CP ECONOMICS
FUNDAMENTALS OF ECONOMICS STUDY GUIDE
1. What is a factory building an example of?
2. What people will LIKELY find the highest paying job in the workforce? (hint:
think human capital)
3. Zach Allen wants to be a doctor. He also wants to buy a brand new car. Since
both medical school and the new car are very expensive, he cannot afford to do
both. If he decides that the benefits of going to medical school will ultimately
outweigh the gratification (cost) of buying a new car, then the MOST rational
decision Zach could choose is
4. According to the production possibilities frontier, at which point on the graph
would Woodstock Shoe House be failing to produce either product efficiently?
5. According to the circular flow diagram, the market for labor would be in the
__________ market.
6. Jeanette bought a new pair of shoes with the last $30 in her checking account
instead of going to dinner and a mini golf with her friends. What is the
opportunity cost of the shoes?
7. Human capital includes all of the following:
8. The cost of the decision once it is weighed against the benefits:
9. Lack of adequate resources to obtain all of one’s wants:
10. Act of giving up one thing of value to gain another:
11. Value of the best alternative option that is lost when a decision is made:
12. The rate at which goods and services are produced:
13. Where goods/services are sold to consumers for final consumption:
14. Where the factors of production are purchased and consumed:
15. Firm that exists as a separate legal entity:
16. Share of ownership in a corporation:
17. Investment in people:
18. Business owned by an individual or the members of a household:
19. What are the three basic economic questions?
20. List the three major economic actors (NOT the factors of production) in the U.S.
economy?
21. In a market economy, what is the primary motivation for producers to sell their
products at a price consumers can afford?
22. Which of the following would consumers MOST OFTEN need to consider when trying
making a rational economic decision?
23. McDaniel Corporation has just finished a year of record profits. Rather than use
the resources to immediately raise production, they decide to purchase updated
technology. McDaniel Corporation’s actions represent what?
24. How do goods pass from producers to consumers in a free enterprise system
(mixed-market economy)?
25. What incentive motivates a manufacturer to sell a product?
26. In which economy does the government make all decisions (What, How & For Whom to
produce)?
27. In Spain, the government owns industries such as the TV stations, hospitals,
universities, and defense contractors. However, most of their industries involve
privately owned firms that compete for business. Which of the following would
BEST describe the type of economy France has?
28. You are an entrepreneur with an innovative idea for a new shoe selling business.
In which kind of economy would you have the most opportunity to try to achieve
success?
29. Natalie owns her own company. She invests in all the capital goods needed to
make her product and sells her goods with the motivation of making huge profits.
She freely chooses what to produce and consumers freely choose whether or not to
buy her product. Natalie’s company operates in a
30. List problems MOST often associated with command economies?
31. List the typical role(s) of government in a market economy?
32. List disadvantages of a market economy?
33. Which type of economic system has the factors of production privately owned?
34. In a market economy, how are goods and services paid for by the government?
35. What impact can deregulation usually have on industries?
36. The real estate on which a company builds its main manufacturing center are all
examples of
37. John must make an economic decision. He must choose whether or not to buy a new
car. After considering all the options, he concludes that the marginal costs of
the car are greater than the marginal benefits. In John’s case, buying the car
would be a _____________________ decision.
38. Purchasing new equipment for a business, paying for employees training, and
purchasing the latest computers for one’s office are all examples of
39. What are some advantages and disadvantages of a sole proprietorship?
40. People/businesses freely choose to engage in market transactions:
41. Devotion of resources to one specific task:
42. Resources that are used to create other goods and services:
43. Risk-taker in search of profits that starts a business:
44. Producers and consumers determined what gets made and for whom:
45. Government owns most of the property and means of production:
46. Economic system that stems from ritual, custom, & habit:
47. Taylor and two associates have been operating a business that is not going well.
She is stressed out because the company is over $200,000 in debt and she knows
that if it goes under, she and her associates will have to pay it out of their
own pockets. It sounds like Taylor and her two associates have a
48. With respect to raising funds, the difference between a corporation & other
types of businesses is
49. Donald owns a Shell gas station that has branches nationwide. His store is an
example of a
50. Ralph started a car repair business, but soon decided that car repair was too
stressful for him. He could close his business relatively easy and return to
school because the business was a
51. The most common form of business organization in the United States is the
52. Churches are considered to be
53. Hannah opens a website consulting firm. She faces unlimited liability, but
maintains all the decision making authority. What type of business does she own?
54. A type of business that has unlimited life is
55. Which type of business has limited liability of its owners?
56. The economic system that is based on equity and the government decides what gets
made and sets prices is referred to as what?
57. What does Arrow A represent?
58. What does Arrow C represent?
59. GDP is
60. Study of how society allocates scare resources: