Economics Final Exam Quiz

The four factors of production are land, capital, labor, and entrepreneurs. Land refers to all natural resources used in production, such as land itself, water, minerals, and forests. Capital includes all man-made resources used in production, such as machinery, buildings, and tools. Labor refers to the physical and mental efforts of individuals involved in production. Entrepreneurs are individuals who take the initiative to combine the other factors of production and create new products or services in order to make a profit.

The correct answer is Production Possibilities Frontier. The Production Possibilities Frontier (PPF) is a graphical representation of the maximum output combinations that can be produced by an economy, given its resources and technology. It shows the trade-offs between producing different goods or services, indicating the opportunity cost of producing one good over another. The PPF demonstrates the concept of scarcity and helps in understanding the efficiency and potential growth of an economy.

Economics is the study of how individuals and societies make choices to allocate scarce resources to satisfy their unlimited wants. It involves analyzing various economic indicators such as employment, GDP, inflation, economic growth, and income distribution. Additionally, economics also deals with understanding the behavior and decision-making processes of individuals and firms. The answer provided captures the essence of economics by emphasizing the concept of trying to satisfy unlimited wants with limited resources.

The correct answer is "A risk taker in search of profits who does something new with existing resources." This answer accurately defines an entrepreneur as someone who takes risks and seeks profits by introducing innovative ideas or methods using the resources they already have. Entrepreneurs are known for their ability to identify opportunities, take calculated risks, and create value by introducing new products, services, or processes to the market. They often utilize their existing resources in a creative and innovative way to achieve their goals and generate profits.

The correct answer is Land - rent, labor - wages, capital - interest, entrepreneurs - profit. This answer correctly identifies the payments for the factors of production. Land is associated with rent, labor with wages, capital with interest, and entrepreneurs with profit.

Opportunity cost refers to the concept of giving up or sacrificing one option in order to pursue or obtain another option. It involves evaluating the potential benefits or gains of choosing one alternative over another, while considering the potential losses or foregone benefits of not choosing the alternative. In other words, it is the cost or value of the next best alternative that is forgone when a decision is made.

The law of supply states that suppliers will generally be willing to offer more of a good or service for sale at higher prices, and less at lower prices. This is because higher prices incentivize suppliers to produce and sell more in order to maximize their profits. On the other hand, lower prices may not provide enough incentive for suppliers to produce and sell as much, as it may not be as profitable. Therefore, the correct answer is "The principle that suppliers will normally offer more for sale at high prices and less at lower prices."

Macroeconomics is the branch of economics that focuses on the economy as a whole. It examines aggregate economic indicators such as GDP, inflation, and unemployment to understand and analyze the overall performance and behavior of an economy. Macroeconomics looks at factors that influence the economy on a large scale, such as government policies, international trade, and monetary policy. It aims to study and explain the fluctuations and trends in economic activity at the national and global levels.

Scarcity refers to the condition that arises when society does not have enough resources to fulfill all the desires and needs of its people. It is the result of limited resources and unlimited wants. In this situation, individuals and societies must make choices and trade-offs, giving up one thing in order to obtain something else. Scarcity forces individuals and societies to prioritize and allocate resources efficiently, making it an essential concept in economics.

The three basic economic questions are "what to produce", "how to produce", and "for whom to produce". These questions address the fundamental choices that societies and individuals face when allocating resources and determining the production and distribution of goods and services. "What to produce" refers to the selection of goods and services to be produced based on consumer demand and resource availability. "How to produce" pertains to the methods and techniques used in the production process, considering factors such as efficiency and cost-effectiveness. "For whom to produce" involves the distribution of goods and services among different individuals and groups in society, taking into account factors like income and need.

The correct answer is "people with all of the efforts, abilities, and skills". This definition of labor encompasses individuals who possess not only the physical ability to work but also the knowledge, expertise, and capabilities required for a particular job or task. It emphasizes that labor involves the combination of effort, skills, and abilities to perform work effectively.

