1. law, govt and politics
2. government

E C O N
( E N T )
C O U R S E
LESSON ONE
Introduction to
Economics
CHAPTER 1
What is Economics?
CHAPTER 2
Economic Systems and
the American Economy
Introduction to the Course
| 13
EXERCISES
Matching (22 points)
From the list below, select the term that matches each of the following
statements.
1.
system where government controls the
factors of production and makes all
decisions about their use
2.
foregoing one good or service
purchase or produce another one
3.
human effort directed toward producing
goods and services
4.
system where private individuals own the
factors of production and decide how to
use them
5.
natural resources
6.
expansion of the economy to produce
more goods, jobs, and wealth
7.
balancing economic policy
everyone benefits fairly
8.
the condition of wants exceeding all
available resources
9.
material well-being as measured by how
well necessities and luxuries are satisfied
so
to
A.
B.
C.
D.
E.
F.
G.
H.
I.
J.
K.
land
scarcity
economic equity
economic growth
trade-off
command economy
standard of living
labor
traditional economy
capital
capitalism
that
10. system in which economic decisions are
based on customs that have been handed
down for generations
11. previously manufactured goods used to
make other goods and services
Multiple Choice (38 points)
1.
We are forced to make choices because
A.
B.
C.
D.
2.
The four factors of production are the resources of land, labor,
capital, and
A.
B.
C.
D.
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not everything is limited.
we live in a democracy.
all resources are limited.
shortages are a constant situation.
entrepreneurship.
services.
technology.
goods.
42 ECON (ENT) COURSE --Economics and the Free Enterprise System
3.
A truck used by a plumber is a type of
A.
B.
C.
D.
4.
The value of the next best alternative that had to be given up to
do the action that was chosen is the
A.
B.
C.
D.
5.
quota system.
command economy.
laissez-faire system.
mixed economy.
The desire to make money that motivates people to produce
goods and services is called
A.
B.
C.
D.
9.
entrepreneurship.
slave labor.
the market.
the government.
Pure capitalism is also known as a
A.
B.
C.
D.
8.
trade-offs.
production possibilities.
costs.
factors of production.
When Adam Smith coined the term “invisible hand,” he was
referring to
A.
B.
C.
D.
7.
trade-off.
sale price.
capital.
opportunity cost.
All the combinations of goods and services that can be produced
in a given time with a fixed amount of resources are called
A.
B.
C.
D.
6.
modus transportius.
raw good.
capital.
labor.
the profit incentive.
entrepreneurship.
greed.
laissez-faire.
Which country best follows the ideas of Adam Smith?
A.
B.
C.
D.
North Korea
China
Singapore
Cuba
10. Productivity refers to
A.
B.
C.
D.
using the four factors of production.
producing goods and services in better and faster ways.
measuring sales.
creating goods and services.
Lesson One - Introduction to Economics
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11. Which of the following is a strength of a market economy?
A.
B.
C.
D.
No one is allowed to live in poverty.
It offers guaranteed lifetime employment.
It provides centralized planning.
It gives producers and consumers a great deal of freedom.
12. Today most economic systems are
A.
B.
C.
D.
mixed.
traditional.
capitalist.
command.
13. The goal of economic freedom is to
A.
B.
C.
D.
limit competition.
give government a large role in the economy.
ensure that businesses don’t fail.
allow people to make choices.
14. Unemployment compensation helps provide economic
A.
B.
C.
D.
growth.
stability.
equity.
freedom.
15. Since the founding of the United States, the role of government
in the economy has
A.
B.
C.
D.
decreased.
increased.
had no impact on individual economic choices.
been eliminated.
16. Zoning regulations are an example of
A.
B.
C.
D.
the role of government in regulating economic activities.
a traditional economy.
the lack of government involvement in economic activities.
a pure market economy.
17. When analyzing an economic problem, economists do not
consider
A.
B.
C.
D.
government regulations.
choices.
resources.
values.
18. A free enterprise system involves trade-offs between
A.
B.
C.
D.
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state and federal government.
businesses in the same industry.
individual gain and social equity.
customs and beliefs.
44 ECON (ENT) COURSE --Economics and the Free Enterprise System
19. Which of the following is an example of a good?
A.
B.
C.
D.
a car wash
a car
a tune-up
an oil change
20. Capitalism is also known as a
A.
B.
C.
D.
free market system.
mixed economy.
quota system.
command economy.
Short Answer and Essay (20 points)
1.
Short Answer - Factors of production: Pick a good or service and
describe how each of the factors of production is present in that
good or service. See the following example:
Example: Johnny has a mobile car wash.
• Capital = the vehicle used to pull the car wash equipment and the
equipment itself
• Labor = Johnny’s and anyone he may hire to help
• Land = the water
• Entrepreneurship = Johnny is providing it as he has purchased the
capital and is risking this investment to create a business
Lesson One - Introduction to Economics
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