Fundamental Economics(Unit 1 Practice Test)
Multiple Choice
1.Limited productive resources and unlimited wants result in:
a. / opportunity costs / c. / scarcityb. / trade-offs / d. / all of the above
2.A basic condition that exists in which unlimited wants exceed limited productive resources is called:
a. / scarcity / c. / shortageb. / economics / d. / surplus
3.If you wanted to start your own landscaping business (cutting grass, trimming hedges), the most expensive CAPITAL would be the:
a. / mowing equipment / c. / benefits for employeesb. / labor / d. / advertising
4.The resources used to make all goods and services are the
a. / production trade-offs. / c. / opportunity costs.b. / production possibilities. / d. / factors of production.
5.Entrepreneurs are:
a. / government agents who buy land / c. / workers making a good salaryb. / risk takers in search of profits / d. / risk takers in search of costs
6.Which of the following lists would an economist consider to be land?
a. / natural gas, fertile soil, crude oil, mineralsb. / corn fields, bridges, rock quarries, oil wells
c. / factories, office buildings, assembly lines, workers
d. / farm fields, irrigation, pesticides, fertilizers
7.Which of the following represents a successful strategy for allocating scarce resources?
a. / none of the above / c. / building a home without power toolsb. / having a central government make all economic decisions for a large country / d. / assembly line production
8.Jim wants to go on a hike for exercise, but his wife is wants him to stay home and watch television with her. Jim knows that if he stays home with his wife he will not have an enjoying hike, but he will make her happy. If Jim decides to go on the hike, what is his opportunity cost?
a. / none of the above / c. / Exercise from the hikeb. / Enjoying nature / d. / Making his wife happy
9.What is the opportunity cost of a decision?
a. / the best possible way the question could have been decidedb. / the series of alternative decisions that could have been made
c. / the different ways that a different person might have made the decision
d. / the most desirable alternative given up for the decision
10.Imagine you decide to purchase a football for $35 instead of going out to dinner. Which of the following is an opportunity cost of your decision?
a. / going out to dinnerb. / the time spent making the purchase and the tax paid on the ball
c. / $35 in cash
d. / the time spent deciding to spend your money
11.Jim has been hiking for 1 hour and is considering turning back. If he adds another 30 minutes to his hike, this 30 minutes will burn 300 more calories. However, he will get back home 30 minutes later and loose 30 minutes of quality time with his wife. What is the marginal benefit of 30 more minutes of hiking?
a. / burning 300 calories / c. / 30 minumtes of hikingb. / none of the above / d. / quality time with spouse
12.
What is produced at point B?
a. / 50 Guns, 120 Butter / c. / 30 Guns, 100 Butterb. / 120 Guns, 50 Butter / d. / 30 Butter, 50 Guns
13.What is the opportunity cost of moving from B to A?
a. / 100 Butter / c. / 50 Butterb. / 120 Guns / d. / 90 Guns
14.“Resources are not being fully utilized in the production of guns and butter.” Where?
a. / C / c. / Db. / B / d. / A
15.“There are not enough resources to currently produce guns and butter at this level.” Where?
a. / D / c. / Cb. / B / d. / A
______
16. When does it cease (stop) being rational to add additional units at the margin?
a. / none of the above / c. / When marginal cost outweighs marginal benefitb. / When marginal benefit outweighs marginal cost / d. / Whe marginal benefit continues to increase
17.Which factor of production can be specialized?
a. / Land / c. / Physical Capitalb. / Labor / d. / All of the above
18.Division of labor is a characteristic of
a. / classroom education. / c. / home craft businesses.b. / entrepreneurship. / d. / specialization - such as assembly line production.
19.Invidivudals freely engage in countless transactions guided by their self-interest. What concept best fits this description?
a. / competition / c. / specializationb. / profit motive / d. / voluntary exchange
20.Which of the following is NOT a key economic question?
a. / Who should ensured that goods and services are paid for?b. / How should these goods and services be produced?
c. / What goods and services should be produced?
d. / Who consumes these goods and services?
21.Which of the following is NOT characteristic of a centrally planned economy?
a. / The central government makes all economic decisions.b. / Each collective or factory sets its own goals.
c. / The central government owns all land and capital.
d. / Each person is assigned a job.
22.What is one of the most important advantages of a free market?
a. / It encourages growth. / c. / It is easy to regulate.b. / It protects the less fortunate. / d. / It can change rapidly.
23.In what kind of an economy does the government make all the decisions?
a. / laissez faire / c. / centrally plannedb. / socialist / d. / free enterprise
24.What is an important advantage of a free market?
a. / It offers a wide variety of goods and services.b. / It protects the less fortunate.
c. / It is easy to regulate.
d. / It does not change unless the government directs it.
25.Which of the following goals is difficult to achieve in a pure free market system?
a. / economic efficiency / c. / economic freedomb. / economic equity / d. / economic growth
26.Which of the following is NOT a weakness of centrally planned economies?
a. / Most workers lack job security.b. / Consumers’ needs are generally not met.
c. / Individual freedoms are sacrificed for societal goals.
d. / Workers lack incentives to be innovative.
27.All of the following are characteristics of a free market economy EXCEPT
a. / economic freedom. / c. / government control of productive resources.b. / profit motive. / d. / private property rights.
