1. Which of the following explains why scarcity exists in all societies?
Answer: People’s wants are unlimited and resources are limited.
Read the text and answer the question.
2. Trey is working hard to save up money to buy an old car for $1,500. He is the team captain for his school’s basketball team and attends practice after school each day until 5:30 PM. After practice, he works at a restaurant from 6:00 PM to 10:00 PM. If he quit the team it would only take him two months to save up the money but, without working extra shifts, it will take Trey several extra months to save up for the car.
How does scarcity affect Trey?
Answer: Time is scarce so Trey must decide whether to buy the car as soon as possible or to keep his position on the team.
Janice decides to produce and sell clothing. She leases retail space at a mall from James and hires five of her friends to help.
3. Which factor of production does Janice represent?
Answer: entrepreneurship
4. Which of these is an example of a physical capital resource for a construction company?
answer: a supply truck
5.What typically motivates entrepreneurs to improve goods and services or create new ones?
Answer: profit
6. A company has a manufacturing facility overseas due to lower production costs. They have decided to move their manufacturing facility back to the US due to increasing tariffs and tax-cut incentives.
Which best describes an opportunity cost of this decision?
answer: the ability to produce goods at a lower cost
7. A firm determines that the marginal cost of producing an additional unit of a good would be greater than the marginal benefit of doing so.
Based on this information, what is the MOST rational decision for the firm to make?
answer: maintain its current production level
8. A company announces to employees that it will no longer offer a bonus to employees who meet monthly sales quotas. What effect is this announcement MOST LIKELY to have on the company?
answer: Employees will not work as hard to meet the monthly sales quota because there is no personal benefit to be gained.
9. Why would a business choose to specialize in one specific good or service?
answer: Specialization helps businesses increase their productive efficiency and lower the cost of producing the specific good or service.
10. The pipe located underneath Jiro’s kitchen sink was leaking and he did not know how to fix it. He called a plumber who agreed to come fix the leaking pipe in exchange for $125 plus the cost of any parts.
Was this a voluntary exchange? Why or why not?
answer: Yes, because both parties willingly entered the exchange and benefited from it.
11. What is the role of government in a mixed economic system?
answer: The government regulates business to preserve competition in the marketplace.
12. Compared to market economies, command economies are more effective at advancing which economic goal?
answer: equality
