Economics Test 1 Review

What is the definition of economics?

• The study of government policies

• The study of business profits

• The study of how people make choices with unlimited wants and limited resources

• The study of money and banking

Scarcity happens when:

• There is more than enough of everything

• There are limited resources but unlimited wants

• People choose not to buy anything

• Businesses stop selling products

Which is NOT an example of scarcity?

• A. A store runs out of a popular toy

• B. A farmer has only so much land to grow crops

• C. A restaurant gives out free food forever

• D. A new phone is in high demand, but only a few are available

True or False: Scarcity means people must make choices about how to use resources.

• True

• False

What is a trade-off?

• Getting something for free

• Giving up one thing to get something else

• Buying more when the price goes down

• When businesses compete for customers

Opportunity cost is best described as:

• The money spent on an item

• The next best alternative given up

• The total benefit of all choices made

• The price of an item before tax

Which is an example of opportunity cost?

• Choosing to study instead of watching TV

• Buying a shirt that is on sale

• Paying less for gas than usual

• A business lowering prices to attract customers

What happens to demand when prices go up?

• People buy more

• People buy less

When supply increases and demand stays the same, what happens to price?

• A. Price increases

• B. Price decreases

• C. Price stays the same

• D. The government sets the price

What does the demand curve show?

• The quantity people are willing to buy at different prices

• How much businesses are willing to produce

• How government policies affect supply

• The total revenue made by businesses