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DOWNLOAD THE Test Bank for Principles of Economics Version 3 0 3rd
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Chapter 2: Confronting Scarcity: Choices in Production

Multiple Choice

1. Economic resources used in the production process are called:
T T T T T T T T



A) free gifts of the natural environment.
T T T T T



B) factors of production. T T



C) consumer items. T



D) money capital. T




Ans: B T



Difficulty: Easy T




2. An economic system is the set of rules that define
T T and . T T T T T T T T T



A) resources; prices T



B) who gets to vote; when elections will be held
T T T T T T T T



C) market prices; factors of production
T T T T



D) how an economy's resources are to be owned; how decisions about the resources are to be made
T T T T T T T T T T T T T T T T




Ans: D T



Difficulty: Medium T




3. The model that shows the goods and services the economy is capable of producing is the model of:
T T T T T T T T T T T T T T T T T



A) utility.
B) the fallacy of composition.
T T T



C) production possibilities. T



D) scarcity.

Ans: C T



Difficulty: Easy T




4. Factors of production are:
T T T



A) the resources the economy has available to produce goods and services.
T T T T T T T T T T



B) generally unlimited in modern economies. T T T T



C) always employed in modern economies.
T T T T



D) the knowledge that can be applied to the production of goods and services.
T T T T T T T T T T T T




Ans: A T



Difficulty: Easy T




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5. The three broad types of factors of production are:
T T T T T T T T



A) capital, labor, and natural resources.T T T T



B) money, profit, and interest. T T T



C) stocks, bonds, and financial assets.
T T T T



D) technology, human capital, and comparative advantage. T T T T T




Ans: A T T



Difficulty: Easy T




6. The three broad types of resources used to produce goods and services are also known
T T T T T T T T T T T T T T T



as:
A) economic systems. T



B) factors of production. T T



C) production possibilities. T



D) financial capital. T




Ans: B T T



Difficulty: Easy T




7. Capital is best considered as:
T T T T



A) the natural environment.
T T



B) a factor of production that has been produced.
T T T T T T T



C) financial assets. T



D) money.

Ans: B T T



Difficulty: Easy T




8. A factor of production that has been produced for use in the production of other goods
T T T T T T T T T T T T T T T T



and services is:
T T



A) labor.
B) money.
C) capital.
D) natural resources. T




Ans: C T T



Difficulty: Easy T




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9. Labor is the T that can be applied to production.
T T T T T T T



A) the natural environment. T T



B) produced resources. T



C) financial assets. T



D) human effort. T




Ans: D T



Difficulty: Medium T




10. Any factor of production is capital if it:
T T T T T T T



A) was produced and can be used to produce other goods and services.
T T T T T T T T T T T



B) generates utility. T



C) uses human effort to produce goods and services.
T T T T T T T



D) is included in financial capital.
T T T T




Ans: A T



Difficulty: Medium T




11. The factors of production are:
T T T T



A) money, labor, natural resources, and capital. T T T T T



B) technology, human capital, and natural resources. T T T T T



C) money, capital, and natural resources. T T T T



D) labor, capital, and natural resources. T T T T




Ans: D T T



Difficulty: Easy T




12. A factor of production that is produced in order to produce something else is called:
T T T T T T T T T T T T T T



A) money.
B) labor.
C) technology.
D) capital.

Ans: D T T



Difficulty: Easy T




13. Human effort that can be applied in the production process is called:
T T T T T T T T T T T



A) natural resources. T



B) technology.
C) labor.
D) specialization.

Ans: C T T



Difficulty: Easy T



14. Resources from nature that can be used to produce other goods and services are called:
T T T T T T T T T T T T T T



A) money.



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B) natural resources. T



C) labor.
D) capital.

Ans: B T T



Difficulty: Easy T




15. For a factor of production to be called capital it must:
T T T T T T T T T T



A) be produced. T



B) occur in the natural environment. T T T T



C) be a part of human skill. T T T T T



D) be a result of a stock issue. T T T T T T




Ans: A T T



Difficulty: Easy T




16. Which of the following is an example of capital?
T T T T T T T T



A) a gravel truck T T



B) a savings account T T



C) a share of General Motors stock
T T T T T



D) a lake T




Ans: A T



Difficulty: Medium T




17. To be considered capital, a factor of production must:
T T T T T T T T



A) have been produced. T T



B) occur naturally. T



C) be part of a factory or building. T T T T T T



D) be a skill or talent possessed by a person.
T T T T T T T T




Ans: A T



Difficulty: Medium T




18. One of the two criteria for a resource to be considered capital is that it must:
T T T T T T T T T T T T T T T



A) occur naturally. T



B) be part of a factory or building. T T T T T T



C) be a skill or talent possessed by a person.
T T T T T T T T



D) be possible to use it to produce other goods and services.
T T T T T T T T T T




Ans: D T



Difficulty: Medium T




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