1. Equity Security Freedom Stability
In a typical market economy, producers are allowed to choose which products they wish to make and the amount of those products they will produce. Consumers are allowed to choose which producer they will purchase from and how many they will buy. This MOST DIRECTLY supports the broad economic goal of
Equity
Security
Freedom
Stability
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3. Which statement correctly describes the relationship between investment in personal education and standard of living?
The higher the education level a person has, the higher the salary they are likely to make.
The higher the education level a person has, the less likely they are to increase productivity.
The higher the education level a person has, the lower the salary they are likely to make.
The higher the education level a person has, the more likely they are to be unemployed

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5. For whom to produce When to produce What to produce How to produce
A headline reads: “High Tech Firms Begin Producing New Generation of Computers.” What basic economic question is being addressed in this headline?
For whom to produce
When to produce
What to produce
How to produce

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7. What is the term for an economic system where the government makes almost all the economic decisions?
Traditional
Capitalist
Command
Market

8. Foreign exchange market Resource market Product market
Steel Beam, Inc. is looking to purchase a new steel-processing machine and factory. In the circular flow diagram, this transaction will take place in the
Foreign exchange market
Resource market
Product market
Government controlled sector

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10. If Jim chooses job A, he will receive $50,000 a year, full benefits and 2 weeks of vacation. If he chooses job B he will receive $60,000 a year, full benefits and no paid vacation. Assuming Jim chooses job B, which statement is correct?
Jim’s opportunity cost is everything he gave up at job A.
Jim’s opportunity cost is everything he gained at job B.
Jim has incurred no opportunity cost because the jobs were completely different.
Jim’s opportunity cost is the $50,000 he could have gotten at the other job.

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12. Which statement is true in the circular flow diagram?
Businesses are demanders in the product market and suppliers in the factor market.
Businesses and households are not components of the circular flow diagram.
Households are demanders in the factor market and suppliers in the product market.
Households are demanders in the product market and suppliers in the factor market.

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14. Jill is trying to decide whether or not to buy a car
Jill is trying to decide whether or not to buy a car. If she is using rational decision making, she should MAINLY consider
Whether the car will lose value over time
The type of insurance she will need
If buying the car will incur any opportunity costs
The marginal costs and marginal benefits

15. If someone has comparative advantage in the production of a good, then
With a given set of resources, they produce the good at a lower opportunity cost
With a given set of resources, they produce more of the good than the competitors
They can produce more of that good than anyone else
They can charge more for the good because they have a higher opportunity cost.

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17. A production possibilities curve shows
All of society’s resources
Choices a person makes between items
The combination of goods that can be produced with a set of resources
The technological changes that improve production

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19. Assume the United States has absolute advantage over Singapore in the production of all goods. Which statement about trade possibilities between the two countries is correct?
They can still arrange a beneficial trade if each one focuses production on a good in which they have comparative advantage
Since the United States has absolute advantage in all goods, it is impossible to reach a trade agreement
Singapore could benefit from a trade with the United States, but the United States would not benefit.
The terms of trade will be based on the United State’s absolute advantage.

20. Julio decides to attend college after high school rather than getting a job. What is his opportunity cost of attending college?
All the things he could have done in that time
His tuition and fees
The education he gains in college
Wages he could have earned at a job

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22. Which provides the greatest incentive for entrepreneurs to take risks?
Interest
Prices
Profits
Inflation

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24. How does specialization relate to voluntary exchange?
Cause and effect, voluntary exchange forces us to specialize
Cause and effect, specialization leads to a need for voluntary exchange
It has the same relationship as productivity does to growth
It is an inverse relationship

25. In the production of chocolate chip cookies sold in the commercial market, which represents the factor of capital?
The oven used to bake the cookies
The retailer who sells the cookies
The dough used to bake the cookies
The worker who decorates the cookies

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27. Which headline describes a situation that will MOST LIKELY lead to future economic growth?
“Population increases for 4th straight year!”
“Study shows a shift in the production possibilities curve to the left!”
Government to pay for more people to attend college!”
“New natural resources discovered!"

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29. Which transaction below will take place in the product market on a circular flow diagram?
The Pencil Company’s paying yearly taxes.
Chris’ purchase of a new video game.
Smithville Farm’s purchase of 3 new tractors.
Jenny’s posting of her resume on a website.

