Last Name:     Period: 
 
First Name: 

ECON CH-1 WHAT IS ECONOMICS

Matching
 
 
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
 

 1. 

 the line that shows different production possibilities for an economy
 

 2. 

 the basic economic condition of all goods and services
 

 3. 

 greatest output of goods and services through the best use of resources
 

 4. 

 land, labor, and capital
 

 5. 

 temporary lack of one or more goods
 

 6. 

 representation of the possible ways an economy could use resources
 

 7. 

 the most attractive alternative that is given up when an economic decision is reached
 

 8. 

 all the possible alternatives that are rejected when a choice is made
 
 
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
 

 9. 

 limited quantities of resources to meet unlimited needs or desires
 

 10. 

 actions or activities that one person performs for another
 

 11. 

 most desirable alternative given up when people choose one course of action over another
 

 12. 

 representation of alternative ways to use an economy’s resources
 

 13. 

 paid effort that people devote to a task
 

 14. 

 use of resources in a way that maximizes output of goods and services
 

 15. 

 use of fewer resources than the economy is capable of using
 

 16. 

 physical objects that can be exchanged
 

Multiple Choice
Identify the choice that best completes the statement or answers the question.
 

 17. 
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.
water available for irrigating a crop because it is used for other crops.
d.
food available because few people want to buy it.
 

 18. 
The purpose of a production possibilities graph is to
a.
keep an economy from having nonproductive workers.
b.
enable a country to mobilize to win a war.
c.
show alternative ways to use an economy’s resources.
d.
make it possible to increase an economy’s output.
 

 19. 
What is the opportunity cost of a decision?
a.
the best possible way the question could have been decided
b.
the most desirable alternative given up for the decision
c.
the different ways that a different person might have made the decision
d.
the series of alternative decisions that could have been made
 

 20. 
What can a decision-making grid do?
a.
help you determine some of the opportunity costs for your decision
b.
show you every possible consequence of your decision
c.
tell you the right course of action
d.
show you every possible benefit of your decision
 

 21. 
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.
technology.
c.
production possibility curves.
b.
land and natural resources.
d.
human capital.
 

 22. 
Which of the following is an example of scarcity, rather than shortage?
a.
Gasoline was rationed in America during World War II.
b.
You have spent your last penny and payday is a week away.
c.
A popular toy is sold out during the busy holiday season.
d.
A person wants an endless supply of everything but cannot have it.
 

 23. 
Production possibilities frontiers curve when they are charted on a graph because they show
a.
the technological level of the economy’s productivity.
b.
the underutilization of resources.
c.
the maximum output of goods and services.
d.
the increasing costs resulting in increasingly less output.
 

 24. 
What could cause a production possibilities curve to move down and to the left?
a.
A baby boom 20 years ago resulted in a large number of young adults in the population today.
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 nation loses land after being defeated in a war.
 

 25. 
The resources used to make all goods and services are the
a.
production possibilities.
c.
production trade-offs.
b.
opportunity costs.
d.
factors of production.
 

 26. 
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
 

 27. 
What does a production possibilities frontier show?
a.
the maximum amount that an economy can produce
b.
global trade-offs and costs of doing business
c.
an economy that is producing but not at the maximum
d.
scarce and less scarce resources
 

 28. 
One example of an entrepreneur is
a.
an Olympic ice skater who later decides to join a professional ice show.
b.
an artist who runs a business painting murals in office buildings and restaurants.
c.
a lawyer in a high-profile law firm that specializes in business law.
d.
a writer who is hired by a film studio to adapt a novel into a screenplay.
 

 29. 
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.
guns or butter
c.
decision at the margin
b.
global trade-off
d.
production efficiency decision
 

 30. 
Which of the following is a “guns or butter” decision?
a.
A man must decide whether to install an alarm system in his house or buy new furniture for the living room.
b.
A country must decide whether to use its steel to build new fighter jets or new sports cars.
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.
 