The correct answer is Proprietorship, partnership, corporation. These are the three main types of businesses. A proprietorship is a business owned and operated by one individual. A partnership is a business owned and operated by two or more individuals. A corporation is a legal entity separate from its owners, with shareholders who own the company. These three types of businesses offer different advantages and disadvantages in terms of ownership, liability, and taxation.

When the price of a product increases or decreases, it directly affects the demand for that product. When the price increases, the demand decreases as consumers are less willing to pay a higher price for the same product. Conversely, when the price decreases, the demand increases as consumers are more willing to purchase the product at a lower price. Therefore, a change in price causes a shift in the demand curve.

Equilibrium refers to a state where prices are relatively stable. In this situation, there is a balance between the demand and supply of goods or services, resulting in a stable price level. This means that there is no significant upward or downward pressure on prices, and they remain relatively constant over time.

A merger is defined as a combination of two or more businesses to form a single firm. This means that two or more separate companies come together and merge their operations, assets, and resources to create a new entity. The purpose of a merger is to achieve synergy, increase market share, expand product offerings, or gain a competitive advantage. By combining their strengths and eliminating redundancies, the merged firm aims to enhance profitability and efficiency in the marketplace.

The law of demand states that as the price of a good or service increases, the quantity demanded by consumers decreases, and vice versa. This means that there is an inverse relationship between price and quantity demanded. When the price is high, consumers are less willing and able to purchase the good or service, resulting in a lower quantity demanded. Conversely, when the price is low, consumers are more willing and able to purchase the good or service, leading to a higher quantity demanded.

The points along the frontier represent the maximum combination of output that can be achieved if all resources are fully employed. This means that the economy is operating at its full potential and efficiently utilizing all available resources. Any point inside the frontier would indicate an underutilization of resources, while any point outside the frontier would be unattainable given the current level of resources.

Inflation refers to a rise in the general level of prices. When inflation occurs, the cost of goods, clothing, and shelter increases. As a result, workers need more money to afford these essential items.

The correct answer is Traditional, command, market. Traditional businesses are those that follow long-established practices and customs. Command businesses are controlled and regulated by the government or a central authority. Market businesses operate in a free market system where supply and demand determine prices and production. These three types of businesses represent different approaches to organizing and operating economic activities.

Surplus refers to a situation where the quantity supplied exceeds the quantity demanded at a given price. This means that there is an excess supply of a product in the market, leading to a surplus. This can occur when the price of a product is set too high, resulting in fewer consumers willing to purchase it, while producers continue to supply the product at higher quantities. As a result, there is an imbalance between supply and demand, leading to a surplus.

A price ceiling refers to a maximum legal price that can be charged for a product. This means that the price of the product cannot exceed a certain limit set by the government or regulatory authority. The purpose of a price ceiling is to protect consumers by ensuring that they do not have to pay excessively high prices for essential goods or services. It is often implemented in situations where there is a concern about price gouging or monopolistic practices. By setting a maximum price, the government aims to make the product more affordable and accessible to the general public.

Shortage refers to a situation where the quantity demanded exceeds the quantity supplied at a specific price. This means that there is an insufficient supply of a particular good or service to meet the demand from consumers. It often leads to higher prices as suppliers may increase prices in response to the scarcity. Shortages can occur due to various factors such as limited production capacity, unexpected increase in demand, or disruptions in the supply chain. In such situations, consumers may have to wait or compete to obtain the desired product or service.

The correct answer is Progressive, proportional, regressive. These are the three types of taxes. Progressive taxes are based on the taxpayer's ability to pay, meaning that the tax rate increases as income increases. Proportional taxes, also known as flat taxes, impose the same tax rate on all taxpayers regardless of their income. Regressive taxes, on the other hand, impose a higher tax burden on lower-income individuals compared to higher-income individuals, as the tax rate decreases as income increases.

Marginal costs refer to the additional cost incurred when producing one more unit of a product. It takes into account the increase in expenses such as materials, labor, and overhead that are directly attributed to the production of that additional unit. This concept helps businesses determine the optimal level of production by comparing the additional revenue generated from selling one more unit with the corresponding increase in costs. By understanding marginal costs, companies can make informed decisions about pricing, production levels, and resource allocation to maximize profitability.

