Economics-Practice Exam 2026/2027 questions And Answers
The government of a country must make a decision between increasing military spending and
subsidizing wheat farmers. This is an example of? - A guns or butter issue. Economists and
politicians use the term "guns or butter" to describe a country's choice of spending money on
military or domestic needs.
The law of increasing costs means that when an economy increases the production of one item,
what happens to the opportunity cost? - Opportunity cost goes up. According to the law of
increasing costs, as production shifts from making one item to another, more and more
resources are necessary to increase production of the second item. Therefore, the opportunity
cost increases.
The physical capital used by a woodworker to make furniture would include - Saws and drills.
Human-made objects used to create other goods and services are physical capital.
The town of Riverton makes many tires. The town also grows a small amount of strawberries.
Strawberries are becoming more popular. Riverton decides to grow more strawberries and
make fewer tires. According to the law of increasing costs, what will happen? - The law of
increasing costs states that as production shifts from making one good to another, more
resources are needed to increase production of the second good. Therefore, the opportunity
cost increases. The opportunity cost of growing strawberries will increase.
To earn the most pay, what is the trade-off? - SKIP
What does the economic concept of "guns or butter" mean? - The term guns or butter refers to
the government's choice between spending money on military or domestic needs.
What happens as production of one item switches to the production of another item?
a. The cost of production decreases.
, b. Land costs rise more than labor costs.
c. The cost of production stays the same.
d. More resources are needed. - More resources are needed.
What happens when workers are laid off?
a. decreased opportunity cost
b. underutilization
c. increased opportunity cost
d. efficiency - underutilization
What information is needed to make a decision at the margin? - cost to produce each unit
What is the difference between a shortage and scarcity? - Unlike shortages, which are
temporary, scarcity always exists.
What is the production possibilities frontier or curve?
a. a line that shows how much can be made so resources are best used
b. a line that shows how resources can best be used in the future
c. a line that shows when resources are underutilized
d. a line that shows the only way resources can be used - a line that shows how much can be
made so resources are best used
What kinds of goods can be compared on a production possibilities curve? - Any two categories
of goods. A production possibilities curve is a graph that shows alternative ways to use an
economy's productive resources.
The government of a country must make a decision between increasing military spending and
subsidizing wheat farmers. This is an example of? - A guns or butter issue. Economists and
politicians use the term "guns or butter" to describe a country's choice of spending money on
military or domestic needs.
The law of increasing costs means that when an economy increases the production of one item,
what happens to the opportunity cost? - Opportunity cost goes up. According to the law of
increasing costs, as production shifts from making one item to another, more and more
resources are necessary to increase production of the second item. Therefore, the opportunity
cost increases.
The physical capital used by a woodworker to make furniture would include - Saws and drills.
Human-made objects used to create other goods and services are physical capital.
The town of Riverton makes many tires. The town also grows a small amount of strawberries.
Strawberries are becoming more popular. Riverton decides to grow more strawberries and
make fewer tires. According to the law of increasing costs, what will happen? - The law of
increasing costs states that as production shifts from making one good to another, more
resources are needed to increase production of the second good. Therefore, the opportunity
cost increases. The opportunity cost of growing strawberries will increase.
To earn the most pay, what is the trade-off? - SKIP
What does the economic concept of "guns or butter" mean? - The term guns or butter refers to
the government's choice between spending money on military or domestic needs.
What happens as production of one item switches to the production of another item?
a. The cost of production decreases.
, b. Land costs rise more than labor costs.
c. The cost of production stays the same.
d. More resources are needed. - More resources are needed.
What happens when workers are laid off?
a. decreased opportunity cost
b. underutilization
c. increased opportunity cost
d. efficiency - underutilization
What information is needed to make a decision at the margin? - cost to produce each unit
What is the difference between a shortage and scarcity? - Unlike shortages, which are
temporary, scarcity always exists.
What is the production possibilities frontier or curve?
a. a line that shows how much can be made so resources are best used
b. a line that shows how resources can best be used in the future
c. a line that shows when resources are underutilized
d. a line that shows the only way resources can be used - a line that shows how much can be
made so resources are best used
What kinds of goods can be compared on a production possibilities curve? - Any two categories
of goods. A production possibilities curve is a graph that shows alternative ways to use an
economy's productive resources.