 31. 
One example of thinking at the margin is
a.
determining whether it is better to spend your savings on a new CD player or on a television.
b.
deciding whether the benefit of working two extra hours per day is worth the sacrifice of study time.
c.
deciding to buy a car you don’t really like because it is significantly less expensive than the one you want.
d.
putting all of your money in a savings account because the interest rates are so high.
 

 32. 
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.
physical capital
c.
production opportunity
b.
technology
d.
global resources
 

 33. 
What is a factory building an example of?
a.
physical capital
c.
human capital
b.
technology
d.
an economic trade-off
 

 34. 
The opportunity cost of a decision can be examined by using a
a.
production possibilities graph.
c.
global trade-off grid.
b.
factors of production chart.
d.
graph of increasing costs.
 

 35. 
All of the following are types of decisions that can be made at the margin EXCEPT
a.
whether to grow beans or corn on a large farm.
b.
whether to leave early in the morning or late in the day for a trip.
c.
whether or not to go on a vacation.
d.
whether or not to hire 100 new workers.
 

 36. 
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 work at night because the pay is too low
c.
orange juice because the trucks carrying it are on strike
d.
enough workers to finish two jobs because there’s a limited supply of workers
 

 37. 
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 making caps when it could be making t-shirts instead.
d.
The company is running more efficiently than its competitors.
 

 38. 
Any resources that are made by humans and used to create other goods and services are called
a.
capital.
c.
production.
b.
labor.
d.
services.
 

 39. 
Which of the following is NOT shown on a production possibilities curve?
a.
whether an economy has grown or shrunk
b.
the opportunity cost of a decision to produce more of one good or service
c.
the efficiency of an economy
d.
all of the goods and services an economy has the ability to produce
 

 40. 
The government of a country must make a decision between increasing military spending and subsidizing wheat farmers. This kind of decision is a
a.
global trade-off.
c.
decision at the margin.
b.
guns or butter issue.
d.
basic economic decision.
 

 41. 
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.
the difference between the cost to produce the CDs and the price you paid for them
b.
$30
c.
dinner and a movie with your friends this Saturday night
d.
knowing you are the first of your friends to have these CDs
 

 42. 
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 opportunity cost goes up.
c.
the actual cost of making the item goes down.
d.
the production costs will increase also.
 

 43. 
The physical capital used by a woodworker to make furniture would include
a.
saws and drills.
c.
hard work and time.
b.
a workshop and money.
d.
wood and glue.
 

 44. 
Human capital includes
a.
the salary paid to an accountant.
b.
the machinery used to weave cloth.
c.
the equipment used by a doctor to cure a patient.
d.
a taxi driver’s knowledge of the city streets.
 

 45. 
Which of the following is the kind of decision that can be made at the margin?
a.
whether or not to go on a vacation
b.
whether to have a dog or a cat as a pet
c.
whether or not to hire new workers
d.
whether or not to build an extra room on a home
 

 46. 
Why are all goods and services scarce?
a.
Some people want to have more goods than others.
b.
Some things are needs and others are wants.
c.
All resources are scarce.
d.
Some goods cost more than others.
 

 47. 
An efficient economy is one that
a.
makes the best use of all its goods and services.
b.
has very few people who do not work for a living.
c.
makes the least costly use of its resources.
d.
uses its resources to make the most goods and services.
 

 48. 
How would you describe an economy that uses its resources to make the greatest possible number of goods and services?
a.
efficient
c.
globally aware
b.
underutilized
d.
using opportunity cost well
 

 49. 
Which of the following lists would an economist consider to be land?
a.
iron ore, natural gas, fertile soil, water
b.
dams, bridges, rock quarries, oil wells
c.
farm fields, tractors, pesticides, fertilizers
d.
factories, office buildings, assembly lines, workers
 

 50. 
What can cause a production possibilities curve to move to the right?
a.
A new invention lowers the cost of production.
b.
An epidemic kills thousands of young men and women.
c.
The population is growing increasingly old.
d.
Thousands of people move out of the country.
 

 51. 
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 increase.
b.
the cost of producing tires will decrease while the cost of producing kiwis will increase.
c.
the cost of producing kiwis will decrease while the cost of producing tires will increase.
d.
the cost of producing tires will decrease.
 



 
         Start Over