Economics Practice Final

All societies must answer these three questions:

• WHAT to produce, HOW to produce it, and FOR WHOM it is to be produced?

• WHAT to produce, HOW to produce it, and WHEN to produce it?

• WHAT to produce, HOW to produce it, and WHY to produce it?

• WHAT to produce, HOW to produce it, and WHO produces it?

Economics is the study of:

• business

• finance

• international trade

• choice

Which of the following descriptions best explains the meaning of opportunity cost?

• the initial cost of starting a new business

• the cost of business failure

• the cost of choosing one alternative over another

• the risk associated with a new product failing

The four factors of production are:

• land, capital, labor, and resources

• land, labor, entrepreneurs, and consumers

• tools, machinery, factories, and costs

• land, labor, capital, and, entrepreneurs

A point inside the production possibilities curve represents -

• An efficient use of resources.

• Future output

• An inefficient use of resources.

• An impossibility given current resources.

Which of the following would result in a change in the production possibilities curve in a mythical country Alpha?

• an influx of immigrants from other countries

• the discovery of an abundant natural resource

• a long drought

• all of the above

In the product market of the circular flow model –

• firms buy finished products from households

• consumers buy factors of production from firms

• firms sell factors of production to the government

• consumers buy finished products from firms

The crucial problem of economics is:

• establishing a fair tax system

• providing social goods and services

• developing a price mechanism that reflects the relative scarcities of products and resources

• allocating scarce resources to satisfy unlimited wants

Which of these statements describes a disadvantage of a traditional economy?

• Everyone knows his or her role.

• New ways of doing things are encouraged.

• New ways of doing things are discouraged.

• Difficult economic decisions are made by the state.

In which of these systems is the government most likely to provide people with goods & services they could not otherwise afford?

• market economy

• socialist economy

• traditional economy

• free enterprise economy