The three functions of money are medium of exchange, measure of value, and store of value. Money serves as a medium of exchange, allowing individuals to trade goods and services. It also acts as a measure of value, providing a common unit of measurement for the worth of different goods and services. Lastly, money serves as a store of value, allowing individuals to save and accumulate wealth over time.

The correct answer is "a and b" because total cost includes both variable and fixed costs. Variable costs are expenses that change with the level of production, such as raw materials or labor costs. Fixed costs, on the other hand, are expenses that do not change with the level of production, such as rent or insurance. Therefore, total cost encompasses all costs associated with production, including both variable and fixed costs.

The correct answer is A and B. Capital refers to the tools, equipment, machinery, and factories used in the production of goods. This includes both the physical tools and equipment as well as the infrastructure necessary for production. Therefore, options A and B are both correct as they accurately describe the components that fall under the definition of capital.

A nation can achieve growth on the PPF by having more resources or increased productivity. When a nation has more resources, it can produce more goods and services, leading to economic growth. Additionally, increased productivity means that the nation can produce more output with the same amount of resources, which also contributes to growth. Both factors allow the nation to operate at a point beyond its initial production possibilities, leading to an expansion of its production capabilities and overall economic growth.

Microeconomics is the branch of economics that focuses on the behavior and decision making of individual units, such as households, firms, and industries. It analyzes how these units make choices regarding the allocation of resources and the production and consumption of goods and services. Microeconomics examines factors such as supply and demand, market equilibrium, pricing, and market failures. It provides insights into the functioning of specific markets and helps understand the behavior of economic agents at a smaller scale.

The correct answer is "Gifts of nature" because land is considered a gift of nature as it is a natural resource that is not created by humans. It refers to the surface of the earth that includes all natural resources such as soil, water, minerals, and vegetation. Land is an essential factor of production and plays a crucial role in various economic activities and human civilization.

The paradox of value refers to the apparent contradiction between the low value of nonessentials and the high value of essentials. This means that items that are considered nonessential or less needed tend to have a lower value, while items that are essential or greatly needed have a higher value. Similarly, there is also an apparent contradiction between the high value of nonessentials and the low value of essentials, indicating that sometimes nonessential items can have a higher value than essential items.

A price floor is the lowest legal price that can be paid for a good or service. It is a government-imposed regulation that sets a minimum price that sellers are allowed to charge. This is done in order to protect producers and ensure that they receive a fair income for their products. By setting a price floor, the government aims to prevent prices from falling too low and potentially causing financial difficulties for producers.

When a given change in price causes a relatively smaller change in the quantity demanded, it indicates that the demand for the product is inelastic. This means that consumers are not very responsive to changes in price and are willing to pay a higher price for the product. Inelastic demand typically occurs for essential goods or products with limited substitutes, where consumers have few alternatives and are therefore less sensitive to price changes.

A point inside the curve on a PPF represents production as less than its maximum potential. This means that resources are not being fully utilized and there is room for increased production without sacrificing the production of other goods.

The correct answer is Securities and Exchange Commission. The SEC is a government agency in the United States that is responsible for regulating and overseeing the securities industry, including stock exchanges, brokerage firms, and investment advisors. It plays a crucial role in protecting investors, maintaining fair and efficient markets, and facilitating capital formation. The SEC enforces securities laws, requires companies to disclose relevant financial information, and investigates and prosecutes cases of securities fraud.

The correct answer is Federal Open Market Committee. The FOMC is a committee within the Federal Reserve System that is responsible for making decisions regarding monetary policy in the United States. It consists of members from the Federal Reserve Board and presidents of regional Federal Reserve Banks. The FOMC meets regularly to discuss economic conditions and determine the appropriate course of action to achieve the Federal Reserve's dual mandate of price stability and maximum employment. They have the power to set interest rates and implement other policies to influence the economy.

An increase in demand can cause an increase in supply because when there is a higher demand for a product or service, producers are motivated to increase their production in order to meet the increased demand. This can be done by increasing the quantity produced or expanding production facilities. Conversely, a decrease in demand would lead to a decrease in supply as producers would reduce their production to match the lower demand. Therefore, an increase in demand is a factor that can cause an increase in supply.

