Economics Lesson 1 Quiz

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Questions and Answers

The key economic concept that serves as the basis for the study of economics is:

Money

Inflation

Scarcity (correct)

Unemployment

The opportunity cost of Tammie's attending the concert is:

$450

$50

$600 (correct)

$300

From an economic perspective, when a student decides to attend another year of college, the student has concluded that the marginal:

Costs of attending college have decreased that year

Benefits of attending college have increased that year

Costs of attending college will be partly subsidized by the parents or the government

Benefits of attending college are greater than the marginal costs (correct)

The purpose of the ceteris paribus assumption used in economic analysis is to:

Focus on the effect of a single factor on a certain variable Signup and view all the answers

A schedule or curve that shows the various combinations of two products a consumer can purchase with a specific amount of money income is:

A budget line Signup and view all the answers

Economists would classify all of the following as land except:

A hydroelectric dam Signup and view all the answers

Which is not a factor of production?

Money Signup and view all the answers

The role of the entrepreneur in society is to:

Bring the factors of production together and take the risks of producing Signup and view all the answers

The combination of 5 drill presses and 2 bread is:

An inefficient combination Signup and view all the answers

A point on the production possibilities curve is:

Attainable and resources are fully employed Signup and view all the answers

If a production possibilities curve is concave and not a straight line, then:

Resources are not equally suited to producing alternative products Signup and view all the answers

If two variables are directly related they will always graph as:

An upsloping line Signup and view all the answers

The market system is said to be characterized by 'consumer sovereignty.' This is because:

Of the role of consumers in determining what goods are produced Signup and view all the answers

Anything that is generally acceptable in trading for goods and services is a:

Medium of exchange Signup and view all the answers

Explain how (if at all) each of the following events affects the location of a country's production possibilities curve.

(a) An increase in the quality of education moves the curve outward. (b) An increase in the number of unemployed workers moves the curve inward. (c) Improved efficiency in copper extraction moves the curve outward. (d) A devastating earthquake shifts the curve inward. Signup and view all the answers

What are the three interrelated features of the economic perspective?

Scarcity and Choice, Purposeful Behavior, Marginalism (Benefits and Costs) Signup and view all the answers

What is the difference between microeconomics and macroeconomics?

Macroeconomics looks at the economy as a whole, while microeconomics focuses on individual decision-making. Signup and view all the answers

The economic perspective assumes that people make choices based on their self-interest and that they are purposeful. These economic decisions are also based upon the comparisons of what?

It is based off the comparisons of marginal benefits and marginal costs. Signup and view all the answers

Name and explain the two types of economic statements.

Positive statements are factual and can be tested. Normative statements are opinion-based and often lead to disagreements. Signup and view all the answers

What is the economic means of satisfying wants?

The economic means are limited because of limited income. Signup and view all the answers

A schedule or curve that shows the various combinations of two products a consumer can buy with money income is called what?

Budget Line Signup and view all the answers

When a consumer's income increases, the budget line shifts to the left or right?

An increase in the consumer's income will shift the budget line to the right. Signup and view all the answers

What are the four types of economic resources?

Land, Labor, Capital, and Entrepreneurial Ability Signup and view all the answers

In a command economy, property resources are primarily owned by who?

In a command economy, resources are typically owned by the government. Signup and view all the answers

Broadly defined, competition is present if two conditions prevail; what are these two conditions?

Independently acting sellers and buyers operating in a particular market, and freedom of sellers and buyers to enter or leave markets. Signup and view all the answers

What is it called when workers specialize in various tasks to produce a commodity?

Human specialization or Division of Labor Signup and view all the answers

Consumers are not sovereign in a market economy and do not register their economic wants with 'Dollar votes'.

False Signup and view all the answers

What economic terminology explains a situation where the product the first trader wants to sell is the same as the product the second trader wants to buy?

Coincidence of Wants Signup and view all the answers

In the circular flow model, what are the two markets and what roles do each of them play?

