Free Enterprise Lesson 1

Any resources that are made by humans and used to create other goods and services are called:
a) services
b) production
c) capital
d) labor
An example of a shortage is limited amounts of:
a) water available for irrigating a crop because it is used for other crops
b) labor available because the workers have other jobs
c) food available because the trucks carrying it are on strike
d) food available because few people want to buy it
The resources used to make all goods and services are the:
a) production possibilities
b) factors of production
c) production trade-offs
d) opportunity costs
All of the following are types of decisions that can be made at the margin EXCEPT:
a) whether to grow beans or corn on a large farm
b) whether or not to hire 100 new workers
c) whether to leave early in the morning or late in the day for a trip
d) whether or not to go on a vacation
The purpose of a production possibilities graph is to:
a) enable a country to mobilize to win a war
b) keep an economy from having nonproductive workers
c) show alternative ways to use an economy's resources
d) make it possible to increase an economy's output
An efficient economy is one that:
a) has very few people who do not work for a living
b) makes the best use of all its goods and services
c) uses its resources to make the most goods and services
d) makes the least costly use of its resources
The law of increasing costs means that when an economy increases the production of one item:
a) the opportunity cost goes up
b) the actual cost of making the item goes down
c) the actual cost goes up but the opportunity cost goes down
d) the production costs will increase alot
The opportunity cost of a decision can be examined by using a:
a) production possibilities graph
b) factors of production chart
c) global trade-off grid
d) graph of increasing costs
Production possibilities frontiers curve when they are charted on a graph because they show:
a) the underutilization of resources
b) the maximum output of goods and services
c) the increasing costs resulting in increasingly less output
d) the technological level of the economy's productivity
Which of the following is the kind of decision that can be made at the margin:
a) whether or not to hire new workers
b) whether or not to go on a vacation
c) whether or not to build an extra room on a home
d) whether to have a dog or a cat as a pet
What is a factory building an example of?
a) human capital
b) physical capital
c) an economic trade-off
d) technology
The government of a country must make a decision between spending money on a hospital or spending the amount on border security. What kind of decision is this?
a) guns or butter
b) decision at the margin
c) global trade-off
d) production efficiency decision
How would you describe an economy that uses its resources to make the greatest possible number of goods and services?
a) efficient
b) using opportunity costs well
c) globally aware
d) underutilized
What does a production possibilities frontier show?
a) scarce and less scarce resources
b) global trade-offs and costs of doing business
c) an economy that is producing but not at the maximum
d) the maximum amount that an economy can produce
The lack of which of the following represents a scarcity?
a) orange juice because the trucks carrying it are on strike
b) enough workers to finish two jobs because there's a limited supply of workers
c) enough workers to work at night because the pay is too low
d) grapefruit juice because very few people want to buy it
Which of the following makes someone an entrepreneur?
a) earning a lot of money as a computer programmer
b) becoming a highly paid dancer
c) running a service that hires people to install sprinkler systems in lawns
d) inventing and selling the rights to manufacture a computer game
A country's production possibilites increase because the available workers become more skilled at using a computer. This is an example of growth caused by:
a) global resources
b) physical capital
c) technology
d) production opportunity
A nation's automakers install new robotic machinery to build cars. Now, cars take only a day to make, and the factories can produce many more cars than before. This is an example of growth caused by:
a) land and natural resources
b) human capital
c) technology
d) production possibility curve
One example of an entrepreneur is:
a) a writer who is hired by a film studio to adapt a novel into a screenplay
b) a lawyer in a high-profile law firm that specializes in business law
c) an Olympic ice skater who later decides to join a professional ice show
d) an artist who runs a business painting murals in office buildings and restaurants
What can a decision-making grid do?
a) tell you the right course of action
b) show you every possible consequences of your decision
c) help you determine some of the opportunity costs for your decision
d) show you every possible benefit of your decisions
Which of the following lists would an economist consider to be land?
a) factories, office buildings, assembly lines, workers
b) farm fields, tractors, pesticides, fertilizers
c) dams, bridges, rock quarries, oil wells
d) iron ore, natural gas, fertile soil, water
One example of thinking at the margin is:
a) determining whether it is better to spend your savings on a new CD player or on a television
b) deciding whether the benefit of working two extra hours per day is worth the sacrifice of study time
c) putting all your money in a savings account because the interest rates are so high
d) deciding to buy a car you don't really like because it is significantly less expensive than the one you want
The community of Desertville traditionally produces a large number of tires and a small amount of kiwi fruit. Kiwis are becoming increasingly popular, and Desertville has decided to expand kiwi cultivation and decrease tire manufacturing. According to the law of increasing cost,
a) the cost of producing tire will decrease while the cost of producing kiwis will increase
b) the cost of producing kiwis will increase
c) the cost of producing tires will decrease
d) the cost of producing kiwis will decrease while the cost of producing tires will increase
Which of the following is an example of scarcity, rather than shortage?
a) A popular toy is sold out during the busy holiday season
b) You have spent your last penny and payday is a week away
c) A person wants an endless supply of everything but cannot have it
d) Gasoline was rationed in America during World War II
The physical capital used by a woodworker to make furniture would include:
a) saws and rills
b) wood and glue
c) hard work and time
d) a workshop and money
Human capital includes:
a) the salary paid to an accountant
b) a taxi driver's knowledge of the city streets
c) the machinery used to weave cloth
d) the equipment used by a doctor to cure a patient
A company that makes baseball caps is underutilizing its resources. What does this mean?
a) The company is running more efficiently than its competitors
b) The company is paying its employees less than it should be
c) The company is making caps when it could be making t-shirts instead
d) The company is producing fewer caps than it could be
What can cause a production possibilities curve to move to the right?
a) Thousands of people move out of the country
b) A new invention lowers the cost of production
c) An epidemic kills thousands of young men and women
d) The population is growing increasingly old