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                                                      Chapter 1 Review Guide



True/False
Indicate whether the sentence or statement is true or false.
 

 1. 

When manufactured goods are used to produce other goods and services, they are called capital goods.
 

 2. 

The paradox of value occurs when some necessities have little value, while some non-necessities have a much higher value.
 

 3. 

In economics, land refers to the natural resources needed for production, such as forests, minerals, and climate.
 

 4. 

Time is an opportunity cost when a manufacturer assigns workers to one task rather than to another.
 

 5. 

Economic growth occurs when a nation's total output of goods and services increases over time.
 

 6. 

Economic products consist of both goods and services that are useful, relatively scarce, and transferable to others.
 

 7. 

A nation's wealth refers to a worth that can be expressed in dollars and cents.
 

 8. 

Both goods and services are counted as part of a nation's wealth.
 

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
 

 9. 

The study of economics is important because it enables us to
a.
describe our standard of living.
b.
increase our consumption of consumer goods.
c.
become better decision makers.
d.
determine what goods ought to be produced.
 

 10. 

The dollar value of all final goods and services and the most comprehensive measure of a country's total production output is
a.
its standard of living.
c.
a cost-benefit analysis.
b.
financial capital.
d.
Gross Domestic Product (GDP).
 

 11. 

The money used to buy the tools and equipment needed for production is known as
a.
capital goods.
c.
financial capital.
b.
the factors of production.
d.
wealth.
 

 12. 

The situation in which some necessities have little value while some non-necessities have a much higher value is known as
a.
paradox of value.
c.
trade-offs.
b.
opportunity cost.
d.
economic interdependence.
 

 13. 

Manufactured goods needed to produce other goods and services are called
a.
nondurable goods.
c.
Gross Domestic Product (GDP).
b.
capital goods.
d.
consumer goods.
 

 14. 

Division of labor is a characteristic of
a.
home craft businesses.
c.
classroom education.
b.
assembly line production.
d.
entrepreneurship.
 

 15. 

A popular model used to illustrate the concept of opportunity cost is
a.
the production possibilities frontier.
c.
the paradox of value.
b.
entrepreneurship.
d.
the factors of production.
 

 16. 

An economy at its production possibilities frontier is operating
a.
with slow economic growth.
c.
without division of labor.
b.
at full potential.
d.
as a free enterprise economy.
 

 17. 

Actions in one part of the country or world that have an economic impact on what happens elsewhere are examples of
a.
opportunity costs.
c.
specialization.
b.
trade-offs.
d.
economic interdependence.
 

Matching
 
 
Match each statement with the correct item below.
a.
study of how people try to satisfy their needs and wants through the use of limited resources
b.
people with all their efforts, abilities, and skills
c.
condition of not having enough resources to produce all the things people want
d.
worth that can be expressed in dollars and cents
e.
item that is economically useful or that satisfies an economic want
f.
alternative choices made by consumers in the marketplace
g.
quality of life based on the possession of the necessities and luxuries that make life easier
h.
sum of those economic products that are tangible, scarce, useful, and transferable
i.
cost of the next best alternative use of money, time, or resources when one choice is made rather than another
j.
tools, equipment, machinery, and factories used in the production of goods and services
 

 18. 

value
 

 19. 

scarcity
 

 20. 

labor
 

 21. 

trade-offs
 

 22. 

standard of living
 

 23. 

good
 

 24. 

economics
 

 25. 

capital
 

 26. 

opportunity cost
 

 27. 

wealth
 
 
Match each statement with the correct item below.
a.
diagram representing various combinations of goods and/or services that an economy can produce when all productive resources are fully employed
b.
any good that lasts three years or more when used regularly
c.
process of using up goods and services to satisfy wants and needs
d.
process of creating goods and services
e.
market where productive resources are bought and sold
f.
economy in which consumers and privately owned businesses make the majority of the WHAT, HOW, and FOR WHOM decisions
g.
basic requirement for survival
h.
manufactured goods that are used to produce other goods
i.
way of expressing a need that leads to a preference for some goods over others
j.
work that is performed for someone
 

 28. 

capital good
 

 29. 

need
 

 30. 

want
 

 31. 

service
 

 32. 

production possibilities frontier
 

 33. 

production
 

 34. 

free enterprise economy
 

Short Answer
 

 35. 

Synthesizing Information How is it possible for a good to be both a capital good and a consumer good?
 

 36. 

Determining Relevance Why is prediction an important element of economics?
 

Essay
 

 37. 

Identifying Central Issues Why is cost, measured in dollars alone, an insufficient measure of value? What concept do economists use to better evaluate a decision? Why is it important?
 

 38. 

Making Generalizations Why is the study of economics important even for people who are not going to be business owners or investors?
 



 
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