28.The minimum wage is federal law in the United States. Which economic goal would it best fall under?
a. / economic growth. / c. / full employment.b. / economic equity. / d. / economic efficiency.
29.Command economies struggle with economic growth because they lack
a. / profit motive / d. / incentivesb. / competition / e. / A, C, and D
c. / A, B, and D / f. / government intervention
30.According to ______, the invisible hand of the marketplace leads to efficient use of resourses through the combination of ______, voluntary exchange, and competition.
a. / Karl Marx/ profit motive / c. / Adam Smith/ open opportunityb. / Adam Smith/ self-interest / d. / Adam Smith/ government intervention
31.Which of the following is a benefit of competition for consumers?
a. / Free goods and services / c. / Lower quality goods and servicesb. / Higher prices of goods and services / d. / Higher quality goods
32.How do consumers exercise their power in the American economy?
a. / by what goods and services they buy / c. / by saving their moneyb. / by becoming entrepreneurs / d. / by working for businesses
33.The United States can best be described as having a
a. / traditional system. / c. / pure free enterprise system.b. / mixed market economy. / d. / command economy.
34.Why does even a free market economy need some government intervention?
a. / to ensure that the government has the freedom to tax as necessaryb. / to provide for things that the marketplace does not address
c. / so that the government has some control over factor resources
d. / to make sure that the government can fulfill its needs for military personnel
35.Which of the following does a government provide as part of a safety net for the people?
a. / general elections every four years / c. / unemployment compensationb. / regulation of commerce / d. / a strong military defense
36.What is a negative consequence of government regulation?
a. / higher taxes / c. / larger, more complicated governmentb. / higher cost of products / d. / all of the above
37.What could cause a production possibilities curve to move down and to the left?
a. / A nation loses land after being defeated in a war.b. / An increase in the use of computer technology speeds up production.
c. / A baby boom 20 years ago resulted in a large number of young adults in the population today.
d. / Thousands of investors from overseas invest money in a nation’s economy.
38.
In the production possibilities frontier shown in this graph, what could cause production for both agricultural and manufactured goods to expand and increase?
a. / increased productivity, resources, or new technology in production of manufactured and agricultural goodsb. / an increase in agricultural goods while manufactured goods remains the same
c. / a strike by industry workers
d. / an increase in agricultural goods production while manufactured goods production remains the same
39.Economists would call goods and services _____ and productive resources ______.
a. / wants; needs / c. / tradeoffs; guns or butterb. / inputs; outputs / d. / outputs; inputs
40.Increasing your human capital by gaining further education and skills can greatly increase your:
a. / unemployment / c. / standard of livingb. / none of the above / d. / debt to income ratio
Fundamental Economics 2010 (Unit 1 Test)
Answer Section
MULTIPLE CHOICE
1.ANS:DPTS:1
2.ANS:APTS:1
3.ANS:APTS:1
4.ANS:DPTS:1DIF:MediumREF:4
OBJ:1.1.1.3TOP:factors of production
5.ANS:BPTS:1
6.ANS:APTS:1DIF:EasyREF:4
OBJ:1.1.1.2TOP:factors of production | land
7.ANS:DPTS:1
8.ANS:DPTS:1
9.ANS:DPTS:1DIF:MediumREF:9-10
OBJ:1.1.2.2TOP:opportunity cost | trade-offs
10.ANS:APTS:1DIF:AverageREF:Page 20
11.ANS:APTS:1
12.ANS:BPTS:1
13.ANS:DPTS:1
14.ANS:CPTS:1
15.ANS:CPTS:1
16.ANS:CPTS:1
17.ANS:DPTS:1
18.ANS:DPTS:1DIF:AverageREF:Page 16
19.ANS:DPTS:1
20.ANS:APTS:1DIF:MediumREF:23-24
OBJ:1.2.1.1TOP:economic system
21.ANS:BPTS:1DIF:MediumREF:34-35
OBJ:1.2.3.1TOP:centrally planned economy
22.ANS:APTS:1DIF:MediumREF:32
OBJ:1.2.2.4TOP:market economy
23.ANS:CPTS:1DIF:MediumREF:27
OBJ:1.2.3.1TOP:centrally planned economy
24.ANS:APTS:1DIF:MediumREF:32
OBJ:1.2.1.4TOP:market economy
25.ANS:BPTS:1DIF:MediumREF:32
OBJ:1.2.2.4TOP:free market
26.ANS:APTS:1DIF:HardREF:38
OBJ:1.2.3.3TOP:centrally planned economy
27.ANS:CPTS:1DIF:EasyREF:Page 46
28.ANS:BPTS:1DIF:AverageREF:Page 42
29.ANS:CPTS:1
30.ANS:BPTS:1
31.ANS:DPTS:1
32.ANS:APTS:1DIF:AverageREF:Page 49
33.ANS:BPTS:1DIF:EasyREF:Page 51
34.ANS:BPTS:1DIF:MediumREF:40-41
OBJ:1.2.4.1TOP:market economy
35.ANS:CPTS:1DIF:EasyREF:26
OBJ:1.2.1.2TOP:three economic questions and societal values
36.ANS:DPTS:1
37.ANS:APTS:1DIF:MediumREF:16
OBJ:1.1.3.2TOP:production possibilities curve
38.ANS:APTS:1DIF:AverageREF:Page23
MSC:Document Based Question
39.ANS:DPTS:1
40.ANS:CPTS:1