What is economics?
Economics studies the choices and trade-offs people make when faced with limitations.
What is meant by scarcity in economics?
Scarcity in economics encompasses the basic economic problem that there are limited resources but unlimited wants. There is a
gap between what is wanted and what is available, so how to allocate resources must be considered.
Which part of the economy does the microeconomic perspective focus on?
The social science of microeconomics focuses on the implications of individual human actions.
Why do economists use models?
Economists use simplified frameworks to illustrate complex processes to make hypotheses about economic behavior that can be
tested.
Which market is interacting in a circular flow diagram by which a firm sells and households buy?
Market for good and services. This model shows the flow of goods and services through the economy between the economic
agents of producers/firms and consumers/households.
What is a traditional economy?
A traditional economic system is built on customs, beliefs, and ways of doing things passed down over time, in generally agrarian or
hunter-gatherer societies.
Which kind of economy brings together buyers and sellers of goods or services?
A market economy is decentralized and demand-driven; in fact, a market can be defined as an institution that brings together
buyers and sellers of goods and services (individuals or businesses).
Module1
Question 1 of 7
The economic concept of scarcity includes which of the following?
Excess demand
Deflation
Limited resources
Surplus
Correct! Scarcity involves resource allocation when there is a gap between the availability of limited resources and
what is desired.
Question 2 of 7
Which characteristic describes a market economy?
Past family traditions
Government-created mandate
Hereditary customary roles
Incentive-based decisions
Correct! In a market economy most decisions are made by buyers and sellers with signals by supply and demand.
Question 3 of 7
What is an example of factors of production?
, Goods and services
Shortages
Land
Money
Correct! The four factors of production are land, labor, capital, and entrepreneurship.
Question 4 of 7
A student has been studying algebra for 1.5 hours and is debating whether to study 1 more hour or go to the gym
to exercise.
When is this student making this decision, according to economists?
At the point of no return
At the opportunity point
At the apex
At the margin
Correct! When thinking at the margin, the student is thinking about what the next action means for them.
Question 5 of 7
The price of gasoline increased this summer.
Which decision is not an example of making a decision at the margin?
I sell my car and never drive again.
I decide to ride my bike to the store.
I cancel my plans to drive across country.
I decide to combine errands, so I make fewer trips.
Correct! Thinking at the margin means thinking about what the next action means for the person. This is not an
example.
Question 6 of 7
What is an example of factors of production?
Capital
Goods and services
Shortages
Money
Correct! Capital is a resource that has been produced but is also used to produce other goods and services.
,Question 7 of 7
What type of economy receives economic decisions passed down from a government authority and where
resources are owned by the government?
Underground
Command
Market
Traditional
Correct! In a command economy, the government decides what goods and services will be produced and what
prices will be charged for them.
Given the option of two activities, an individual chooses a soccer game over going to a concert.
Which type of cost is the activity that is sacrificed?
What you sacrifice / what you gain = opportunity costs
The production possibilities frontier has a curved shape because of which law?
Law of diminishing returns. As additional increments of resources are added to producing a good or service, the marginal benefit
from those additional increments will decline, represented in a downward curve.
Which concept describes when a country can produce a good at a lower opportunity cost than another country?
Comparative advantage refers either to when a country can produce a good at a lower cost in terms of other goods or when a
country has a lower opportunity cost of production.
Module 2
Question 1 of 7
Classify point A with the appropriate distinction.
Choose two correct answers.
Inefficient
Attainable
Unattainable
Efficient
Correct! Point A is an efficient output combination lying on the PPF curve. Any point on or below the curve is
attainable. Since A is on the curve, it is attainable.
Question 2 of 7
Choice of Output Produced Each Day
, Country Can
Machine Tools Bottles of Wine
Produce either/or
Romania 6 20
Austria 11 32
Based on the chart, which country has comparative advantage in which good?
Austria has comparative advantage in wine, and Romania in tools.
Romania has comparative advantage in wine, and Austria in tools.
Austria has comparative advantage in both wine and tools.
Romania has comparative advantage in both wine and tools.
Correct! Comparative advantage refers to when a country can produce a good at a lower cost in terms of other
goods; or, when a country has a lower opportunity cost of production.
Question 3 of 7
Choice of Output Produced Each Day
Country Can
Machine Tools Bottles of Wine
Produce either/or
Romania 4 28
Italy 12 35
Based on the chart, how many bottles of wine does each tool in Romania cost?
25
7
2
10
Correct! The number of machine tools in Romania (4) divides 7 times into the 28 bottles of wine produced.
Question 4 of 7
Choice of Output Produced Each Day
Country Can
Cheese Blocks Bottles of Wine
Produce either/or
Germany 6 20
Italy 10 40
Which statement is true of production?
Wine costs 4 cheese blocks in Italy.
Germany has an absolute advantage in cheese blocks
Italy has a comparative advantage in cheese blocks.
Wine costs 0.3 cheese blocks in Germany.
Correct! Germany produces 6 cheese blocks or 20 bottles of wine. ( = 0.3)
Economics studies the choices and trade-offs people make when faced with limitations.
