Economics Unit 1 Pre-Test (Thinking Like an Economist)

What is the most basic economic issue for all societies?

• scarcity

• taxation

• inflation

• recession

A company decides to install more machines and lay off workers. Which economic question is addressed directly?

• How to produce

• What to produce

• For whom to produce

• Where to produce

In economic terms, what are land, labor, capital, and entrepreneurship?

• production possibilities

• factors of production

• production trade-offs

• opportunity costs

Jenny has enough money to buy either a CD or go to a movie with her friends. In economics, what is the choice that Jenny "gives up" called?

• Positive Cost

• Negative Cost

• Opportunity Cost

• Marginal Cost

What is the main idea behind the study of economics?

• Monetary policy

• Efficiency of production

• Allocation of scarce resources

• Business decisions

In economics terms, what does "there is no free lunch" mean?

• someone must pay for everything

• all production is designed to reduce scarcity

• choices are never based on self-interest

• people only think of others when making choices

How does the process of specialization change an economy?

• eliminates unemployment

• decreases competition

• improves efficiency of production

• increases government control

Unlimited Wants + Limited Resources = ????

• scarcity

• competition

• savings

• equilibrium

Unlimited Wants + Limited Resources =????

To deal with the problem in the above "equation," societies establish _________?

• governments

• economic systems

• hierarchies

• private business

In every economic system, what must people choose to do?

• Satisfy ALL the wants of their society

• Make the BEST use of scarce resources

• Create an equal distribution of income

• Save money to reduce the national debt