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31. Growth, efficiency, and freedom are broad social goals that are typically associated with which type of economic system?
Command
Monopoly
Traditional
Market

32. Competition and free enterprise are most common in which type of economic system?
Market
Planned
Communist
Traditional

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34. The factors of production are
Land, labor, capital, time
Human resources, national resources, capital resources, and time
Human resources, natural resources, capital resources, and entrepreneurship
Consumption, investment, government spending, and net exports

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36. Which economic situation is characterized by unlimited wants exceeding limited resources?
Shortage
Surplus
Scarcity
Specialization

37. When a retail store dedicates more floor space to selling a new product, what is their opportunity cost?
The chance to sell an old product in that space
The income generated from selling the new product
The money lost while setting up the new space
The products that are placed in the new space

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39. Which describes scarcity?
A condition where supply exceeds demand
Unlimited wants exceeding limited resources
The situation that exists when there is temporarily a shortage of a good or service
An unlimited demand for goods and services

40. Jim says “as the price of something increases, the quantity demanded decreases.” Jim is
Incorrect, he means supply instead of quantity demanded
Incorrect, he means demand instead of quantity demanded
Correct, that is the law of supply
Correct, that is the law of demand

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42. When buyers and sellers interact in a market, what is the result?
Usually a market clearing price is determined.
Since buyers and sellers are always changing their preferences, markets become unstable and unreliable
Over time, fewer and fewer goods are produced because buyers have all they want
Equilibrium quantities are determined and then prices are set by the government

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44. Which would cause a production possibilities curve to shift to the left?
A massive disease that wipes out ½ of the population
Giving up some of one good to produce another
A discovery of new resources
A huge population boom in a country

45. Command Traditional Market Oligopoly
Joe lives in a country where the citizens decide where they want to work, what they want to buy, and how much they want to pay for items. Based on this limited description, Joe’s country operates under what kind of economic system?
Command
Traditional
Market
Oligopoly

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47. A COMMAND economy is an economy where the economic questions are answered by
The government
A foreign country
Tradition
The consumers and producers

48. An entrepreneur uses which productive resources when creating a good or service?
Scarcity, incentives, interdependence
Monetary and fiscal policies
Land, labor, capital
Technology, education, growth

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50. Susan offers to trade her old iPod for Claudia’s cell phone and Claudia accepts. Assuming both products work perfectly, we can conclude that
Susan places the same value on cell phones as she does for iPods
Claudia is now happier than Susan
Both people have gained because the exchange was voluntary and non-fraudulent
Neither party has gained because the exchange was fraudulent

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52. Entrepreneurship Labor Land Capital
In order to build a skyscraper, Builders Inc. purchases land, rents out several cement trucks, and hires 400 construction workers and 50 managers. Builders Inc. represents
Entrepreneurship
Labor
Land
Capital

53. Which BEST describes scarcity?
There is a limited amount of a resource to meet an unlimited demand
When there is not a lot of something
There is limited demand for an item that is plentiful
What is given up when a choice is made

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55. Which is NOT one of the three basic economic questions that must be answered in an economy?
When to produce
What to produce
For whom to produce
How to produce

56. Voluntary and fraudulent Non-fraudulent and mutually beneficial
Sylvia purchased a product that claimed it could make her lose weight. She later found out that the company purposefully did not actually include the key ingredient in the product and it did not work. Which terms best describe this transaction?
Voluntary and fraudulent
Non-fraudulent and mutually beneficial
Marginal and scarce
Rational and equitable

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58. Which economic situation exists directly because unlimited wants exceed limited resources?
Inflation
Productive resources
Scarcity
Gain from trade

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60. At a restaurant you may find a host, waiter, bus person, cook, and dishwasher. This is an example of the economic principles of
Division of labor
Specialization of capital
Economy of scale
Marginal productivity

61. In economics rational decisions occur when
Command economies answer the three basic economic questions
Marginal benefits equal or exceed marginal costs
A budget is used for spending and saving decisions
Suppliers lower their prices to increase demand

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63. In a market economy, the role of buyers and sellers is to
Manipulate supply and demand to provide the best overall benefit to everyone in society
Establish equilibrium prices and quantities for goods and services
Avoid causing inflation
Remove any government interaction in the market

64. Opportunity cost is best described as the
Monetary value of all alternatives forgone when a choice is made
Sum of all production costs
Value of the best alternative forgone when a choice is made
Most expensive resource used in production

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66. Which is a human resource that Ms
Which is a human resource that Ms. Johnson could use for her art gallery?
A security system to protect the artwork
A series of paintings by a prominent local artist
Knowledge of trends in modern art
Light fixtures to help display the artwork

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