ECON Book Final Part 1

In the neighborhood of Maximo Jerez, located in Managua, Nicaragua, citizens only have water from 2 a.m. to 7 p.m. After Hurricane Sandy, much of the Northeast region of the United States was left without electricity. How do these examples illustrate the same economic principle?

• They illustrate the problem of capital, because both cities were without a needed resource and needed funding to purchase more.
• They illustrate the problem of needs versus wants, because the Nicaraguans need water, but electricity is just a want for Americans.
• They illustrate the problem of resource management, because the water needs to be rationed in Nicaragua and controlled during the storm in the United States.
• They illustrate that scarcity is a problem everywhere in the world, because both poor and wealthy societies can still have issues of limited resources.

Why would a study of economics necessarily include the problems of scarcity and choice?

• The study of economics should include scarcity and choice because these problems exist in all societies regardless of their level of poverty or wealth. The study of these problems shows how people seek to satisfy their needs and wants by making choices about their limited resources.
• The study of economics should include scarcity and choice because these problems exist in industrialized societies, especially the wealthiest ones. The study of these problems shows the origins of human social behavior, and the development and organization of economic institutions.
• The study of economics should include scarcity and choice because these problems exist in the world's poorest societies, especially non-industrialized ones. The study of these problems helps economists build upon knowledge from other social sciences to understand how to alleviate world poverty.
• The study of economics should include scarcity and choice because these problems exist in a majority of societies, especially among the richest and poorest peoples. The study of these problems shows how oppression has become the norm throughout the world while the wealthiest people try to control a majority of the resources.

Based on an examination of the graph, what conclusions can be drawn regarding the production possibilities of corn and jeans?

• The blue curve indicates a decrease in the capacity to produce both corn and jeans, resulting in economic growth.
• The blue curve indicates an increase in the capacity to produce both corn and jeans, resulting in economic growth.
• The blue curve indicates an increase in the capacity to produce both corn and jeans, resulting in economic decline.
• The blue curve indicates a decrease in the capacity to produce both corn and jeans, resulting in economic decline.

The photograph best represents the use of

• entrepreneurship
• human capital
• cost/benefit analysis
• physical capital

If Jake decides to work for two more years to earn money instead of getting an advanced degree, what would be his opportunity cost, and why?

• His opportunity cost is the money he gains while working for another two years, because his decision to work will give him the money he needs for graduate school.
• His opportunity cost is the possibility that his parents will be angry with him for not pursuing his degree, because his decision to work will likely mean giving up on graduate school.
• His opportunity cost is the time he has to invest working for another two years, because his decision to work forced him to spend that two years working instead of going to school.
• His opportunity cost is the money he might have gained from having an advanced degree, because his decision to work forced him to give up or postpone the alternative option of graduate school.

The points on the production possibilities frontier in this chart all represent

• opportunity costs
• underutilization of resources
• efficient use of resources
• two different types of resources

Why would a government most likely be able to influence the production possibilities curve in a free market economy?

• because government policy can affect the costs of production
• because governments tax profits on manufacturers
• because governments control the factors of production
• because governments can influence the demand for any given product

How a society answers the three basic economic questions shapes people's

• freedom of choice
• exposure to scarcity
• contributions to national defense
• liking for consumer goods

As the photograph indicates, businesses and consumers are increasingly making use of technology. What economic goal does this best reflect?

• equity
• security
• efficiency
• freedom

Which of the following countries has the freest market system?

• North Korea
• Singapore
• China
• United States