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Fundamentals of Economics Test

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5 Written Questions

5 Matching Questions

  1. economics
  2. production possibility frontier (PPF)
  3. consumer goods
  4. capital goods
  5. allocative efficiency
  1. a goods used to produce other goods or services over time
  2. b the study of how individuals, firms, and societies choose to use their scarce resources to provide for their unlimited material wants
  3. c a graphical illustration that shows the maximum quantity of one good that can be produced, given the quantity of the other good being produced
  4. d goods produced for present consumption
  5. e production of the combination of goods and services that provides the most net benefit to society. the optimal quantity of a good is achieved when MB=MC of the next unit. This only occurs at one point on the PPF

5 Multiple Choice Questions

  1. the additional cost incurred from the consumption of the next unit of a good or service
  2. the difference between the benefit and the cost of any activity
  3. the institution through which buyers and sellers interact and engage in exchange
  4. factors of production - include labor, physical capital, land or natural resources, and entrepreneurial ability
  5. a formal statement of a theory, describing the relationship between two or more variables

5 True/False Questions

  1. comparative advantageexists if a producer can produce more of a good than all other producers


  2. free enterpriseunder a free market system, individual producers must figure out how to plan, organize, and coordinate the production of products and services


  3. stabilitythe condition in which output is steady or growing, with low inflation and full employment of resources


  4. equityfairness of economic outcomes


  5. opportunity costthe best alternative that we forgo, or give up, when we make a choice or a decision


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