Economics Chapter 1

What is the fundamental economic problem that arises because resources are limited and human wants are unlimited?

• Abundance

• Scarcity

• Surplus

• Inflation

Which of the following best describes a 'need'?

• A luxury car

• A vacation

• Food and water

• Designer clothes

In the circular flow model, households provide which of the following to firms?

• Goods and services

• Taxes

• Factors of production

• Government regulations

What is the term for the next best alternative that is given up when a choice is made?

• Trade-off

• Opportunity cost

• Marginal cost

• Sunk cost

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

• Land

• Labor

• Money

• Capital

What does the Production Possibility Curve (PPC) illustrate?

• The maximum possible output combinations of two goods or services an economy can achieve when all resources are fully and efficiently employed

• The total amount of goods and services produced in an economy

• The relationship between supply and demand

• The distribution of income in an economy

Which of the following is an example of a trade-off?

• Choosing to study for an exam instead of going to a movie

• Buying a car with a loan

• Saving money in a bank account

• Receiving a paycheck

What does the term 'opportunity cost' refer to in economics?

• The cost of an investment

• The cost of the next best alternative foregone

• The cost of production

• The cost of living

Which of the following is a characteristic of a 'want'?

• Essential for survival

• Limited in nature

• Can be satisfied with goods and services

• Unlimited and ever-changing

In the context of the Production Possibility Frontier (PPF), what does a point inside the curve represent?

• Efficient use of resources

• Inefficient use of resources

• Unattainable production level

• Maximum production capacity