Economics EOC Quiz Answer Key Fundamental Economic Concepts - (SSEF1) Resources And Scarcity, (SSEF2) Rational Decision Making, (SSEF3) Specialization

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1 Economics EOC Quiz Answer Key Fundamental Economic Concepts - (SSEF1) Resources And Scarcity, (SSEF2) Rational Decision Making, (SSEF3) Specialization Student Name: Teacher Name: Heather Creamer 1) Which of these terms is the BEST synonym for the word "entrepreneur"? A) "business owner" B) "home owner" C) "employee" D) "student" An entrepreneur is a "business owner", a person who undertakes the responsibility of owning a business. Date: Score: 2) As one of the factors of production, capital can be defined as A) the goods and services a business produces. B) the supply of labor needed to produce goods. C) the people that purchase goods and services. D) the equipment and factories needed to produce goods. The factors of production are land, labor, capital, and entrepreneurship. Capital is defined as the equipment and factories needed to produce goods. 3) Land, labor, capital, and entrepreneurship are the A) basis of employment. B) results of production. C) factors of production. D) results of supply and demand. Factors of production, is the correct answer. Land, labor, capital, and entrepreneurs are the factors necessary to produce any good or service in an economy. 4) As developing nations industrialize and make use of capital resources, new challenges to the supply of the world's natural resources will no doubt appear because A) the newly developed countries will industrially overtake the existing developed countries. B) the rate of depletion will increase as developing countries begin to use more natural resources. C) more developed countries do not want developing countries to become more economically independent. D) the developing countries will learn to bargain with their natural resources and impact the economies of other nations. As developing nations are taught to industrialize and make use of capital resources, new challenges to the supply of the world s natural resources will no doubt appear because the rate of depletion will increase as developing countries begin to use natural resources in similar fashions as industrialized countries. Industrial nations have historically used the productive resources to produce goods for the rest of the world. However, once non-industrial nations become more industrialized and begin to make more goods, those productive resources will become even more scarce and possibly disappear altogether. 1/13

2 5) Which of these BEST represents capital investment for a company? A) advertising B) renting space C) buying new equipment D) hiring new employees In economics, capital includes the buildings and equipment needed to produce goods and services. Therefore, buying new equipment is an example of capital. 6) Which type of cost occurs when an individual pays for a piano lesson instead of going to a movie? A) fixed cost B) marginal cost C) residual cost D) opportunity cost When you choose to do one thing instead of doing another, you've made an opportunity cost. You gave up a number of things to be taking this practice test right now, an the #1 thing you decided NOT to do is referred to as the "opportunity cost". 7) Mr. Stevens owns a building in downtown Bentonville. He has considered opening a sporting goods store in the building but has also been approached by someone who would like to rent the space to open a gym. If Mr. Stevens decides to open his sporting goods store, what is the opportunity cost of this decision? A) the opportunity to rent it to another tenant B) the property tax he would pay on the building C) the opportunity he has to run his own business D) the profits he would make from his sporting goods store Opportunity cost is defined as the value of an alternative not chosen. Since Mr. Stevens chose not to rent his building he is giving up the the opportunity to rent it to another tenant. 8) An opportunity cost is A) usually absent in a command economy. B) when goods are recycled into other goods. C) the next-best alternative you give up in order to do something else. D) is only an issue when there is not a scarcity of goods and resources. An opportunity cost is the next-best alternative you give up in order to do something else. This can be concert tickets you don t buy in order to purchase a new suit for a job interview, it can be NOT selling your land to a developer when you donate it to become a charity park, or it can be NOT sitting and watching mindless television while you re studying for a graduation test. Every single decision that has ever been made has had an opportunity cost. 9) The basic economic condition that exists when unlimited wants exceed limited productive resources is called A) capital. B) scarcity. C) hyper inflation. D) opportunity cost. The basic economic condition that exists when unlimited wants exceed limited productive resources is called scarcity. All resources are limited, which makes scarcity the major economic problem. 2/13

3 10) ALL of these are examples of A) skilled labor. B) human resources. C) unskilled labor. D) capital resources. ditch digger computer programmer international financier All of these are examples of human resources. There is skilled labor (programmer) and unskilled labor (digger), but all threeincluding the financier who uses money to get businesses started- are humans who give their efforts to get something produced. 11) The opportunity cost of a move from point A to point B is A) the increased production of D. B) the increased production of C. C) the decreased production of good X. D) the decreased production of good Y. The opportunity cost of a move from point A to point B is the decreased production of good Y. A move from point A to point B increases the output of good X, but also implies a decrease in Y. This decrease is the opportunity cost. 3/13

