What is an opportunity cost?

The next-best alternative given up in order to do something else.

What is a rational economic decision?

One in which marginal benefits are greater than marginal costs.

An efficient economy is one that...

uses its resources to make the most goods and services

what is the difference between a shortage and scarcity?

a shortage can be temporary but scarcity always exists

A positive incentive is...

something that rewards us for buying/using it.

Why is scarcity a problem?

Because economic wants exceed available productive resources.

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Unit 1 Review: Fundamentals of Economics

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Questions 14

Answers

1
What is an opportunity cost?
When goods are recycled into other goods.
Only an issue when there is not a scarcity of goods and resources
Usually absent in a command economy.
The next-best alternative given up in order to do something else.
2
Which of the following is an example of physical capital?
oil in Texas
Gold found in Georgia
A new computer
A doctor's knowledge and skill
3
What is a rational economic decision?
One in which marginal costs are greater than marginal benefits.
One in which the benefits are unknown, but costs are low.
One in which there is no opportunity cost.
One in which marginal benefits are greater than marginal costs.
4
What is market economy?
Individuals are in charge
No one is in charge
Government is in charge
Both government and individuals are in charge
5
In what type of economy does the government decide whether houses or apartments will be built?
Traditional
Market
Mixed
Command
6
An efficient economy is one that...
makes the leasy costly use of its resources
has very few people who do not work for a living
uses its resources to make the most goods and services
makes the best use of all of its goods & services, some resources left over
7
what is the difference between a shortage and scarcity?
there is no real difference between the two
a shortage results from rising prices, scarcity from falling
a shortage is a lack of all goods, scarcity just one good
a shortage can be temporary but scarcity always exists
8
A positive incentive is...
something that penalizes us for buying it.
something that rewards us for buying/using it.
9
Societies are faced with which three basic questions about production of goods?
When, where, and for whom?
What, how, and why?
What, where, and when?
What, how, and for whom?
10
When governments break up monopolies & try to address shortages or surpluses, they are:
providing public goods
redistributing income
protecting property rights
resolving market failures
11
Joe's company decides to use a portion of their profits to purchase new, updated equipment. Joe's company has made what?
a decision based on the law of diminishing returns
a profit mimizing decision
An investment in human capital
a capital investment
12
What do most economists believe is the most efficient way to allocate resources?
Government Action
Competitive Markets
Distorted incentives
Rationing
13
Julie found customers & hired workers for her pet walking business. What factors of production do her workers represent?
capital
land
entrepreneurship
labor
14
Why is scarcity a problem?
Because countries have failed to achieve continuous full employment.
Because economic wants exceed available productive resources.
It has been eliminated in affluent societies such as the US and Canada.
It has been solved in all industrialized nations.

Unit 1 Review: Fundamentals of Economics Flashcards | StudBud