Intro to economics Practice Test
Terms in this set (45)
All human beings suffer from what?
The Problem of Unsatisfied Wants
What is a brief explanation of "unsatisfied wants?"
All human beings continually experience a variety of dissatisfaction, that is, some sort of
discomfort--whether physical, mental, emotional, or whatever.
To put it another way, even on the best of days, we will develop some sort of dissatisfaction,
and we will try to get rid of that dissatisfaction.
The desire to get rid of some sort of dissatisfaction could be called a what?
The "fundamental economic problem" is that wants are more numerous than
What is a resource?
Those things (be they tangible or intangible) that can be used in the attempt to satisfy
What is a tangible resource?
Something that has physical existence like a hammer, a road, or a guitar.
What is an intangible resource?
It is a resource that you cannot see, touch, taste, etc. It can be something like a skill, a
reputation, an education, friendship, romantic love, etc.
What is a mathematical expression of the fundamental economic problem?
Wants > Resources
A term that captures the essence of the fundamental economic problem is what?
Another way of expressing the fundamental economic problem is that it's a problem of what?
What's another way of expressing the problem of scarcity?
Human beings, whether as individuals or in groups, do not have enough resources to satisfy all of their wants.
What Rolling Stones song captures the problem of scarcity?
You Can't Always Get What You Want
What is economics?
The activities (particularly human activities) involving production, consumption, and exchange. One could also say that economics is also the study of production, consumption, and exchange.
What is another definition of economics?
Economics is the study of how human beings produce, consume, and exchange scarce tangible and intangible resources in the attempt to satisfy a seemingly unlimited human wants.
For economists, is there a difference between a "need" and a "want?"
Economist believe that a need is food or water that is a necessity to life then a want is something that is not a necessity.
Why is it true that "there is no such thing as a free lunch?"
Because someone is always paying for the sandwich such as you have a certificate for free lunch but the restaurant is paying for the supplies to prepare sandwich.
What are the "three basic questions" of economics?
What to produce?
How to produce?
For whom to produce?
What do economists mean by "what to produce?"
Basically, a given person, family, tribe, or modern nation-state must make decisions about
what tangible or intangible things to produce.
What do economists mean by "how to produce?"
involves the choices to be made concerning how a thing
will be made.
For example, will we extract coal from the ground by digging it out with shovels, a situation
in which many laborers do the job of digging coal.
What do economists mean by "for whom to produce?"
This involves the issue as to who will receive the things produced. For example, if a society
spends a great deal of time and resources building a giant palace and pyramid, who will get
to use it?
What are the "Four Factors of Production?"
For an economist, what is land?
means all of those natural resources that are not man-made.
Whether we are talking about dirt, an ocean, sunshine, or coal deposits, or any other
product of nature, these can be thought of as "land."
What is labor?
is the human effort (personally I would include animal effort as well, but that's
something that can be debated) involved in the production of some product.
What is capital?
item that can be used to make some other thing.
Capital can also be something that is used to perform a service.
What is leadership?
a special form of labor. As such, in my humble opinion, I would otherwise not
consider it to be a factor of production separate from labor. But...it is a high school class,
and it is conventional to consider leadership/entrepreneurship to be a distinct factor of
When land, labor, capital, and leadership (entrepreneurship) are present, what is
What is production?
The making of products and/or the performance of a service
What are four elements concerning the "scope of economics?"
For an economist, what is Description?
involves the compiling of information involving human production,
consumption, and/or exchange.
For an economist, what is Analysis?
seeks to answer questions about economic issues. For example, why is American
For an economist, what is explanation?
This involves the communication of economic information.
For an economist, what is prediction?
This involves a form of analysis and explanation in which economists and other analysts
seek to forecast what is about to happen.
What are economic products?
are things (whether tangible or intangible) that have use (utility), are relatively scarce, and can be transferred (sold, traded, or given as a gift) to someone else.
When a thing has utility, scarcity, and transferability, what can that thing possess?
What is a good?