4 12) A company produces two products, X and Y. All of the points represent possible product output EXCEPT A) point A. B) point B. C) point C. D) point D. All of the points represent possible product output EXCEPTpoint D. A company cannot produce a combination of X and Y that lies outside of the curve. 4/13

5 13) The graph is a production possibilities chart. Which of these might cause the line to move to the right? A) higher labor costs B) an increase in prices C) shortage of required resources D) improved technology in whoopee cushion production If the production possibilities line "expands" (moves to the right), production in increased. Improved technology in whoopee cushion production might cause such an increase. 5/13

6 14) The purpose of this production possibilities graph is to show A) how supply and demand determine price. B) whether the supply of goods is elastic or not. C) the number of workers required for a specific task. D) how limited resources can be used to produce a combination of items. When limited resources can be used to produce a combination of items, a production possibilities graph shows how many of each item could be produced with the resources available. 6/13

7 15) In this production possibilities graph, what MIGHT cause the line (frontier) to move to the left? A) increased demand for basketballs B) a shortage of needed raw materials C) an increase in the number of workers D) increased efficiency because of new whoopee cushion technology In a production possibilities graph the frontier represents production at full efficiency. A shortage of needed raw materials would reduce efficiency and the line would move to the left. 7/13

8 16) The graph shows how many basketballs and how many whoopee cushions can be produced given a limited supply of resources. Such a graph is called a A) price graph. B) demand curve. C) supply curve. D) production possibilities graph. A production possibilities graph shows the possible combinations of items which could be produced with available resources. 17) Marginal benefit: a gain from an increase or loss from a decrease in the consumption of a good or service. "Marginal benefit" is MOST related to what economic concept? A) opportunity cost B) supply elasticity C) demand elasticity D) equilibrium price "Marginal benefit" is directly related to opportunity cost. Remember that opportunity refers to what people are willing to give up in order to do or acquire something. Additionally, "marginal cost" directly relates to opportunity cost. 8/13

9 18) A small company is trying to determine the best use of its resources in producing two different goods. What resource should they develop to investigate these options? A) marginal cost curve B) competitive norm curve C) supply and demand curve D) production possibilities curve A production possibilities curve shows the different quantities that this small company could produce with their limited resources. Points along the curve represent the opportunity cost. 19) Number of Workers Total Costs Marginal Costs Total Revenue Marginal Revenue Total Profit 0 $ $ (50.00) 1 $ $12.86 $ $15.00 $ (35.00) 2 $ $6.92 $ $15.00 $ $ $5.00 $ $15.00 $ $ $3.75 $ $15.00 $ $ $3.21 $1, $15.00 $ $ $4.50 $1, $15.00 $1, $ $4.74 $1, $15.00 $1, $ $10.00 $2, $15.00 $1, $ $15.00 $2, $15.00 $1, $ $22.50 $2, $15.00 $1, $1, $ $15.00 $1, A company is trying to decide how many workers to hire. They want to maximize profits. What is the maximum number of workers the company can hire to maximize profits while not having marginal costs exceed marginal revenue? A) 8 B) 9 C) 10 D) 11 The company should hire 9 workers to maximize profits. With the addition of the 10th worker, marginal costs exceed marginal revenue. 9/13

10 20) Number of Workers Total Costs Marginal Costs Total Revenue Marginal Revenue Total Profit 0 $ $ (50.00) 1 $ $12.86 $ $15.00 $ (35.00) 2 $ $6.92 $ $15.00 $ $ $5.00 $ $15.00 $ $ $3.75 $ $15.00 $ $ $3.21 $1, $15.00 $ $ $4.50 $1, $15.00 $1, $ $4.74 $1, $15.00 $1, $ $10.00 $2, $15.00 $1, $ $15.00 $2, $15.00 $1, $ $22.50 $2, $15.00 $1, $1, $ $15.00 $1, The owners of a local business are making a rational decision about how many workers to hire. How many workers would cause the marginal costs to exceed the marginal benefits? A) 8 B) 9 C) 10 D) workers cause the marginal costs to exceed the marginal benefits. Although the marginal costs for 11 workers are also higher that the marginal revenue, the marginal costs from 10 workers had already raised the costs. 21) What is the primary purpose of job specialization? A) regional self-sufficiency B) increased consumer income C) increased marginal utility D) increased efficiency and productivity Division of labor and job specialization usually result in increased efficiency and productivity. This reduces production costs and increases profits. 22) Workers on an assembly line are an example of A) allocation. B) entrepreneurs. C) homogenization. D) specialization. Workers on an assembly line are an example of specialization. Henry Ford's example is well-known, but all workers who learn only a few tasks instead of completing a whole product are examples of specialization. 10/13