Product Market sells goods and services produced by businesses to households, and Resource Market sells resources from households to businesses. Signup and view all the answers

What Adam Smith term explains competition in the economy compelled by firms seeking to promote their own interests?

Invisible Hand Signup and view all the answers

A fundamental assumption of economics is that:

Every decision maker faces constraints Signup and view all the answers

Adam Smith believed that:

A benevolent deity insured that the free marketplace would always work Signup and view all the answers

An economic model is:

An abstract representation of reality Signup and view all the answers

Whose theory implied that unemployment could be avoided by producing enough goods and services to keep all workers busy?

Jean-Baptiste Say Signup and view all the answers

If China can produce more clothing in a year than England using fewer resources, then:

China must have an absolute advantage in producing clothing Signup and view all the answers

James Buchanan believed that:

Bureaucrats are self-interested utility-maximizers, motivated by things like salary, public reputation, power, etc. Signup and view all the answers

John Maynard Keynes believed that:

The government needed to intervene in the free marketplace when certain conditions existed Signup and view all the answers

Macroeconomics is:

C and D above Signup and view all the answers

Opportunity costs exist because:

Limited resources cannot satisfy all of the wants in a society Signup and view all the answers

What economic system is based on private ownership of capital?

Capitalism Signup and view all the answers

Study Notes

Key Economic Concepts

Scarcity is the fundamental economic concept that drives the study of economics, emphasizing limited resources to meet unlimited wants.
Opportunity cost represents the value of the next best alternative given up when making a choice.

Opportunity Cost Analysis

Tammie's opportunity cost for attending a concert is calculated by considering her lost wages and costs associated with the trip, totaling $600.
Understanding opportunity cost is vital for economic decision-making and prioritizing resources.

Marginal Analysis

Marginal benefits must exceed marginal costs for an individual, such as a student attending an additional year of college, to justify their decision.
The concept of ceteris paribus is used to isolate the effects of one variable, ensuring other factors remain constant in economic analysis.

Production Possibilities and Efficiency

A budget line illustrates the combinations of two products available to a consumer based on their income.
Production possibilities curves are tools that display attainable output levels, where points on the curve indicate efficient use of resources, while points inside are inefficient.

Economic Resources

Four main types of economic resources include land, labor, capital, and entrepreneurial ability.
Land, as a factor of production, excludes certain items like hydroelectric dams, which are man-made.

Market Mechanisms

Consumer sovereignty in market economies empowers consumers to dictate production through their purchasing choices.
The circular flow model highlights interactions in the economy, with households providing resources to businesses and purchasing goods and services in return.

Economic Theories and Models

The "invisible hand" concept from Adam Smith illustrates how individual pursuits contribute to societal benefits.
Economic models serve as abstract representations of reality, helping to simplify complex economic interactions.

Macroeconomics vs. Microeconomics

Macroeconomics examines the overall economy, including factors affecting aggregate performance, while microeconomics focuses on individual decision-making.
Understanding the differences between these two branches is crucial for comprehensive economic analysis.

Statements in Economics

Positive economic statements are factual and objective, while normative statements include personal opinions or value judgments; the latter often leads to disagreements among economists.

Economic Systems and Theories

Capitalism is characterized by private ownership of capital, contrasting with command economies where resources are government-owned.
Influential economists like John Maynard Keynes argue for government intervention in the economy during downturns to stabilize it.

Specialization and Competition

Specialization increases efficiency through division of labor, allowing workers to focus on specific tasks.
Healthy competition exists where multiple independent buyers and sellers operate, promoting market dynamism.

Limitations and Constraints

The economizing problem arises due to the limited means to satisfy unlimited wants, highlighting the importance of choice and prioritization in economics.
Opportunity costs stem from resource limitations, forcing trade-offs in decision-making processes.

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Description

Test your knowledge on key economic concepts and opportunity cost with this quiz based on Lesson 1 of economics. Challenge yourself with multiple-choice questions that cover fundamental principles of the subject.