Essential Economic Concepts Quiz
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Questions and Answers

What does a Production Possibilities Graph show?

  • The total cost of production for two goods in a given time period
  • The price elasticity of demand for two goods
  • The maximum possible combinations of two goods that can be produced in a given time period with available resources (correct)
  • The total revenue generated from the sale of two goods

    • What are the 4 factors of production?

  • Land, labor, money, and technology
  • Land, labor, capital, and entrepreneurship (correct)
  • Land, resources, production, and distribution
  • Labor, capital, goods, and services

    • What are the 3 key economic questions?

  • What to produce, how to produce, and for whom to produce (correct)
  • Why to produce, who to produce for, and how to produce efficiently
  • When to produce, where to produce, and how much to produce
  • Who to produce for, how to distribute, and when to produce

    • Define market failure.

    <p>A situation in which the market does not allocate resources efficiently</p> Signup and view all the answers

    Define Law of Demand.

    <p>As the price of a good decreases, the quantity demanded increases, and vice versa</p> Signup and view all the answers

    Define complements and give one example.

    <p>Goods that are consumed together, like peanut butter and jelly</p> Signup and view all the answers

    What is the term for the situation where limited resources cannot satisfy all the needs and wants of people?

    <p>Scarcity</p> Signup and view all the answers

    What do we call the risk-taking individual who combines the other factors of production to create and market new goods or services?

    <p>Entrepreneur</p> Signup and view all the answers

    What is the term for the value of the next best alternative that is given up when making a choice?

    <p>Opportunity cost</p> Signup and view all the answers

    What does the term 'guns or butter' refer to in economics?

    <p>Trade-offs between military and civilian spending</p> Signup and view all the answers

    What is the term for the condition in which all resources are used to produce the goods and services that people most want?

    <p>Efficiency</p> Signup and view all the answers

    What is the term for goods that are both non-excludable and non-rival in consumption?

    <p>Public goods</p> Signup and view all the answers

    What is the term for the situation where limited resources cannot satisfy all the needs and wants of people?

    <p>Scarcity</p> Signup and view all the answers

    What does a Production Possibilities Graph show?

    <p>Alternative combinations of goods that an economy can produce given its available resources</p> Signup and view all the answers

    What is the term for the risk-taking individual who combines the other factors of production to create and market new goods or services?

    <p>Entrepreneur</p> Signup and view all the answers

    What are the 3 key economic questions?

    <p>What to produce, how to produce, for whom to produce</p> Signup and view all the answers

    Define free enterprise.

    <p>An economic system where individuals are free to own businesses and make economic choices</p> Signup and view all the answers

    Define market failure.

    <p>When the market is unable to allocate resources efficiently</p> Signup and view all the answers

    Define elastic demand and give one example.

    <p>When a change in price leads to a proportionally smaller change in quantity demanded; luxury goods</p> Signup and view all the answers

    What are the 4 economic systems?

    <p>Market economy, planned economy, mixed economy, traditional economy</p> Signup and view all the answers

    Define free enterprise.

    <p>An economic system where private individuals or groups have the right to own property and businesses and make a profit with limited government intervention</p> Signup and view all the answers

    Define substitutes and give one example.

    <p>Goods that are consumed instead of each other, e.g., tea and coffee</p> Signup and view all the answers

    What are the 6 factors that can cause the demand curve to shift to the right?

    <p>Change in consumer income, change in consumer tastes, change in expectations, change in the number of consumers, change in the price of related goods, change in technology</p> Signup and view all the answers

    What are the 4 economic systems?

    <p>Capitalism, socialism, communism, mixed economy</p> Signup and view all the answers

    Define complements and give one example.

    <p>Goods that are consumed together and complement each other, e.g., computers and software</p> Signup and view all the answers

    Define inelastic demand and give one example.

    <p>Demand that is unaffected by price changes, e.g., salt</p> Signup and view all the answers

    What are the 6 factors that can cause the demand curve to shift to the right?

    <p>Changes in income, price of substitutes, price of complements, population, expectations, advertising</p> Signup and view all the answers

    What is the main factor that can affect elasticity of supply?

    <p>Availability of substitutes for production inputs</p> Signup and view all the answers

    What are the factors that can cause the supply curve to shift to the left?

    <p>Natural disasters affecting production</p> Signup and view all the answers

    Define equilibrium.

    <p>A state of balance where quantity demanded equals quantity supplied</p> Signup and view all the answers

    What are the 3 uses of money?

    <p>Medium of exchange, unit of account, store of value</p> Signup and view all the answers

    What category makes up the largest percentage of mandatory spending?

    <p>Social Security and Medicare</p> Signup and view all the answers

    What is the definition of inflation?

    <p>A general increase in prices and fall in the purchasing value of money</p> Signup and view all the answers

    What are the 3 uses of money?

    <p>Medium of exchange, unit of account, store of value</p> Signup and view all the answers

    What category makes up the largest percentage of mandatory spending?

    <p>Social Security and Medicare</p> Signup and view all the answers

    What is the definition of inflation?

    <p>A general increase in prices and fall in the purchasing value of money</p> Signup and view all the answers

    What is the purpose of NAFTA?

    <p>To promote trade and economic integration between the United States, Canada, and Mexico</p> Signup and view all the answers

    What is the most important job of the Federal Reserve?

    <p>Controlling the money supply and interest rates to maintain economic stability</p> Signup and view all the answers

    Define comparative advantage.

    <p>The ability of a country to produce a good at a lower opportunity cost than another country</p> Signup and view all the answers

    What is the most important job of the Federal Reserve?

    <p>Controlling inflation and maintaining price stability</p> Signup and view all the answers

    Define specialization. Why does specialization cause nations to trade with each other?

    <p>Specialization is when a country focuses on producing a limited set of goods and services.</p> Signup and view all the answers

    Define tariff.

    <p>A tax on imported goods</p> Signup and view all the answers

    What is the purpose of NAFTA?

    <p>To eliminate trade barriers between Canada, Mexico, and the United States</p> Signup and view all the answers

    What is the most important job of the Federal Reserve?

    <p>Controlling the nation's money supply and interest rates</p> Signup and view all the answers

    What does specialization cause nations to do?

    <p>Trade with each other to obtain goods and services they do not produce efficiently</p> Signup and view all the answers

    What is the purpose of NAFTA?

    <p>To promote trade and economic integration between the United States, Canada, and Mexico</p> Signup and view all the answers

    Define trade surplus.

    <p>A situation where a country exports more goods and services than it imports</p> Signup and view all the answers

    Define protectionism.

    <p>The policy of restraining trade between countries through methods such as tariffs and quotas</p> Signup and view all the answers

    Expansionary fiscal policies are designed to stimulate economic growth and increase aggregate demand.

    <p>True</p> Signup and view all the answers

    Contractionary fiscal policies are intended to slow down economic growth and decrease aggregate demand.

    <p>True</p> Signup and view all the answers

    Classical Economics is a school of economic thought that emphasizes the importance of free markets and minimal government intervention.

    <p>True</p> Signup and view all the answers

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