Multiple Choice
Identify the choice that
best completes the statement or answers the question.
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1.
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Any resources that are made by
humans and used to create other goods and services are called
a. | production. | c. | labor. | b. | services. | d. | capital. |
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2.
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An example of a shortage is
limited amounts of
a. | labor available because the workers
have other jobs. | b. | food available because the trucks carrying it are on
strike. | c. | food available because few people want to buy
it. | d. | water available for irrigating a crop because it is used for other
crops. |
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3.
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The resources used to make all
goods and services are the
a. | factors of
production. | c. | production
trade-offs. | b. | opportunity costs. | d. | production possibilities. |
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4.
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All of the following are types
of decisions that can be made at the margin EXCEPT
a. | whether to leave early in the
morning or late in the day for a trip. | b. | whether or not to hire 100 new workers. | c. | whether or not to go on a
vacation. | d. | whether to grow beans or corn on a large
farm. |
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5.
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The purpose of a production
possibilities graph is to
a. | make it possible to increase an
economy’s output. | b. | show alternative ways to use an economy’s
resources. | c. | enable a country to mobilize to win a war. | d. | keep an economy from having nonproductive
workers. |
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6.
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An efficient economy is one
that
a. | makes the least costly use of its
resources. | b. | has very few people who do not work for a
living. | c. | uses its resources to make the most goods and
services. | d. | makes the best use of all its goods and
services. |
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7.
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The law of increasing costs
means that when an economy increases the production of one item
a. | the actual cost goes up but the
opportunity cost goes down. | b. | the actual cost of making the item goes
down. | c. | the production costs will increase also. | d. | the opportunity cost goes
up. |
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8.
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The government of a country
must make a decision between increasing military spending and subsidizing wheat farmers. This kind of
decision is a
a. | guns or butter
issue. | c. | basic economic
decision. | b. | decision at the margin. | d. | global trade-off. |
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9.
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The opportunity cost of a
decision can be examined by using a
a. | factors of production
chart. | c. | graph of increasing
costs. | b. | production possibilities graph. | d. | global trade-off grid. |
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10.
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Production possibilities
frontiers curve when they are charted on a graph because they show
a. | the increasing costs resulting in
increasingly less output. | b. | the underutilization of resources. | c. | the technological level of the economy’s
productivity. | d. | the maximum output of goods and
services. |
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11.
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Why are all goods and services
scarce?
a. | Some goods cost more than
others. | b. | Some people want to have more goods than
others. | c. | Some things are needs and others are wants. | d. | All resources are
scarce. |
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12.
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What is the opportunity cost of
a decision?
a. | the series of alternative decisions
that could have been made | b. | the different ways that a different person might have made the
decision | c. | the most desirable alternative given up for the
decision | d. | the best possible way the question could have been
decided |
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13.
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Which of the following is the
kind of decision that can be made at the margin?
a. | whether to have a dog or a cat as a
pet | b. | whether or not to go on a vacation | c. | whether or not to hire new
workers | d. | whether or not to build an extra room on a
home |
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14.
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What is a factory building an
example of?
a. | human
capital | c. | physical
capital | b. | an economic trade-off | d. | technology |
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15.
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The government of a country
must make a decision between spending money on a hospital or spending the same amount on border
security. What kind of decision is this?
a. | production efficiency
decision | c. | global
trade-off | b. | guns or butter | d. | decision at the margin |
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16.
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How would you describe an
economy that uses its resources to make the greatest possible number of goods and
services?
a. | underutilized | c. | using opportunity cost well | b. | globally aware | d. | efficient |
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17.
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What does a production
possibilities frontier show?
a. | an economy that is producing but not
at the maximum | b. | scarce and less scarce resources | c. | the maximum amount that an economy can
produce | d. | global trade-offs and costs of doing
business |
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18.
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The lack of which of the
following represents a scarcity?
a. | grapefruit juice because very few
people want to buy it | b. | enough workers to finish two jobs because there’s a limited supply of
workers | c. | orange juice because the trucks carrying it are on
strike | d. | enough workers to work at night because the pay is too
low |
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19.
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Which of the following makes
someone an entrepreneur?
a. | inventing and selling the rights to
manufacture a computer game | b. | running a service that hires people to install sprinkler systems in
lawns | c. | becoming a highly paid dancer | d. | earning a lot of money as a computer
programmer |
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20.
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A country’s production
possibilities increase because the available workers become more skilled at using a computer. This is
an example of growth caused by
a. | production
opportunity | c. | technology | b. | physical capital | d. | global resources |
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21.
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You bought two new CDs with the
last $30 in your checking account, and your next payday is on Monday. What is the opportunity cost of
these CDs?
a. | knowing you are the first of your
friends to have these CDs | b. | $30 | c. | the difference between the cost to produce the CDs and the price you paid for
them | d. | dinner and a movie with your friends this Saturday
night |
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22.
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A nation’s automakers
install new robotic machinery to build cars. Now, cars take only a day to make, and the factories can
produce many more cars than before. This is an example of growth caused by
a. | human
capital. | c. | land and natural
resources. | b. | production possibility curves. | d. | technology. |
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23.
