Name: ______Per. ______Date: ______

Chapter One Study Guide (2016)

Multiple Choice

Identify the choice that best completes the statement or answers the question.

____ 1. An example of a shortage is limited amounts of

A) / water available for irrigating a crop because it is used for other crops.
B) / Nutrient-rich soil which is ideal for farming
C) / Fresh produce because the trucks carrying it are on strike.
D) / lobster because few people are willing to pay the high price

____ 2. The opportunity cost of a decision can be examined by using a

A) / production possibilities graph. / C) / global trade-off grid.
B) / factors of production chart. / D) / graph of increasing costs.

____ 3. The government of a country must make a decision between spending money on a hospital or spending the same amount on border security. What kind of decision is this?

A) / guns or butter / C) / global trade-off
B) / decision at the margin / D) / production efficiency decision

____ 4. How would you describe an economy that uses its resources to make the greatest possible number of goods and services?

A) / efficient / C) / globally aware
B) / using opportunity cost well / D) / underutilized

____ 5. The lack of which of the following represents a scarcity?

A) / orange juice because the trucks carrying it are on strike
B) / nutrient-rich soil which is ideal for farming
C) / enough workers to work at night because the pay is too low
D) / grapefruit juice because very few people want to buy it

____ 6. 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 creates a business painting murals in office buildings and restaurants.

____ 7. The physical capital used by a woodworker to make furniture would include

A) / saws and drills. / C) / hard work and time.
B) / wood and glue. / D) / a workshop and money.

____ 8. 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 medical equipment used by a doctor to cure a patient.

____ 9. What could cause a production possibilities curve to move down and to the left?

A) / A nation loses land after being defeated in a war.
B) / A baby boom 20 years ago resulted in a large number of young adults in the population today.
C) / An increase in the use of computer technology speeds up production.
D) / Thousands of investors from overseas invest money in a nation’s economy.

____ 10. What is the opportunity cost of a decision?

A) / the series of alternative decisions that could have been made
B) / the best possible way the question could have been decided
C) / the different ways that a different person might have made the decision
D) / the most desirable alternative given up for the decision

____ 11. What can a decision-making grid do?

A) / tell you the right course of action
B) / show you every possible consequence of your decision
C) / help you determine some of the opportunity costs for your decision
D) / show you every possible benefit of your decision

Matching: Match each term with the correct statement below

A) / efficiency / G) / shortage
B) / goods / H) / opportunity cost
C) / trade-off / I) / underutilization
D) / production possibilities graph / J) / labor
E) / scarcity / K) / factors of production
F) / services

____ 13. most desirable alternative given up when people choose one course of action over another

____ 14. limited quantities of resources to meet unlimited needs or desires

____ 15. representation of alternative ways to use an economy’s resources

____ 16. use of fewer resources than the economy is capable of using

____ 17. actions or activities that one person performs for another

____ 18. physical objects that can be exchanged

____ 19. paid effort that people devote to a task

____ 20. use of resources in a way that maximizes output of goods and services

Identifying Key Terms

Match each term with the correct statement below.

A) / factors of production / G) / growth
B) / production possibilities frontier / H) / opportunity cost
C) / production possibilities graph / I) / underutilization
D) / trade-offs / J) / efficiency
E) / shortage / K) / services
F) / scarcity

____ 21. greatest output of goods and services through the best use of resources

____ 22. land, labor, and capital

____ 23. temporary lack of one or more goods

____ 24. the most attractive alternative that is given up when an economic decision is reached

____ 25. the line that shows different production possibilities for an economy

____ 26. all the possible alternatives that are rejected when a choice is made

____ 27. representation of the possible ways an economy could use resources

____ 28. the basic economic condition of all goods and services

Critical Thinking

29. An economist might say, “Choosing is refusing.” Identify and explain which basic concept from the chapter is illustrated by this statement.

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