A Tangible item that has utility, scarcity, transferability. An example of a good would be a car,
a pizza, or a plot of land.
What is a consumer good?
It is a good that is intended to be used by a consumer as its final use. An example of a
consumer good would be a Lazy Boy Recliner. The normative use of this piece of furniture
would be to sit in it and relax.
What is a capital good?
A capital good is a good that is used to produce another good or service. For example, a
guitar used by a musician in a rock concert is a capital good. The guitar in this case would be
used for the performance of the service of entertainment. A spatula (e.g. Sponge Bob's
beloved cooking utensil) can be used to produce hamburgers at a restaurant. Those
hamburgers can be traded for money. In short, the spatula is used to produce a good, in this
case, a good that can be eaten.
If a good can be regularly used for a period of 3 years or more, then the good is
considered to be what?
A Durable Good. Examples of durable goods would be a refrigerator, a car, a drill press, or a
dining room table.
If a good is regularly used for a period of less than 3 years, then the good is
considered to be what?
A Non Durable Good. Examples of non-durable goods would be lettuce, tennis shoes, a
bottle of shampoo, a basketball goal net, or a pair of socks.
What is a service?
A service is labor performed by someone for someone else.
Sometimes the end result is largely intangible. For example, a lawyer might give someone
legal advice, advice devoted to persuading that person to do--or not to do---something. If
so, the lawyer has provided an intangible product to his/her client. Other than the good
advice (hopefully), the client receives nothing else.
Sometimes the service has a tangible quality. For example, if a barber cuts someone's hair
(an act of labor for someone else), the customer ends up with less hair (a tangible
outcome). If an artist paints a portrait of a person, the customer receives both a service
(the labor of the artist), plus a tangible good called a portrait.
Keep in mind: All services (the labor involved) are intangible. But...often the service is
connected to a tangible product (e.g. car repairs done by a mechanic, orthodontic braces
installed by a dentist).
What is a value?
The worth a good or service has in term of price.
For example, we might say that a car is "worth" $10,000 in our economy. In a less advanced
economy, one might say that the value of an ox cart is "worth" 15 chickens.
What is the Paradox of Value?
The paradox of value involves the inverse (an opposite numeric pairing) relationship
between price (the amount of something that can be exchanged for something else) and
many items that are necessary for survival.
For example, in our economy, the price of a lifetime allowance good clean water ( a good
necessary for survival) is far lower than that of a bag of very large diamonds (a good that is
not necessary for survival). The bag of large diamonds will fetch a high price in our modern
economy, while good clean water is relatively inexpensive.
In this sense, water has a low monetary value, but a high value in terms of utility (i.e.
What is one of the reasons that, in New York City, a bad of large diamonds
fetches a higher price than a year's worth of good drinking water?
One reason is scarcity. Large diamonds are rare. They are hard to obtain. In New York,
good water is fairly common. It is not found everywhere, but good water is easily available
to most New York residents
What is utility?
Utility is the existence of usefulness in a product. If a product has both scarcity and utility,
it will fetch a price. If a product has both high scarcity and high utility, then the product
will fetch a very high price---and will thus have high value
For example, a few years ago, Cam Newton was the first player chosen in the NFL draft
because he was considered to be a player of rare ability (a type of scarcity). Because
millions of people like football, a talented quarterback is considered to be something of
high utility (a type of athletic usefulness).
As such, Cam Newton was able to charge a high price to play quarterback, a much higher
price than a teacher can charge to teach high school economics.
What is wealth?
In the purest sense, wealth is the relative ability of someone to satisfy his/her wants.
In the purest sense, money is not the same thing as wealth. For example, Steve Jobs
ultimately lost his battle with cancer, despite having millions of dollars at his disposal.
There are occasions in which certain goods and/or services are not available and/or not
for sale. For Steve Jobs, ultimately a cure for his illness either did not exist, or was not for
sale. Hence...his money was worthless in terms of saving his life.
BUT...in an economy such as ours, an abundance of money is great for obtaining a wide
variety of goods and services for which to satisfy a wide range of wants.