The limited nature of resources compared to unlimited wants

Why is it important for students, entrepreneurs, and politicians to understand opportunity costs?

It helps them make better financial decisions

What are the four factors of production?

Capital, labor, land, and entrepreneurship

What is competition, and how does it affect price and quality?

Competition decreases prices and improves quality

Why are the four factors of production an important part of our economic system?

They are necessary for producing goods and services

What is the purpose of the "circular flow" model?

To show how money, goods, and services move in an economy

If supply rises, what happens to demand?

Demand stays the same, but prices fall

If demand rises, what happens to supply?

Supply may increase in response

What was Adam Smith’s theory of the “invisible hand”?

The economy functions best when individuals pursue their self-interest

What are the three basic economic questions?

What to produce? How to produce? Who to produce it for?

What is a traditional economy?

An economy based on customs and culture

What is a command economy?

A system where the government makes all economic decisions

What does the term "incentive" mean?

A reward or punishment that motivates behavior

Why does every society face the three economic questions?

Because resources are scarce, and decisions must be made about their use

What are the three interacting parts of the "circular flow" model?

Households, businesses, and the government

What is a (free) market economy?

An economy where supply and demand dictate production

What is a mixed economy?

A combination of market and government intervention

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Economics Basics (3-13-25)

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Questions 20

Answers

1
1. What is scarcity?
The unlimited availability of resources
The limited nature of resources compared to unlimited wants
The ability to produce everything a society desires
The study of how people make choices
2
If price rises, what happens to demand?
Demand decreases
Demand stays the same
Demand increases
Demand is unpredictable
3
Why is it important for students, entrepreneurs, and politicians to understand opportunity costs?
It allows them to avoid all risks
It helps them predict the future
It ensures that they always make a profit
It helps them make better financial decisions
4
What are the four factors of production?
Money, labor, government, and demand
Imports, exports, revenue, and cost
Supply, demand, equilibrium, and trade
Capital, labor, land, and entrepreneurship
5
In a market economy, who makes decisions about production and prices?
The state and local authorities
Banks and financial institutions
The government
Consumers and producers
6
What is competition, and how does it affect price and quality?
Competition increases prices and decreases quality
Competition decreases prices and improves quality
Competition always leads to monopolies
Competition has no impact on markets
7
Why are the four factors of production an important part of our economic system?
They are only used by large corporations
They are necessary for producing goods and services
They determine the wealth of a nation
They only apply to traditional economies
8
What is the purpose of the "circular flow" model?
To explain the stock market
To predict global trade patterns
To demonstrate how banks operate
To show how money, goods, and services move in an economy
9
If supply rises, what happens to demand?
Demand increases
Demand is not affected by supply
Demand stays the same, but prices fall
Demand decreases
10
If demand rises, what happens to supply?
Supply is unaffected
Supply may increase in response
Supply automatically increases
Supply decreases
11
What was Adam Smith’s theory of the “invisible hand”?
The government should control all production
The economy functions best when individuals pursue their self-interest
The market is always in perfect equilibrium
The economy should have no trade or international exchange
12
What are the three basic economic questions?
Who should pay taxes? Should goods be distributed? What should be exported?
What to produce? How to produce? Who to produce it for?
What ishould be government-controlled? How should demand be measured?
How much money to print? Who controls? What is the price of labor?
13
What is a traditional economy?
An economy controlled by the government
A system based on global trade
An economy based on customs and culture
An economy where only private businesses make decisions
14
What is a command economy?
A system where individual choices determine production
A system where the government makes all economic decisions
A free trade system
A system based entirely on bartering
15
What does the term "incentive" mean?
A government tax on imports
A fixed price for goods
The total profit of a business
A reward or punishment that motivates behavior
16
If price declines, what happens to demand?
Demand becomes irrelevant
Demand decreases
Demand increases
Demand remains constant
17
Why does every society face the three economic questions?
Because resources are scarce, and decisions must be made about their use
Because resources are unlimited
Because people agree on the best way to allocate resources
Because every country has the same government structure
18
What are the three interacting parts of the "circular flow" model?
Exports, imports, and savings
Households, businesses, and the government
Labor unions, multinational corporations, and banks
Consumers, producers, and natural disasters
19
What is a (free) market economy?
An economy where supply and demand dictate production
An economy where the government controls most industries
An economy without private property
A system where only large corporations can operate
20
What is a mixed economy?
An economy based only on agriculture
A completely unregulated economy
A system where businesses have no competition
A combination of market and government intervention

Economics Basics (3-13-25) Flashcards | StudBud