Ivy Software - Fundamentals of Economics UPDATED ACTUAL Questions and CORRECT Answers

Ivy Software - Fundamentals of Economics
UPDATED ACTUAL Questions and
CORRECT Answers
A government imposed and legally enforced minimum market price.
a. price ceiling
b. surplus
c. economic burden

d. price floor - CORRECT ANSWER - d. price floor


The ___________________ of any life activity is the cost of what you give up to partake in that
activity. Among a comparison of individuals, businesses or countries, the one who has the lowest
opportunity cost of an activity has a comparative advantage in that activity.
a. opportunity cost
b. comparative advantage
c. factors of production

d. entrepreneurial ability - CORRECT ANSWER - a. opportunity cost


All the productive resources of the earth may be put in one of the following four categories: land,
labor, capital, and entrepreneurial ability. In limited supply, so they must be allocated among
members of society.
a. comparative advantage
b. entrepreneurial ability
c. opportunity cost

d. factors of production - CORRECT ANSWER - d. factors of production


Includes all natural resources that are used to produce goods & services
a. land
b. labor

,c. capital

d. entrepreneurial ability - CORRECT ANSWER - a. land


Includes work time and work effort that people devote to producing goods and services
a. land
b. entrepreneurial ability
c. labor

d. capital - CORRECT ANSWER - c. labor


Includes all tools, instruments, machines, buildings, and other constructions that have been
produced in the past that businesses now use to produce goods and services
a. capital
b. labor
c. land

d. entrepreneurial ability - CORRECT ANSWER - a. capital


Includes all human resources that organize the other factors of production. Entrepreneurs come
up with new ideas about what and how to produce, make business decisions, and bear risks that
arise from these decisions
a. entrepreneurial ability
c. capital
b. labor

d. land - CORRECT ANSWER - a. entrepreneurial ability


The ________ mechanism is one way that society chooses to allocate scarce resources. The
market prices of each factor of production has been assigned a unique name by economists.
a. rent
b. price
c. interest

,d. profit - CORRECT ANSWER - b. price


Unit price one pays for the use of land.
a. profit
b. wage
c. interest

d. rent - CORRECT ANSWER - d. rent


Unit price one pays for the services of labor
a. rent
b. wage
c. profit

d. interest - CORRECT ANSWER - b. wage


Unit price one pays for the use of capital
a. profit
b. interest
c. rent

d. price - CORRECT ANSWER - b. interest


Income earned (or lost) by an entrepreneur for running a business
a. profit
b. rent

c. interest - CORRECT ANSWER - d. profit


A model of an economy that shows how much of the economy can produce using all of its
factors of production efficiently.
a. Absolute advantage

, b. Opportunity cost
c. Production possibilities frontier

d. Comparative advantage - CORRECT ANSWER - c. Production possibilities frontier


The ability of an individual or group to carry out a particular economic activity (such as making
a specific product) more efficiently than another activity; the one who has the lowest opportunity
cost of an activity.
a. entrepreneurial ability
b. comparative advantage
c. opportunity cost

d. absolute advantage - CORRECT ANSWER - b. comparative advantage


True/False: When an economy fully uses its factors of production, then it ends up at a location
inside the production possibilities frontier - CORRECT ANSWER - False: it ends up at a
location inside the production possibilities frontier if it does not fully use its factors of
production


True/False: When an economy does not fully use its factors of production, then it ends up at a
location inside the production possibilities front - CORRECT ANSWER - True


True/False: If an economy ends up at a location outside the production possibilities front, the
economy has not fully and efficiently used its factors of production. - CORRECT
ANSWER - True;
this economy does NOT have enough factors of production to produce any bundle beyond its
production possibilities frontier.


True/False: as an economy experiences increasing opportunity cost as they increase one goods
production. - CORRECT ANSWER - True


The law of __________________ is the concept that as you continue to increase production of
one good, the opportunity cost of producing that next unit increases. This comes about as you
reallocate resources to produce one good that was better suited to produce the original good.