Name: ____________________________________

Period: _________________

`Chapter 1 Review
Vocab Matching
____ a worker’s knowledge & skill
____ giving up one benefit to gain
another
____ comparing opportunity cost and
benefits A. capital
____ deciding how much or less to do
B. cost/benefit analysis
____ any point inside the production
possibilities frontier C. economics
____ use of resources that maximizes D. entrepreneur
output E. goods
____ extra benefit of adding the same F. guns or butter
unit G. human capital
____ most desirable alternative H. labor
____ choice between spending on I. land
military needs or social welfare J. marginal benefit
____ cost of adding one unit K. production possibilities curve
____ graph showing alternate ways to
use productive resources L. production possibilities frontier
____ all natural resources M. efficiency
____ human-made objects such as a N. underutilization
building O. marginal cost
____ something desired but not P. needs
necessary to for survival
Q. opportunity cost
____ physical objects that someone
produces such as food or clothing R. physical capital
____ people who combine resources to S. scarcity
make new goods & services T. services
____ limited amounts of goods & U. shortage
services are available to meet V. thinking at the margin
unlimited wants W. trade-off
____ consumers want more of a good X. wants
than producers are willing to make
available
____ effort people devote to tasks for
which they are paid
____ any human-made resource used
to produce goods & services
____ study of how people satisfy their
needs and wants by making choices
____ essential for survival
____ actions performed for another
____ a line on a production curve showing
combinations of two products
 Name: ____________________________________

Period: _________________
Multiple Choice
1. Why would scarcity and choice most likely be basic economic problems for all people?

a. Because resources are sustainable, and people must choose which resources to produce
b. Because resources are limitless, and people have unlimited choices that can cause confusion
c. Because resources are not always available, and people must choose whether to produce more
resources
d. Because resources are always limited, and people must make choices by prioritizing their needs
over their wants

2. As a factor of production, the instruction provided by a teacher is considered—

a. labor
b. resources
c. capital
d. physical capital

3. Purchasing a new piece of equipment for one’s factory is affecting which factor of production?

a. Human capital
b. Entrepreneurship
c. Physical capital
d. Land resources

4. To save money, Bobby decided not to go to a concert where his favorite musician was performing.
What was the opportunity cost of that decision?

a. having fun at the concert

b. spending time at home
c. having time to study
d. having extra money

5. "The question remains: How many guns are necessary to maintain a high level of security for the U.S.,
and how much butter can the nation afford without hurting guns and vice versa?"

— David Briceno, “‘Guns vs. Butter,’ America’s Political Dilemma,”

The Union In the quotation above, “butter” refers to

a. social welfare spending.

b. agricultural spending.
c. military spending.
 Name: ____________________________________

Period: _________________
d. defense spending.

Open Response

6. What is the difference between scarcity and shortage?

7. Why do entrepreneurs take the risk to start or expand a business?

8. Give an example of a trade-off your school or local government might have to make. Describe

the issues on both sides of the debate.

9. Name one decision you made recently. What were the possible opportunity costs of that
decision?

10. Suppose that a country has the resources to produce 3 million cars and 100 million tons of
iron ore every year. Why is it a problem if the country produces 2 million cars and 75 million

tons of iron ore one year?

 Name: ____________________________________

Period: _________________

11. From 2000 to 2010, the gross domestic product in the United States grew at an average
annual rate of 3.4 percent. What do you think happened to the production possibilities
frontier?