Economics Test: Chapter 16 and 17 Name: _______________

Part One: Economic Terms:

specialization marginal revenue scarcity total cost

fixed cost entrepreneurs trade-off factor market
marginal cost revenue variable cost voluntary exchange
capitalism benefit-cost analysis profit motive opportunity cost
_____________ 1) expenses that do not change no matter how much a business produces.
_____________ 2) The basic economic problem of not having the resources to produce enough.
_____________ 3) Comparison of the costs and revenues of the options available to a business
_____________ 4) Risk-takers who start new businesses.
_____________ 5) Money a business receives from selling its good or service.
_____________ 6) The income received from each additional unit sold.
_____________ 7) Where people sell labor, buy capital resources like tools, and natural resources are sold.
Part Two: True/False
____ 1. Land for growing food and iron for making steel are examples of natural resources.
____ 2. An increase in consumer income will shift left, causing demand to go down.
____ 3. When a person sells a used car, it is not included in the country’s GDP.
____ 4. If a country’s productivity increases, then its GDP will also increase.
____ 5. In a market economy, dollars are like votes for the goods or services wanted.
____ 6. People who buy and sell services are called producers.
____ 7. In a circular flow model, money goes in the same direction as goods and services.
Part Three: Multiple Choice
1. In a capitalist economy, competition is allowed to prosper with a minimum of
A) Government interference C) Voluntary exchange
B) Specialization D) Division of labor
2. A surplus typically indicates that
A) The price is too high C) Government price controls are needed
B) The market is in equilibrium D) Suppliers cannot meet the current demand
3. What situation may occur when a price is below its equilibrium level?
A) Opportunity cost C) Shortage
B) Surplus D) Trade-off
4. An example of a fixed cost for a noodle restaurant is
A) Labor C) Vegetables, meat, and noodles
B) Monthly rent D) The boxes and chopsticks food comes with
5. Which question is not one of the basic economic questions for a society?
A) How much of a product to produce
B) What goods and services should be produced
C) Whether products are good for the environment
D) Who will consume, or use, the products
6. Which feature is not a part of the free enterprise system of the United States?
A) Government giving help to people in need
B) Private property rights
C) Businesses with similar products compete for consumers
D) Markets where people can buy goods

Short Response Section

1. A. Give an example of a way to increase demand for a particular shoe company

B. Shown is a demand curve. Draw the new position.

C. How will this effect the equilibrium price?

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2. How is the standard of living different from the GDP? Use a country as an example.

3. During the 1800s, Americans built the transcontinental railroad. Explain what competition and division of
labor are, and how they helped to build the railroad.