11 23) Workers concentrating their efforts on a limited number of tasks, thereby increasing productivity is called A) entrepreneurship. B) homogenization. C) sequestration. D) specialization. Workers concentrating their efforts on a limited number of tasks, thereby increasing productivity is called specialization. Adam Smith's 1776 classic, The Wealth of Nations, first discussed the idea of division of labor and specialization. 24) The greatest improvement in the productive powers of labour, and the greater part of the skill, dexterity and judgement with which it is any where directed, or applied, seem to have been the effects of the division of labour. -Adam Smith, The Wealth of Nations, 1776 According to the quote, the author MOST LIKELY agrees with the benefits of A) manorialism. B) mercantilism. C) specialization. D) taxation. According to the quote, the author MOST LIKELY agrees with the benefits of specialization. Adam Smith's ideas challenged the prevailing notion of mercantilism. 25) Although specialization increases productivity, one disadvantage is A) loss of flexibility among workers. B) higher costs in training workers. C) a reduction in wasted time. D) the loss of training time. Although specialization increases productivity, one disadvantage is loss of flexibility among workers. Because workers are trained in one job, they are often unable to assume the duties of other workers without additional training. 26) When an individual specializes to produce one good, and then acquires additional desired goods from other specialists, A) both parties gain as a result of voluntary exchange. B) both parties gain as a result of fraudulent exchange. C) neither party gains as specialization decreases efficiency. D) neither party gains as specialization decreases productivity. When an individual specializes to produce one good, and then acquires other desired goods from other specialists, both parties gain as a result of voluntary exchange. This assumes that the voluntary exchange is non-fraudulent. 11/13

12 27) The Gains from Trade Output Before Specialization and Trade U.S. Japan Total Product A 20,000 30,000 50,000 Product B 500,000 30, ,000 Output After Specialization and Trade U.S. Japan Total Net Gain Product A 0 60,000 60,000 10,000 Product B 800, , ,000 What is the MOST LIKELY result of specialization in producing Products A and B? A) Japan stops producing and using Product B. B) The U.S. stops producing and using Product A. C) The increased output means the U.S. and Japan can trade excess units of Products A and B. D) Specialization means the U.S. will trade 800,000 units of Product B for 60,000 units of Product A. The increased output means the U.S. and Japan can trade excess units of Products A and B. Even though they can each produce these products on their own, overall production increases as a result of comparative advantage and specialization. 28) The workers in this photo MOST LIKELY represent A) capital goods. B) dependency ratio. C) specialization of labor. D) economic interdependence. The workers in this photo MOST LIKELY representspecialization of labor. Through specialization or division of labor, a job is broken down into separate, smaller tasks to improve productivity. 12/13

13 29) New e-commerce businesses, including companies like ebay, focus on voluntary exchange. Which generalization BEST describes this type of commerce? A) Decentralized decision-making requires a large bureaucracy. B) Centralized decision-making produces dramatic economic output. C) Centralized decision-making results in buyers and sellers freely engaging in commerce. D) Decentralized decision-making results in buyers and sellers freely engaging in commerce. Voluntary exchange (like ebay) results in decentralized decision-making with buyers and sellers freely engaging in commerce. Thanks to the popularity of the internet, such transactions are occurring more and more frequently. 30) The amended Telemarketing and Consumer Fraud Abuse Protection Act of 1994 states: A consumer [can] stop calls from all companies within the FTC's jurisdiction by placing his or her telephone number on a central "do-not-call" registry... except when the consumer has an "established business relationship" with the seller on whose behalf the call is made. An economic aspect of the Federal Trade Commission's "do-not-call" registry is that it A) reduces the amount of junk mail received by consumers. B) permits telemarketing calls to new clients on the registry. C) restricts all telemarketing calls to consumers on the registry list. D) allows consumers to engage in voluntary transactions with businesses. An economic aspect of the Federal Trade Commission's "do-not-call" registry is that it allows consumers to engage in voluntary transactions with businesses. The FTC's amended rule intends to protect legitimate, non-fraudulent business transactions while eliminating telemarketing "scams" by fining businesses. 13/13