Fundamental Economic Concepts 
Directions:  Choose the best response for each question.  

1.	 Which basic economic problem does the U.S. share with all other nations?
A.	Scarcity of resources
B.	Lack of technology
C.	Lack of public services
D.	Too much government control

2.	 Which of the following is an example of entrepreneurship?
A.	 A person who invests in computer stocks
B.	A person who starts a new online business
C.	A person who takes a job with a high-tech firm
D.	A person who buys land and builds herself a new house

3.	 Leo and Alex have a car washing business.   Currently, each man washes a car and then waxes that car by himself.  The best way to improve their efficiency would be if
A.	 Leo and Alex wash and wax each car together 
B.	Leo waxes Alex’s cars and Alex waxes Leo’s cars
C.	Leo washes all the cars and Alex waxes all the cars
D.	One day, Leo washes all the cars, while Alex waxes; the next day, they switch

4.	 Using labor in an assembly line in the manufacturing process is an example of worker
A.	Diversification
B.	Specialization
C.	Inefficiency
D.	Marginalization

5.	Why does every economic decision involve an opportunity cost?
A.	 Because resources are scarce and wants are unlimited
B.	Because few decisions have a marginal benefit
C.	Because prices in a market economy are always too high
D.	Because trade-offs are impossible to make in rational decisions

6.	A popular model used to illustrate the concept of opportunity cost is 
A.	Entrepreneurship
B.	Paradox of value
C.	Factors of production
D.	Production possibilities curve

7.	Which of the following is not an opportunity cost you incur if you see a baseball game?
A.	The parking fee, if you drive to the park
B.	The time spent in the after-game traffic jam
C.	The exorbitant price paid for hot dogs
D.	The $50 tickets that were given to you by a friend who could not go to the game

8.	Which of the following is not one of the basic questions all economies must answer?
A.	What goods will be produced?
B.	How will the level of technology be determined?
C.	How are goods and services going to be produced?
D.	Who will get the goods and services that the economy produces?

9.	Profit is a return to 
A.	Land
B.	Labor
C.	Capital
D.	Entrepreneurship

10.	A point inside the Production Possibilities Curve represents
A.	Negative returns
B.	A growing economy
C.	A fully employed economy
D.	Unemployment or underutilization of resources
11.	When you make a buying decision, your opportunity cost is the value of 
A.	The trade-off
B.	Your next best alternative
C.	Your satisfaction with your purchase
D.	The interest the money would have earned had you saved it

12.	When a society invests in education, it improves its standard of living by improving its
A.	Capital goods
B.	Human capital
C.	Labor
D.	Land

13.	If a company achieves greater output using the same amount of inputs, it has experienced an increase in 
A.	Utility
B.	Technology
C.	Productivity
D.	Specialization

                               
14.	What factor of production (productive resources) do the images above illustrate?
A.	Land
B.	Labor 
C.	Capital
D.	Entrepreneurship
Use the Production Possibilities Frontier shown to answer the next two questions; 15 and 16.
                        
15.	In the Production Possibilities Frontier, which points are attainable?
A.	A and B
B.	B and C
C.	C
D.	B only

16.	Moving from point A to point B in the figure above would represent
A.	Diminishing returns
B.	A more inefficient use of resources
C.	A losing situation because fewer plasma TVs are produced
D.	Full production/ full employment

17.	Productivity is measured as the relationship between _______ per unit of ______.
A.	Goods, utility
B.	Outputs, inputs
C.	Utility, goods
D.	Inputs, outputs

18.	Which of the following is not a capital good?
A.	An oven at a bakery
B.	A bulldozer at a construction site
C.	A cash register at a clothing store
D.	A television set for sale at an appliance store

19.	Which of the following is not an example of economic decision making?
A.	Using cost-benefit analysis
B.	Building simple models
C.	Writing a thesis statement
D.	Taking small, incremental steps

20.	Economics may best be defined as a(n)
A.	Scientific study of supply and demand
B.	Limited description of economic activity
C.	Extended application of cost-benefit analysis
D.	Study of efforts to satisfy seemingly unlimited wants with scarce resources
21.	Which sentence BEST describe the effects of regulation and deregulation?
A.	Regulation benefits consumers, while deregulation benefits producers.
B.	Regulation benefits producers, while deregulation benefits consumers.
C.	Regulation benefits both consumers and producers; deregulation hurts both.
D.	Both regulation and deregulation have benefits and costs to producers and consumers.

22.	If public goods are characterized by shared consumption and non-exclusion, which of the following is NOT an example of a public good?
A.	National defense
B.	Weather forecasts
C.	Cell phone towers
D.	Local radio music towers

23.	Which of the following is NOT a method of allocating resources?
A.	Lottery
B.	Majority Rule
C.	First-come, first-served
D.	Not sharing

24.	Investment in technology can lead to greater productivity.
A.	True
B.	False

25.	Which of the following is NOT considered an economic and social goal?
A.	Price stability
B.	Entrepreneurship
C.	Economic growth
D.	Economic efficiently

Short Response

1.	 Compare and contrast the three economic systems (command, market, and mixed). Be sure to address the 3 basic economic questions that all societies must answer.

2.	Explain the significance of investing in human capital through education, training and skill development. Be sure to describe the effects it has on economic growth and the standard of living.