What is meant by scarcity in economics?
Scarcity in economics encompasses the basic economic problem that there are limited resources but unlimited wants. There is a
gap between what is wanted and what is available, so how to allocate resources must be considered.
Which part of the economy does the microeconomic perspective focus on?
The social science of microeconomics focuses on the implications of individual human actions.
Why do economists use models?
Economists use simplified frameworks to illustrate complex processes to make hypotheses about economic behavior that can be
tested.
Which market is interacting in a circular flow diagram by which a firm sells and households buy?
Market for good and services. This model shows the flow of goods and services through the economy between the economic
agents of producers/firms and consumers/households.
What is a traditional economy?
A traditional economic system is built on customs, beliefs, and ways of doing things passed down over time, in generally agrarian or
hunter-gatherer societies.
Which kind of economy brings together buyers and sellers of goods or services?
A market economy is decentralized and demand-driven; in fact, a market can be defined as an institution that brings together
buyers and sellers of goods and services (individuals or businesses).
Module1
Question 1 of 7
The economic concept of scarcity includes which of the following?
Excess demand
Deflation
Limited resources
Surplus
Correct! Scarcity involves resource allocation when there is a gap between the availability of limited resources and
what is desired.
Question 2 of 7
Which characteristic describes a market economy?
Past family traditions
Government-created mandate
Hereditary customary roles
Incentive-based decisions
Correct! In a market economy most decisions are made by buyers and sellers with signals by supply and demand.
Question 3 of 7
What is an example of factors of production?
, Goods and services
Shortages
Land
Money
Correct! The four factors of production are land, labor, capital, and entrepreneurship.
Question 4 of 7
A student has been studying algebra for 1.5 hours and is debating whether to study 1 more hour or go to the gym
to exercise.
When is this student making this decision, according to economists?
At the point of no return
At the opportunity point
At the apex
At the margin
Correct! When thinking at the margin, the student is thinking about what the next action means for them.
Question 5 of 7
The price of gasoline increased this summer.
Which decision is not an example of making a decision at the margin?
I sell my car and never drive again.
I decide to ride my bike to the store.
I cancel my plans to drive across country.
I decide to combine errands, so I make fewer trips.
Correct! Thinking at the margin means thinking about what the next action means for the person. This is not an
example.
Question 6 of 7
What is an example of factors of production?
Capital
Goods and services
Shortages
Money
Correct! Capital is a resource that has been produced but is also used to produce other goods and services.
,Question 7 of 7
What type of economy receives economic decisions passed down from a government authority and where
resources are owned by the government?
Underground
Command
Market
Traditional
Correct! In a command economy, the government decides what goods and services will be produced and what
prices will be charged for them.
Given the option of two activities, an individual chooses a soccer game over going to a concert.
Which type of cost is the activity that is sacrificed?
What you sacrifice / what you gain = opportunity costs
The production possibilities frontier has a curved shape because of which law?
Law of diminishing returns. As additional increments of resources are added to producing a good or service, the marginal benefit
from those additional increments will decline, represented in a downward curve.
Which concept describes when a country can produce a good at a lower opportunity cost than another country?
Comparative advantage refers either to when a country can produce a good at a lower cost in terms of other goods or when a
country has a lower opportunity cost of production.
Module 2
Question 1 of 7
Classify point A with the appropriate distinction.
Choose two correct answers.
Inefficient
Attainable
Unattainable
Efficient
Correct! Point A is an efficient output combination lying on the PPF curve. Any point on or below the curve is
attainable. Since A is on the curve, it is attainable.
Question 2 of 7
Choice of Output Produced Each Day
, Country Can
Machine Tools Bottles of Wine
Produce either/or
Romania 6 20
Austria 11 32
Based on the chart, which country has comparative advantage in which good?
Austria has comparative advantage in wine, and Romania in tools.
Romania has comparative advantage in wine, and Austria in tools.
Austria has comparative advantage in both wine and tools.
Romania has comparative advantage in both wine and tools.
Correct! Comparative advantage refers to when a country can produce a good at a lower cost in terms of other
goods; or, when a country has a lower opportunity cost of production.
Question 3 of 7
Choice of Output Produced Each Day
Country Can
Machine Tools Bottles of Wine
Produce either/or
Romania 4 28
Italy 12 35
Based on the chart, how many bottles of wine does each tool in Romania cost?
25
7
2
10
Correct! The number of machine tools in Romania (4) divides 7 times into the 28 bottles of wine produced.
Question 4 of 7
Choice of Output Produced Each Day
Country Can
Cheese Blocks Bottles of Wine
Produce either/or
Germany 6 20
Italy 10 40
Which statement is true of production?
Wine costs 4 cheese blocks in Italy.
Germany has an absolute advantage in cheese blocks
Italy has a comparative advantage in cheese blocks.
Wine costs 0.3 cheese blocks in Germany.
Correct! Germany produces 6 cheese blocks or 20 bottles of wine. ( = 0.3)