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One example of an entrepreneur
is
a. | a lawyer in a high-profile law firm
that specializes in business law. | b. | a writer who is hired by a film studio to adapt a novel into a
screenplay. | c. | an Olympic ice skater who later decides to join a professional ice
show. | d. | an artist who runs a business painting murals in office buildings and
restaurants. |
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24.
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Which of the following is a
“guns or butter” decision?
a. | A country must decide whether to use
its steel to build new fighter jets or new sports cars. | b. | A man must decide whether to install an alarm system in
his house or buy new furniture for the living room. | c. | A woman has to decide whether to replace her old car with
a new sports car or a family sedan. | d. | A school has to decide whether to build a new gym or renovate the
auditorium. |
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25.
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What can a decision-making grid
do?
a. | show you every possible benefit of
your decision | b. | help you determine some of the opportunity costs for your
decision | c. | show you every possible consequence of your
decision | d. | tell you the right course of
action |
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26.
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Which of the following lists
would an economist consider to be land?
a. | farm fields, tractors, pesticides,
fertilizers | b. | factories, office buildings, assembly lines,
workers | c. | iron ore, natural gas, fertile soil, water | d. | dams, bridges, rock quarries, oil
wells |
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27.
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One example of thinking at the
margin is
a. | deciding whether the benefit of
working two extra hours per day is worth the sacrifice of study
time. | b. | putting all of your money in a savings account because the interest rates are
so high. | c. | deciding to buy a car you don’t really like because it is significantly
less expensive than the one you want. | d. | determining whether it is better to spend your savings on a new CD player or
on a television. |
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28.
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The community of Desertville
traditionally produces a large number of tires and a small amount of kiwi fruit. Kiwis are become
increasingly popular, and Desertville has decided to expand kiwi cultivation and decrease tire
manufacturing. According to the law of increasing costs,
a. | the cost of producing kiwis will
decrease while the cost of producing tires will increase. | b. | the cost of producing tires will decrease while the cost
of producing kiwis will increase. | c. | the cost of producing tires will decrease. | d. | the cost of producing kiwis will
increase. |
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29.
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Which of the following is an
example of scarcity, rather than shortage?
a. | Gasoline was rationed in America
during World War II. | b. | A popular toy is sold out during the busy holiday
season. | c. | A person wants an endless supply of everything but cannot have
it. | d. | You have spent your last penny and payday is a week
away. |
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30.
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The physical capital used by a
woodworker to make furniture would include
a. | hard work and
time. | c. | a workshop and
money. | b. | saws and drills. | d. | wood and glue. |
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31.
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Human capital
includes
a. | the machinery used to weave
cloth. | b. | the equipment used by a doctor to cure a
patient. | c. | the salary paid to an accountant. | d. | a taxi driver’s knowledge of the city
streets. |
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32.
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Which of the following is NOT
shown on a production possibilities curve?
a. | all of the goods and services an
economy has the ability to produce | b. | whether an economy has grown or shrunk | c. | the efficiency of an
economy | d. | the opportunity cost of a decision to produce more of one good or
service |
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33.
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A company that makes baseball
caps is underutilizing its resources. What does this mean?
a. | The company is producing fewer caps
than it could be. | b. | The company is paying its employees less than it should
be. | c. | The company is running more efficiently than its
competitors. | d. | The company is making caps when it could be making t-shirts
instead. |
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34.
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What could cause a production
possibilities curve to move down and to the left?
a. | A nation loses land after being
defeated in a war. | b. | An increase in the use of computer technology speeds up
production. | c. | Thousands of investors from overseas invest money in a nation’s
economy. | d. | A baby boom 20 years ago resulted in a large number of young adults in the
population today. |
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35.
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What can cause a production
possibilities curve to move to the right?
a. | The population is growing
increasingly old. | b. | An epidemic kills thousands of young men and
women. | c. | Thousands of people move out of the country. | d. | A new invention lowers the cost of
production. |
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Matching
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Identifying Key
Terms
Match each
term with the correct statement below. a. | efficiency | g. | shortage | b. | goods | h. | opportunity
cost | c. | trade-off | i. | underutilization | d. | production possibilities graph | j. | labor | e. | scarcity | k. | factors of production | f. | services |
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36.
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most desirable alternative
given up when people choose one course of action over another
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37.
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limited quantities of
resources to meet unlimited needs or desires
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38.
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representation of alternative
ways to use an economy’s resources
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39.
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use of fewer resources than
the economy is capable of using
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40.
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actions or activities that one
person performs for another
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41.
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physical objects that can be
exchanged
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42.
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paid effort that people devote
to a task
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43.
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use of resources in a way that
maximizes output of goods and services
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Identifying Key
Terms
Match each
term with the correct statement below. a. | factors of production | g. | growth | b. | production possibilities frontier | h. | opportunity cost | c. | production possibilities graph | i. | underutilization | d. | trade-offs | j. | efficiency | e. | shortage | k. | services | f. | scarcity |
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44.
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greatest output of goods and
services through the best use of resources
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45.
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land, labor, and
capital
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46.
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temporary lack of one or more
goods
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47.
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the most attractive
alternative that is given up when an economic decision is reached
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48.
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the line that shows different
production possibilities for an economy
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49.
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all the possible alternatives
that are rejected when a choice is made
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50.
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representation of the possible
ways an economy could use resources
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51.
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the basic economic condition
of all goods and services
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