If prices and revenue move in opposite directions, it means that as prices increase, revenue decreases, and vice versa. In such a scenario, demand is considered to be unit elastic. This means that the change in price has an equal and proportional effect on the change in quantity demanded. In other words, the percentage change in quantity demanded is equal to the percentage change in price.

The correct answer is 12. This implies that there are 12 district banks.

Money needs to be portable so that it can be easily carried and exchanged. It also needs to be durable, meaning it can withstand wear and tear over time. Divisibility is important because money should be able to be divided into smaller units for transactions. Lastly, limited availability ensures that money retains its value and is not easily counterfeited or inflated.

The correct answer is "Recession, peak, trough, expansion." The business cycle refers to the fluctuations in economic activity over time. It consists of four stages: recession, which is a period of economic decline; peak, which is the highest point of economic activity; trough, which is the lowest point of economic activity; and expansion, which is a period of economic growth. This sequence accurately represents the typical pattern of the business cycle.

Variable cost refers to the cost that changes in direct proportion to the level of output or production. In other words, as the volume of production increases or decreases, the variable cost also fluctuates accordingly. This cost is directly linked to the quantity of goods or services produced and includes expenses such as raw materials, direct labor, and utilities. Unlike fixed costs that remain constant regardless of production levels, variable costs are flexible and adjust based on the scale of operations.

A durable good is defined as any good that lasts three years or more when used on a regular basis. This means that it is a long-lasting product that can withstand regular use for an extended period of time.

The FDA stands for Food and Drug Administration. This government agency is responsible for protecting public health by ensuring the safety and efficacy of food, drugs, medical devices, cosmetics, and other products. They regulate the manufacturing, labeling, and distribution of these products to ensure that they meet the necessary standards for consumer safety.

The correct answer is "They provide the initiative that combines the resources of land, labor, and capital into new products." This answer accurately describes one of the key functions of an entrepreneur. Initiative refers to the ability to take action, make decisions, and drive the process of combining resources to create new products or services. Entrepreneurs are often the driving force behind innovation and the development of new ideas, and they play a crucial role in bringing together the necessary resources to turn these ideas into reality.

Elasticity refers to the responsiveness of quantity demanded to a change in price. When a given change in price causes a relatively larger change in quantity demanded, it indicates that the demand is elastic. This means that consumers are highly sensitive to price changes and a small increase or decrease in price can lead to a significant increase or decrease in the quantity demanded. In other words, when demand is elastic, consumers are more likely to adjust their purchasing behavior in response to price fluctuations.

Adam Smith is known as a Scottish economist. He is widely regarded as the father of modern economics and his book "The Wealth of Nations" is considered a foundational text in the field. Smith's ideas on free markets, division of labor, and the invisible hand have had a significant impact on economic theory and policy. He was born in Scotland in 1723 and his contributions to economics continue to be influential to this day.

A non-durable good refers to any product that has a relatively short lifespan when used regularly. It does not last for more than three years when used on a regular basis. This means that it is not designed or expected to withstand long-term use or wear and tear. Non-durable goods are typically consumed or worn out quickly, such as perishable items, disposable products, or items with a short lifespan due to frequent use.

Ben Bernanke is the correct answer because he served as the chairman of the Federal Reserve System, commonly known as the FED, from 2006 to 2014. During his tenure, Bernanke played a crucial role in steering the U.S. economy through the financial crisis of 2008. He implemented various measures to stabilize the financial system and promote economic growth. Bernanke's expertise and leadership during this challenging period earned him recognition and made him a well-known figure in the field of economics.

A horizontal merger refers to when two or more firms that produce the same kind of product join. In this type of merger, companies that are direct competitors in the same industry come together to combine their resources, increase market share, and potentially reduce competition. By joining forces, these firms can achieve economies of scale, improve efficiency, and gain a stronger position in the market. This type of merger is common in industries such as technology, telecommunications, and consumer goods.