Economics Test 1. Which term is used to describe the study of how people make decisions in a world where resources are limited? a. scarcity b. decision-making modeling c. economics d. cost-benefit analysis 2. According to economic theory, when does scarcity occur? a. when a society has more resources than it needs to produce goods and services b. when there are not enough resources to produce all of the things a society would like to have c. when inflation occurs and demand for goods and services decreases d. when inflation occurs and demand for goods and services increases 3. When deciding between renovating a water treatment plant or building a new community pool, what is the government most likely to consider? a. scarcity vs. resources b. wages vs. prices c. wants vs. needs d. consumers vs. producers 4. What term do economists use to describe the alternative you face if you decide to do one thing instead of another? a. trade-off b. marginal cost c. marginal benefit d. measure of cost 5. Which of the following best describes an opportunity cost? a. the additional cost of producing one additional unit of output b. an individual goes to the movies and decides to buy popcorn c. the real price of items increases as the value of money decreases d. an individual pays for a guitar lesson instead of going to the movies 6. Of the following scenarios, which is an example of immediate gratification? a. an individual spends $100 on a pair of shoes instead of putting that money into his saving account b. an individual puts money into his savings account to use to buy a car when he turns 16 c. an individual pays for a gym membership instead of going to the movies d. an individual signs up for a credit card in order to begin building credit Use the following graph to answer questions 7-8 Marginal Benefits Marginal Costs 5 10 15 20 25 Acres 7. Which of the following is represented by the graph? a. supply-demand analysis b. utility curve c. opportunity cost analysis d. cost-benefit analysis 8. Suppose the graph above shows the marginal benefits and costs for a farmer trying to decide how much of her 25 acres to plant with lettuce. At what point should the farmer stop farming more acres? a. At 5 acres b. At 15 acres c. At 20 acres d. At 25 acres 9. An MP3 player manufacturer pays the same amount to produce each MP3 player no matter how many it produces in total. Which term describes the type of cost for producing MP3 players? a. total cost b. variable cost c. fixed cost d. marginal cost 10. A car manufacturer can produce 5 cars for $10,000 each. After 5 cars are produced, the price to produce each additional car decreases to $7,500. Which term describes the type of cost for producing cars? a. total cost b. variable cost c. fixed cost d. marginal cost