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Which of the following terms refers to the workers and their efforts required to produce goods and services?
Question 1 Explanation:
Labor is a crucial resource in an economy. The way people acquire skills and put them to use has a direct impact on the quality, quantity, and speed of what an economy can produce.
Which of the following terms refers to the material resources like tools, money, and buildings required to produce goods and services?
Question 2 Explanation:
Amassing capital and using it effectively are crucial components of a successful business. Workers with access to better tools, materials, and facilities should be able to produce goods and services more efficiently and effectively.
Which of the following terms refers to not having enough resources to address every need and/or want?
Question 3 Explanation:
Scarcity is the driving force behind most economic choices. Because resources are, by their very nature, limited, both governments and individuals are forced to make choices about which priorities are worth investing time and resources into addressing. These decisions are, ultimately, what end up shaping economies, large or small.
Which of the following economic systems relies upon businesses and people to make their own decisions regarding what to produce, what to purchase, and how prices are set for goods and services?
Question 4 Explanation:
Market economies hinge on the ability of sellers to set prices for goods and services that consumers are willing to pay while still returning a profit on the labor and resources that went into producing the good or service. Businesses and individuals succeed or fail within a market economy based upon the strength of their buying and selling decisions.
How are economic decisions made within a command economy?
Government planners set production rates and prices for goods.
Citizens vote on production rates for goods and services.
The government controls some essential types of production and service, but nonessential goods are left to private businesses to produce and sell.
The government controls production, but private individuals and business maintain exclusive ownership of the nation’s natural resources.
Question 5 Explanation:
A command economy is tightly regulated by its government. Things like prices, resources, what to produce, and production rates are all set by government officials.
What is the term used to describe an economy where the government oversees the free market (like America’s)?
A traditional economy
A mixed market economy
A semi-command economy
An opportunistic economy
Question 6 Explanation:
While American capitalism is rooted heavily in the free market economic model, the government still provides some essential services as well as some market oversight. This government involvement is designed to help protect people from unfair trade practices and unfit working conditions while, at the same time, ensuring people have access to crucial services like education and military protection.
Which of the following terms refers to the lost benefit that happens when one makes an economic choice rather than opting for the next-best option?
Question 7 Explanation:
Opportunity cost plays a key part in economic decision-making. Weighing the value of lost opportunities forces businesses, governments, and consumers to grapple with the trade-offs that come with their economic choices.
Of these four, which would be considered a fixed cost?
A factory’s electrical bill
The monthly rent payment on a storefront
A restaurant’s ingredients
Question 8 Explanation:
Fixed costs do not change, regardless of how many hours a business stays open or how much of a good or service they produce. A monthly rent payment on a storefront does not change whether the store is open for 24 hours a day or only for an hour a week; once the rent is paid, it covers a month’s occupancy of the structure regardless of how it is used for that particular month.
How could a business reduce its variable costs?
Move to a cheaper facility
Sell unused equipment
Hire more workers
Reduce the number of hours the business is in operation
Question 9 Explanation:
Variable costs are costs that can change depending on how much a business is producing. In this case, by cutting back on hours, a business decreases its variable costs like payroll and energy usage.
Which of the following terms refers to the cost created by producing one extra unit of a good or service?
Question 10 Explanation:
When production increases, variable costs go up while fixed costs remain the same. Marginal cost is the determination of what this increase would be for a single extra unit of production. Using this information to calculate marginal profit (the income from an extra unit minus its cost) helps pinpoint the optimal production level for a business.
How does a business owner calculate total costs?
Subtract marginal costs from fixed costs
Subtract variable costs from fixed costs
Add fixed costs and variable costs
Add marginal costs and variable costs
Question 11 Explanation:
A business’s total costs represent the combination of their fixed costs and their variable costs.
Which of the following businesses has the most positive benefit-cost ratio?
Larry can make $30 at a cost of $10.
Stacy can make $500 at a cost of $250.
Tori can make $30,000 at a cost of $30,000.
Steve can make $200,000 at a cost of $250,000.
Question 12 Explanation:
While Larry is only turning a $20 profit from his business, his benefit-cost ratio of 3:1 is higher than Stacy’s 2:1, Tori’s 1:1, and Steve’s 4:5 (which is actually a loss!).
Which of the following is a factor in calculating demand for a good or service?
The number of consumers
The willingness and ability of consumers to buy
The price consumers will pay
All of the above
Question 13 Explanation:
Evaluating the demand for a good or service involves analyzing the consumers in a particular market. Knowing how much buyers are willing to purchase, how much they are able to actually purchase, and the price at which they are willing and able to do so all factor into demand calculations.
