IVY SOFTWARE MBA PREPWORKS FUNDAMENTALS OF
ECONOMICS EXAM
A government imposed and legally enforced minimum market price.
a. price ceiling
b. surplus
c. economic burden
d. price floor - 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 - 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 - 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 - 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 - 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 - 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 - 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 - ANSWER: b. price
Unit price one pays for the use of land.
a. profit
b. wage
c. interest
d. rent - ANSWER: d. rent
Unit price one pays for the services of labor
a. rent
b. wage
c. profit
d. interest - ANSWER: b. wage
Unit price one pays for the use of capital
a. profit
b. interest
c. rent
d. price - ANSWER: b. interest
Income earned (or lost) by an entrepreneur for running a business
a. profit
b. rent
c. interest - 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 - 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 - 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 - 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 - 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. -
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. - 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.
a. absolute advantage
b. entrepreneurial ability
c. increasing opportunity cost
d. comparative advantage - ANSWER: c. increasing opportunity cost
The ability of an individual or group to carry out a particular economic activity more
efficiently than another individual or group; one has the lowest absolute production
cost relative to those with whom they are compared.
a. increasing opportunity cost
b. comparative advantage
c. constant opportunity cost
d. absolute advantage - ANSWER: d. absolute advantage
When the opportunity cost of a good remains constant as output of the good
increases.
a. constant opportunity cost
b. increasing opportunity cost
, c. comparative advantage
d. decreasing opportunity cost - ANSWER: a. constant opportunity cost
The concept of ______________ states that when comparing producers, the one
with the lowest opportunity cost in the production of some good or service has a
_____________ in that good or service.
a. entrepreneurial ability
b. comparative advantage
c. opportunity cost
d. absolute advantage - ANSWER: b. comparative advantage
An individual or a business should specialize in the production of a good or service in
which they have a:
a. absolute advantage
b. entrepreneurial ability
c. comparative advantage
d. opportunity cost - ANSWER: c. comparative advantage
True/False: the four categories of land, labor, capital and entrepreneurial ability are
collectively called the factors of production. - ANSWER: True
True/False: comparative advantage is the main concept demonstrated in a
production possibilities frontier. - ANSWER: False: its opportunity cost.
True/False: if the productions possibilities frontier between reading pages of a
history text and reading pages of a biology test is linear, then the opportunity cost of
reading additional pages of history is increasing. - ANSWER: False: it would be
increasing opportunity cost if the curve was concave (bowed-out). In this case, the
linear graph is a constant opportunity cost.
True/False: the opportunity cost of something is what you give up to get it -
ANSWER: True
True/False: to have a comparative advantage in something means that you have the
highest opportunity cost relative to those with whom you are compared. - ANSWER:
False: lowest opportunity cost
True/False: to have an absolute advantage in something means that you have the
lowest absolute production cost relative to those with whom you are compared. -
ANSWER: True
The market price of land is called:
a. wage
b. interest
c. profit
d. rent - ANSWER: d. rent
ECONOMICS EXAM
A government imposed and legally enforced minimum market price.
a. price ceiling
b. surplus
c. economic burden
d. price floor - 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 - 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 - 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 - 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 - 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 - 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 - 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 - ANSWER: b. price
Unit price one pays for the use of land.
a. profit
b. wage
c. interest
d. rent - ANSWER: d. rent
Unit price one pays for the services of labor
a. rent
b. wage
c. profit
d. interest - ANSWER: b. wage
Unit price one pays for the use of capital
a. profit
b. interest
c. rent
d. price - ANSWER: b. interest
Income earned (or lost) by an entrepreneur for running a business
a. profit
b. rent
c. interest - 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 - 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 - 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 - 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 - 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. -
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. - 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.
a. absolute advantage
b. entrepreneurial ability
c. increasing opportunity cost
d. comparative advantage - ANSWER: c. increasing opportunity cost
The ability of an individual or group to carry out a particular economic activity more
efficiently than another individual or group; one has the lowest absolute production
cost relative to those with whom they are compared.
a. increasing opportunity cost
b. comparative advantage
c. constant opportunity cost
d. absolute advantage - ANSWER: d. absolute advantage
When the opportunity cost of a good remains constant as output of the good
increases.
a. constant opportunity cost
b. increasing opportunity cost
, c. comparative advantage
d. decreasing opportunity cost - ANSWER: a. constant opportunity cost
The concept of ______________ states that when comparing producers, the one
with the lowest opportunity cost in the production of some good or service has a
_____________ in that good or service.
a. entrepreneurial ability
b. comparative advantage
c. opportunity cost
d. absolute advantage - ANSWER: b. comparative advantage
An individual or a business should specialize in the production of a good or service in
which they have a:
a. absolute advantage
b. entrepreneurial ability
c. comparative advantage
d. opportunity cost - ANSWER: c. comparative advantage
True/False: the four categories of land, labor, capital and entrepreneurial ability are
collectively called the factors of production. - ANSWER: True
True/False: comparative advantage is the main concept demonstrated in a
production possibilities frontier. - ANSWER: False: its opportunity cost.
True/False: if the productions possibilities frontier between reading pages of a
history text and reading pages of a biology test is linear, then the opportunity cost of
reading additional pages of history is increasing. - ANSWER: False: it would be
increasing opportunity cost if the curve was concave (bowed-out). In this case, the
linear graph is a constant opportunity cost.
True/False: the opportunity cost of something is what you give up to get it -
ANSWER: True
True/False: to have a comparative advantage in something means that you have the
highest opportunity cost relative to those with whom you are compared. - ANSWER:
False: lowest opportunity cost
True/False: to have an absolute advantage in something means that you have the
lowest absolute production cost relative to those with whom you are compared. -
ANSWER: True
The market price of land is called:
a. wage
b. interest
c. profit
d. rent - ANSWER: d. rent
