1) Which of the following is an example of how the question of “what goods and services to produce?” is answered by the command process? A) government subsidies for affordable housing B) laws regarding equal opportunity in employment C) government allowance for the deduction of interest payments on private mortgages D) government regulations concerning the dumping of industrial waste 2) Opportunity cost is best defined as A) the amount given up when choosing one activity over all other alternatives. B) the amount given up when choosing one activity over the next best alternative. C) the opportunity to earn a profit that is greater than the one currently being made. D) the amount that is given up when choosing an activity that is not as good as the next best alternative. 3) In a market economy which of the following is the most important factor affecting scarcity? A) the needs and wants of consumers B) the price of the product C) the degree to which the government is involved in the allocation of resources. D) All of the above are equally important. 4) Which of the following is not considered by economists to be a basic resource or factor of production? A) money B) machinery and equipment C) technology D) unskilled labor 5) Select the group that best represents the basic factors of production. A) land labor capital entrepreneurship B) land labor money management skills C) land natural resources labor capital D) land labor capital technology 6) Which of the statements below best illustrates the use of the market process in determining the allocation of scarce resources? A) “Let’s make this product because this is what we know how to do best.” B) “Although we’re currently making a profit on the products we make we should consider shifting to products where we can earn even more money.” C) “Everyone is opening video stores why don’t we?” D) “We can’t stop making this product. This product gave our company its start.” 7) Which of the following is the best example of “what goods and services should be produced?” A) the use of a capital intensive versus a labor intensive process of manufacturing textiles B) the production of army helicopters versus the production of new commercial jet aircraft C) the manufacturing of computer workstations in Hong Kong or in Germany D) the leasing versus the purchasing of new capital equipment 8) Which of the following is the best example of “how should goods and services be produced?” A) adherence to technical specifications in the production of jet aircraft B) the production of jet aircraft for the air force or for a commercial airline C) the use of additional full-time workers versus the use of supplementary part-time workers D) the production of a new manufacturing facility 9) Which of the following is the best example of opportunity cost? A) a company’s expenditures on a training program for its employees B) the rate of return on a company’s investment C) the amount of money that a company can earn by depositing excess funds in a money market fund D) the amount of profit that a company forgoes when it decides to drop a particular product line in favor of another one 10) From the standpoint of a soft drink company the question of “What goods and services should be produced?” is best represented by which of the following decisions? A) whether or not to hire additional workers B) whether or not to increase its advertising C) whether or not to shut down selected manufacturing facilities D) All of the above are examples. E) None of the above are examples.
