Economics Final Study Guide

Scarcity means:

• Having unlimited resources

• Having limited resources

• Having too many choices

• Having no resources at all

The difference between something you need and something you simply want is:

• Needs are essential for survival, wants are not.

• Wants are more important than needs.

• Needs are things you can live without.

• Wants are always cheaper than needs.

What do we give up when we make an economic choice?

• The next best option — opportunity cost

• Our time - opportunity time

• A solution to a problem - Cost of Solution

• A problem we no longer have

How do consumers and producers make decisions based on benefits and costs?

• By flipping a coin

• By considering the benefits and costs of each choice

• By following random trends

• By ignoring all information

Economic Incentives are:

• rewards that motivate people to act - paycheck for working

• laws that restrict how we spend our money

• natural resources

• types of government policies

The three big questions all economies must answer are:

• What to produce, how to produce, and for whom to produce

• What to buy, where to buy, and how to buy

• Who will govern, who will trade, and who will save

• How to invest, how to save, and how to spend

A traditional economy is based on customs, traditions, and beliefs. Which of the following is a real-world example of a traditional economy?

• United States

• Japan

• The Amish

• Germany

A command economy decides what gets produced by:

• Consumer preferences

• Market forces

• Government planning

• Business competition

How do consumers and businesses interact in a market economy?

• Consumers and businesses interact through the exchange of goods and services.

• Consumers set all prices and businesses follow.

• Businesses control all economic decisions without consumer input.

• There is no interaction between consumers and businesses.

What makes the U.S. a modified free enterprise system?

• The government has no role in the economy.

• The government regulates and intervenes in the economy to some extent.

• There are no private businesses.

• All businesses are owned by the government.