez-faire economics, driven by competition
market
command
traditional
mixed
Government owns and controls the factors of production
command
market
traditional
mixed
41. Citizens own factors of production with government regulation
mixed
command
traditional
market
United States uses this form of economy
mixed
command
traditional
market
Part Three – Economic Systems: For questions 34-44, identify each economic system that is described below as a traditional, command, market, or mixed economy. 43. Usually in places of little modern technology
traditional
command
market
mixed
Use bartering to obtain goods and services
traditional
modern
digital
industrial
Products that are made to manufacture other products
Capital Goods
Consumer Goods
Raw Materials
Services
Work that is done for someone at a certain price
Service
Product
Gift
Donation
Incentive to make better products at lower prices in order to receive more profits
Profit Motive
Scarcity
Opportunity Cost
Barter System
The basic economic problem of having limited resources and goods but unlimited wants
Scarcity
Inflation
Barter
Monopoly
When one country can produce more of a product than another country
Comparative Advantage
Absolute Advantage
Opportunity Cost
Trade Deficit
Nations rely on one another to produce goods and services due to scarcity of resources
Economic Interdependence
Absolute Advantage
Self-Sufficiency
Trade Surplus
Match the economic systems to its characteristics or meaning.
Command economy
Centrally owned by the government
Mixed economy
Public and private sectors
Traditional economy
Customs, family, and historical basis
Free Market
Private sector, profit, and minimal gov.
Match the following
Specialization
assigned a specific task
Division of Labor
specific jobs to different employees
Voluntary Exchange
people willingly trade one item for anot
Factors of Production
Land, Labor, Capital, entrepreneurship
Land
Any natural resource used to produce a g
