CHAPTER 1 ASSESSMENT/REVIEW
QUESTIONS AND ANSWERS
why would expanding the nation's communications network be considered an increase
in wealth, while improving the education of its people not be considered an increase in
wealth? -ANSWEALTH is the accumulation of products that are tangible, are scarce,
have utility, and are transferrable from one person to another
SERVICES (like education) are not wealth bc they are intangible. but, they are still
useful/valuable
one of the basic economic questions is FOR WHOM products are produced. in our
society, how would that question be answered for a common consumer product such as
a cell phone? -ANSdepending on the price, it would be produced for low income, middle
income, or very rich people.
identify an example of each of the 4 factors of production required to produce a pencil -
ANS1. land- forests for the trees
2. capital-pencil factory machines/equipment
3. labor- factory workers, forest workers
4. entrepreneurs- produce a new innovative type of pencil
why does planning for economic growth, stability, full employment, and efficiency
involve both risks and sacrifices? -ANSit requires risk because no one knows the future,
you are basing your decisions off the now. it is sacrifice bc it requires us to limit our
current consumption
how does productivity relate to economic growth? -ANSeconomic growth is made
possible by having more resources or increased productivity.
this causes the production possibilities frontier to expand outward
how are the roles of resource owners and firms explained by the circular flow diagram of
economic activity? -ANSthey buy productive resources
they sell goods and services
they receive business income
they give payments for resources
entrepreneurs can/cannot employ all four production factors -ANSCANNOT
they do something new w existing resources
why will economic models never be entirely reliable? -ANSbc they are based on
assumptions, or things we THINK are true. the quality of a model is no better than the
assumptions on which it was based
QUESTIONS AND ANSWERS
why would expanding the nation's communications network be considered an increase
in wealth, while improving the education of its people not be considered an increase in
wealth? -ANSWEALTH is the accumulation of products that are tangible, are scarce,
have utility, and are transferrable from one person to another
SERVICES (like education) are not wealth bc they are intangible. but, they are still
useful/valuable
one of the basic economic questions is FOR WHOM products are produced. in our
society, how would that question be answered for a common consumer product such as
a cell phone? -ANSdepending on the price, it would be produced for low income, middle
income, or very rich people.
identify an example of each of the 4 factors of production required to produce a pencil -
ANS1. land- forests for the trees
2. capital-pencil factory machines/equipment
3. labor- factory workers, forest workers
4. entrepreneurs- produce a new innovative type of pencil
why does planning for economic growth, stability, full employment, and efficiency
involve both risks and sacrifices? -ANSit requires risk because no one knows the future,
you are basing your decisions off the now. it is sacrifice bc it requires us to limit our
current consumption
how does productivity relate to economic growth? -ANSeconomic growth is made
possible by having more resources or increased productivity.
this causes the production possibilities frontier to expand outward
how are the roles of resource owners and firms explained by the circular flow diagram of
economic activity? -ANSthey buy productive resources
they sell goods and services
they receive business income
they give payments for resources
entrepreneurs can/cannot employ all four production factors -ANSCANNOT
they do something new w existing resources
why will economic models never be entirely reliable? -ANSbc they are based on
assumptions, or things we THINK are true. the quality of a model is no better than the
assumptions on which it was based
