1. Fundamental Concepts of Economics
Practice Questions

2. 1. Trees, minerals, and the real estate on which a company builds its main manufacturing center are all
Capital goods
Capital investments
Land
Entrepreneurship

3. Excessive regulation Shortages Rationing Scarcity
2. Following a massive hurricane that hits Georgia’s eastern coast, residents have no running water or electricity. As a result, citizens buy up all of the flashlights and bottled water in the area faster than producers can resupply them. What problem do people on the Georgia coast now face regarding flashlights and bottled water?
Excessive regulation
Shortages
Rationing
Scarcity

4. 3. Which of the following tends to make economies more efficient?
Specialization
Government ownership of property
Income redistribution
Regulations aimed at economic equity

5. 4. Martha owns her own company
4. Martha owns her own company. She invests in all the capital goods needed to make her product and sells her goods with the motivation of making huge profits. So long as she does not produce anything illegal, Martha freely chooses what to produce and consumers freely choose whether or not to buy her product. It sounds like Martha’s company operates in a
Command economy C. Traditional economy
Market economy D. Economy based on equity

6. 5. The greater the profit motive in an economic system, the greater the likelihood of
Innovation
Equity
Security
Government controlling the factors of production

7. 6. prices and government regulation are both strategies for
Increasing consumption
Encouraging economic equity
Dealing with scarcity
Aiding entrepreneurship

8. 7. Jamie must make an economic decision
7. Jamie must make an economic decision. He must choose whether or not to buy a new truck. After considering all the options, he concludes that the marginal costs of the truck are greater than the marginal benefits. In Jamie’s case, buying the truck would be
A rational economic decision
An irrational economic decision
An opportunity cost
A productive choice

9. 8. Common ways the government might try to regulate a mixed-market economy include
Deregulation
Forbidding any private ownership of property
Imposing tariffs or subsidies
Lifting environmental restrictions

10. 9. Which of the following is an example of investing in human capital?
Buying a new company truck
An employee asking for a raise
Paying for an employee’s health insurance
Requiring employees to document what they are doing at work