Economics Test Out Practice Exam with
Correct Answers
1. Economics - ANS ✔the study of how people choose to se their limited
resources to satisfy their unlimited wants
2. Economy - ANS ✔a system used to manage limited resources for the
production, distribution, and consumption of goods and services
3. Positive economics - ANS ✔the branch of economics that uses objective
analysis to find out how the world works; the goal is to describe how things
are
4. Normative economics - ANS ✔the branch of economics that applies value
judgments to data in order to recommend actions or policies; the goal is to
advise how things ought to be done
5. Scarcity - ANS ✔the condition that results because people have limited
resources but unlimited wants
,6. Tradeoff - ANS ✔the exchange of one benefit or advantage for another
that is thought to be better
7. Cost- benefit analysis - ANS ✔a way to compare the costs of an action with
the benefits of that action; if benefits exceed costs, then the action is worth
taking
8. Incentive - ANS ✔any factor that encourages or motivates a person to do
something prices, taxes, and laws create incentives that influence how
people behave
9. Goods - ANS ✔physical articles that have been produced for sale or use;
three examples are food, clothing, and cars
10.Services - ANS ✔work done by someone else for which a consumer,
business, or government is willing to pay; three examples are teaching,
gardening, and childcare
11.Factors of production - ANS ✔the resources used to produce goods and
services; economists define these resources as land, labor and capital
, 12.Entrepreneurship - ANS ✔the willingness and ability to take the risks
involved in starting and managing a business
13.Capital - ANS ✔the tools, machines, and buildings used to produce goods
and services
14.Productivity - ANS ✔a measure of the efficiency with which goods and
services are produced; productivity is often stated as the quantity produced
per person per hour
15.Opportunity cost - ANS ✔the value of the next best alternative that is
given up when making a choice; this is the measure of what you must give
up to get what you most want
16.Production possibilities frontier (PPF) - ANS ✔a simple model of an
economy that shows all the combinations of two goods that can be
produced with the resources and technology currently available
17.Economic equity - ANS ✔the fairness with which an economy distributes
its resources and wealth
Correct Answers
1. Economics - ANS ✔the study of how people choose to se their limited
resources to satisfy their unlimited wants
2. Economy - ANS ✔a system used to manage limited resources for the
production, distribution, and consumption of goods and services
3. Positive economics - ANS ✔the branch of economics that uses objective
analysis to find out how the world works; the goal is to describe how things
are
4. Normative economics - ANS ✔the branch of economics that applies value
judgments to data in order to recommend actions or policies; the goal is to
advise how things ought to be done
5. Scarcity - ANS ✔the condition that results because people have limited
resources but unlimited wants
,6. Tradeoff - ANS ✔the exchange of one benefit or advantage for another
that is thought to be better
7. Cost- benefit analysis - ANS ✔a way to compare the costs of an action with
the benefits of that action; if benefits exceed costs, then the action is worth
taking
8. Incentive - ANS ✔any factor that encourages or motivates a person to do
something prices, taxes, and laws create incentives that influence how
people behave
9. Goods - ANS ✔physical articles that have been produced for sale or use;
three examples are food, clothing, and cars
10.Services - ANS ✔work done by someone else for which a consumer,
business, or government is willing to pay; three examples are teaching,
gardening, and childcare
11.Factors of production - ANS ✔the resources used to produce goods and
services; economists define these resources as land, labor and capital
, 12.Entrepreneurship - ANS ✔the willingness and ability to take the risks
involved in starting and managing a business
13.Capital - ANS ✔the tools, machines, and buildings used to produce goods
and services
14.Productivity - ANS ✔a measure of the efficiency with which goods and
services are produced; productivity is often stated as the quantity produced
per person per hour
15.Opportunity cost - ANS ✔the value of the next best alternative that is
given up when making a choice; this is the measure of what you must give
up to get what you most want
16.Production possibilities frontier (PPF) - ANS ✔a simple model of an
economy that shows all the combinations of two goods that can be
produced with the resources and technology currently available
17.Economic equity - ANS ✔the fairness with which an economy distributes
its resources and wealth
