Basic Concepts Test Review

[Do not make any marks on this test] Matching 1. Economics is the science of: a. scarcity b. abundance 2. Economists consider an economy to be at full-employment even though there are what per cent of the labor force unemployed? a. 1% b. 25% c. 5% d. 10% 3. About 25 nations that have access to advanced technology, natural resources and have good industrial bases are called: a. developing nations b. 3rd world nations c. developed world nations 4. A model economy where individuals make all the decisions is the: a. command economy b. traditional economy c. communism

d. market economy

5. Over 150 poorer, less industrialized countries of the world, mainly located in Africa, Latin America, and Southeast Asia are called: a. developing nations b. developed nations c. high-tech nations 6. In these countries, the government owns some of(10%) the factors of production but citizens have control over economic planning through elections. a. Pure Command b. Communism c. Traditional economy d. Democratic Socialism 7. Any economy that combines elements of the pure market & pure command economic models is called a: a. command economy b. market economy c. mixed economy d. traditional economy 8. Human, natural, and capital resources(building blocks) that can be used to produce products are called: a. Land b. Labor c. Factors of production d. Capital 9. A model economic system where government controls all factors of production is the: a. market economy b. command economy c. traditional economy d. mixed economy 10. Another name for authoritarian socialism, where the government owns most of the factors of production is: a. democracy b. republic c. federalism d. communism 11. Nature's free items are called: a. human resources b. natural resources

c. capital resources

d. labor

12. Brain or muscle-power of human beings is called: a. natural resources b. capital resources c. human resources 13. Machines, buildings, and tools("man-made inputs") used in the production process are called: a. natural resources b. human resources c. capital resources 14. The way nations answer the three basic economic questions determine their: a. natural resources b. style of government c. economic system d. leader of nation

15. Goods and services are called: a. needs b. wants c. products

d. profit

e. trade-off

16. Goods or services that are necessary for survival are called: a. needs b. wants c. products d. profit e. trade-off 17. The choice or decision that is made when a resource is used to produce one item and cannot be used to produce another item is called a: a. opportunity cost b. want c. need d. trade-off e. product 18. Goods or services not necessary for survival are called: a. needs b. wants c. products d. profit e. trade-off 19. When a choice (decision) is made and a first choice is picked over a second choice, the 2nd best choice [best alternative foregone] is called the: a. trade-off b. want c. need d. opportunity cost e. product 20. Finished products meant for immediate consumption are called: a. capital goods b. consumer goods c. traditional goods

WRITE THE LETTER OF THE ITEM THAT

BELONG

DOES NOT

WITH THE FIRST ITEM.

21. Three basic economic questions: a. What goods and services should be produced? b. Why should goods and services be produced? c. How should goods and services be produced? d. For whom should goods and services be produced? 22. Mbuti Pygmies: a. live in the Ituri Forest of Zaire b. belong to a traditional economy c. are food gatherers and hunters d. belong to a command economy 23. Characteristics of capitalism: a. closest to the pure-market model. b. individuals own & control almost all of the factors of production. c. government intervention is limited. d. profits are limited. 24. Characteristics of authoritarian socialism (communism): a. closest to the pure-command model b. government owns and controls almost all of the factors of production c. based on Adam Smith's the The Wealth of Nations d. often includes five-year economic plans for the use of the nation's resources [Continued where you pick the letter of the item that DOES NOT BELONG with the first item] 25. Features of the U.S. economy:

a. private property b. freedom of enterprise(business)

c. limited government interference d. unlimited government interference

26. Entrepreneur: a. risks failure in return for financial gain b. has absolute control over the resources of a manor

c. attempts to start a new business d. attempts to introduce a new product

27. Democratic socialism: a. Government owns and controls some of the factors of production(about 10%) b. Rigid central planning by government directs the economy c. Individuals elect government officials d. Individuals have basic human rights 28. Adam Smith: a. attributed economic growth to the invisible hand of self-interest b. was one of the first people to attempt to explain how the market operates in a pure market system c. was the founder of socialism d. believed producers must sell the right products at the right prices in order to maximize profits 29. Three types of model economic systems: a. Pure Command b. Private c. Pure Market 30. Traditional economy: a. Much technological change b. Customs are strong

d. Traditional

c. Looks to the past d. Change is resisted

Matching 31. When resources do not satisfy needs or wants, this is called: a. abundance b. consumers c. opportunity cost d. scarcity 32. The study of the choices people make in an effort to satisfy their unlimited needs & wants from limited(scarce) resources is the definition of: a. biology b. chemistry c. economics d. career decisions 33. People who wish to buy goods and services are: a. producers b. suppliers c. consumers d. entrepreneurs 34. This diagram shows how resources, products, and payments are exchanged in the U.S. a. production possibilities curve b. circular flow c. AD/AS graph d. AE graph 35. Economic system in which business can be conducted freely with only limited government intervention is: a. communism b. democratic socialism c. free enterprise system 36. This person believed that without governmental interference the market is controlled by the invisible hand of self-interest. a. Karl Marx b. Fredrich Engels c. Mark Morris d. Adam Smith e. Randy Becker 37. This was Karl Marx's term for workers(who were in bondage) in a capitalistic society. a. proletariat b. bourgeoisie c. entrepreneur d. pygmies

38. Along with Friedrich Engels, wrote The Communist Manifesto, the first book on communism. a. Karl Marx b. Bruce Kirsch c. Adam Smith d. Randy Becker e. David Post 39. This is the person who combines land, labor, and capital to produce products. a. pygmy b. proletariat c. bourgeoisie d. entrepreneur 40. This was Karl Marx's term for the owners in a capitalistic society. a. entrepreneur b. pygmies c. proletariat d. bourgeoisie In this Production-Possibilities Curve: 41. At what letter can you get the most capital goods? 42. What letter represents an advance in technology? 43. At what letter(if a country were producing there now) would there be the most economic growth in the future? 44. What letter represents a recession[idle resources]? 45. At what point can you get the most consumer goods? 46. The frontier line in the diagram(curve rather than a straight line) indicates that the 2 products are: a. "equally substitutable"[constant cost] b. an example of "The law of increasing cost"

A C A P I T A L

E B

D C

Consumer Goods

In this Circular Flow Model, choose an answer from the right column that goes with the proper flow. 47. Flow #1

A. Consumer spending

48. Flow #2

B. Firms make payments [rent, wages, Interest, and profits] C. Products (goods/services) are sold

49. Flow #3 50. Flow #4

Test 1 Key Basic Concepts Ch 1 & 2 [50+] 1. A

D. Households sell resources [land, labor, Capital, and entrepreneurial ability]