Which of the following is a true statement about a market’s supply of a good or service?
When supply is low, prices tend to increase.
When supply is low, prices tend to decrease.
When supply is high, prices typically increase.
When supply is high, production usually increases.
Question 14 Explanation:
Scarcity in the marketplace can allow producers to raise prices on goods or services that are in particularly low supply. Of course, demand also factors in; if a good is in low supply and its demand is also low, a high price will likely further deter consumers from purchasing it.
Which of the following terms is used to describe the price where supply and demand are optimally balanced?
Question 15 Explanation:
On a supply and demand curve, the equilibrium price is where the rising supply curve intersects with the falling demand curve. At this optimal price point, the amount consumers would be willing to purchase and the amount a producer would be willing to sell are balanced.
Which of the following market situations would increase the demand for car tires?
An overall increase in public transportation usage
An overall increase in car ownership
A new way of making tires from recycled materials
All of the above
Question 16 Explanation:
As more buyers enter a market, demand for goods in that market increases. In this case, more car owners means there are more consumers in the market for car components like tires.
Which of the following market situations would decrease the demand for a popular health supplement?
The national average income rises significantly.
The Food and Drug Administration studies and formally approves the supplement’s safety.
The supplement is recalled from several national chain stores.
The company that makes the product has to slow production due to an ingredient shortage.
Question 17 Explanation:
An event like a recall can affect consumers’ preferences. If a good or service falls out of favor with the buying public, demand can fall off sharply.
What is the term that refers to the total monetary value of all the goods and services a nation produces in a year?
National Stock Valuation (NSV)
National Supply Acquisition (NSA)
Exported Product Assessment (EPA)
Gross Domestic Product (GDP)
Question 18 Explanation:
The Gross Domestic Product is a popular way to evaluate a nation’s economy. The figure can be used to compare nations to each other as well as to evaluate a nation’s economic growth or decline over a time period
Which of the following conclusions can be drawn from a dramatic rise in a nation’s GDP?
The nation is preparing for military action.
The nation is under new leadership.
The nation’s income has increased.
The nation’s economy has likely shifted to a command economy.
Question 19 Explanation:
The GDP can be a way to assess a nation’s income. When GDP increases, it signifies an uptick in production. Increased production means an increase in labor costs, which, in turn, means an increase in both people’s incomes and their overall purchasing power.
Which of the following factors would be included in the calculation of a nation’s Gross Domestic Product (GDP)?
Richard sells his used car to his neighbor.
Tony buys a box of 1,000 screws to use to make cabinets he plans to sell.
Janet is paid to mow three lawns every week.
An American basketball team travels to Spain to play an exhibition game in a sold-out arena.
Question 20 Explanation:
Services and finished products that are bought and sold inside the country are used to calculate GDP. On the other hand, GDP excludes certain economic activities that do not lead to a final, consumer purchased good or service. For example, the sale of used goods is excluded because the goods were already included in the GDP calculation when they were originally sold as a new product. The purchase of intermediate goods that go into creating a final product (building materials, food ingredients, machine parts, etc.) is also excluded since the parts will eventually be calculated as part of a finished product. Services that take place outside of the country do not count towards GDP either, even if a domestic company carries them out.
Which of the following terms refers to a businessperson who takes the initiative to start a new business?
Question 21 Explanation:
Entrepreneurs are crucial to growing economies. They take risks by investing capital, time, and energy to create companies with no guarantee of success. Without entrepreneurs, economies would have a difficult time increasing both production and innovation.
What term do economists use to describe the sector of the economy that deals with how production resources like labor, raw materials, and capital resources are bought and sold?
Question 22 Explanation:
The factor market deals with all of the facets of production are bought and sold. This includes the cost of hiring a workforce as well as purchasing equipment and materials.
Which of the following describes a way businesses increase productivity?
Improving human capital
Division of labor
All of the above
Question 23 Explanation:
Business have a variety of ways to increase production. By specializing, businesses focus on specific goods and/or services that they can produce reliably and efficiently. Investing in workers’ education, skills, and health leads to a more efficient and effective labor force that can produce at a higher rate. Dividing larger tasks into smaller ones also makes it easier for businesses to be more efficient in achieving production goals.
Which of the following could be considered a driving force of a free enterprise system?
Private property rights
All of the above
Question 24 Explanation:
The free enterprise system thrives because of the motivation to earn money and property. In such a system, businesses and individuals have the ability to trade, save, and compete with others in order to accumulate property and capital. The end result is an economy that thrives due to the predictability of consumers and producers working for their own self-interests.
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