Econ Review

Scarcity in economics refers to which of the following situations?

• A resource that is not available in sufficient quantities to satisfy all the various ways a society wants to use it.

• A situation where a good is available free of charge.

• The ability of society to consume all that it produces.

• An abundance of resources that leads to lower prices.

Answer explanation

Scarcity in economics refers to a resource that is not available in sufficient quantities to satisfy all the various ways a society wants to use it, making it the correct choice.

What does it mean if a country has an absolute advantage in the production of a good?

• It can produce the good at a lower opportunity cost than another country.

• It can produce more of the good from a given amount of resources than another country.

• It is the only country that can produce that particular good.

• It can produce the good without incurring any costs.

Answer explanation

Having an absolute advantage in the production of a good means the country can produce more of the good from a given amount of resources than another country.

Comparative advantage occurs when:

• A country can produce a good with fewer resources than another country.

• A country can produce a good at a lower opportunity cost than another country.

• A country has the absolute advantage in producing all goods.

• A country's production possibilities frontier is expanding.

Answer explanation

Comparative advantage occurs when a country can produce a good at a lower opportunity cost than another country, making it more efficient in resource allocation.

How is marginal utility defined?

• The total satisfaction received from consuming a particular quantity of a good.

• The additional satisfaction received from consuming one more unit of a good.

• The utility lost from consuming too much of a good.

• The average satisfaction received per unit of a good consumed.

Answer explanation

Marginal utility is defined as the additional satisfaction received from consuming one more unit of a good.

The Production Possibilities Curve (PPC) represents:

• The maximum output that can be produced by an economy, assuming all resources are fully employed.

• The unlimited wants and needs of a society.

• The constant opportunity cost between two goods.

• The trade-offs between two goods in a situation of unlimited resources.

Answer explanation

The Production Possibilities Curve (PPC) represents the maximum output that can be produced by an economy, assuming all resources are fully employed.

Opportunity cost refers to:

• The cost associated with not taking a particular action.

• The actual expenses incurred in producing a good.

• The amount of one product that must be given up to produce one additional unit of another product.

• The financial cost of using one's own resources.

Answer explanation

Opportunity cost refers to the amount of one product that must be given up to produce one additional unit of another product.

Which of the following is not considered a factor of production?

• Entrepreneurship

• Capital

• Demand

• Labor

Answer explanation

Demand is not considered a factor of production as it represents the desire for goods and services, not a resource used in production like entrepreneurship, capital, and labor.

A command economy is characterized by:

• Decisions about production and consumption made by the market.

• Private ownership of resources and production.

• Government making all economic decisions.

• Free competition and consumer choice.

Answer explanation

A command economy is characterized by the government making all economic decisions, not by the market, private ownership, or free competition.

In a capitalist economy:

• The government owns all the means of production.

• Economic decisions are based on customs and traditions.

• Private individuals and firms make most of the economic decisions.

• There is no private property.

Answer explanation

Private individuals and firms make most of the economic decisions in a capitalist economy.

The law of diminishing marginal utility states that:

• Utility increases at an increasing rate as consumption increases.

• The first unit of consumption of a good or service provides more utility than the second and subsequent units.

• Each additional unit of a good consumed provides the same level of utility.

• Total utility decreases as consumption increases.

Answer explanation

The law of diminishing marginal utility states that the first unit of consumption of a good or service provides more utility than the second and subsequent units.