Name: ________________________ Class: ___________________ Date: __________
ID: A
Economics Chapter 1 Section 3 Review (NOT an assignment)
Matching
Key Terms and Concepts
Directions: Match the terms with the descriptions. Write the letter of the correct answer in the blank
provided. Not all of the choices will be used.
a.
b.
c.
d.
e.
f.
g.
h.
i.
need
want
goods
services
scarcity
shortage
entrepreneur
factors of production
land
j.
k.
l.
m.
n.
o.
p.
q.
r.
labor
capital
trade-off
opportunity cost
marginal cost
marginal benefit
economics
efficiency
underutilization
____
1. use of fewer resources than an economy is capable of using
____
2. use of resources in such a way as to maximize the output of goods and services
Completion
Complete each statement.
3. A graph that shows alternative ways to use an economy’s productive resources is a _______.
4. When a country’s maximum possible output is plotted on a graph, it is called the _______.
5. When an economy uses fewer production resources than it would at maximum production, it is called
_______.
6. The use of resources to maximize the output of goods and services is _______.
7. The curve usually seen in a production possibilities frontier can be explained by the _______.
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____
8. A production possibilities curve shows the relationship between the production of
a. farm goods and factory goods.
b. two types of farm goods.
c. two types of factory goods.
d. any two categories of goods.
2
Name: ________________________
ID: A
Directions: Use the graph below to answer questions 22 and 23.
____
9. The graph shows how many new schools and new roads a city could build using all of its factor resources.
What does the current production possibilities curve show?
a. As the number of schools increases, so does the number of roads.
b. As the number of schools increases, the number of roads decreases.
c. As the number of schools decreases, so does the number of roads.
d. The number of schools has no effect on the number of roads.
____ 10. The line on a production possibilities curve showing the relative amounts of two types of goods produced
using all resources is called the
a. production possibilities frontier.
b. opportunity cost line.
c. utilization of resources.
d. maximum possible production line.
2
Name: ________________________
ID: A
____ 11. The future production possibilities frontier on this graph shows what might happen if
a. resources were underutilized.
b. there was a shortage of paving equipment.
c. the cost of building materials went down.
d. more resources went to building roads.
____ 12. Increasing the number of laborers in an economy generally causes a(n)
a. increase in the production possibilities curve.
b. decrease in the production possibilities curve.
c. increase in the opportunity cost of production.
d. decrease in the opportunity cost of production.
____ 13. An economy that is producing the maximum amount of goods and services is considered
a. efficient.
b. underutilized.
c. growing.
d. trading off.
____ 14. An efficient economy is one that
a. creates new resources through ongoing research and development.
b. conserves its resources through underutilization.
c. uses its resources to make the most goods and services.
d. does not face the problem of scarcity.
____ 15. A region’s production possibilities curve might show underutilization of resources if the region experienced
a. tax increases.
b. an influx of immigrant labor.
c. a large flood.
d. growth of its industries.
____ 16. A company that makes baseball caps is underutilizing its resources. What does this mean?
a. The company is running more efficiently than its competitors.
b. The company is paying its employees less than it should be.
c. The company is making caps when it could be making t-shirts instead.
d. The company is producing fewer caps than it could be.
____ 17. The law of increasing costs means that as production shifts from one item to another,
a. the cost of production gets cheaper and cheaper.
b. the cost of producing an item stays the same no matter how many are produced.
c. more and more resources are necessary to increase production of the second item.
d. the land costs of increasing production rise much more steeply than do the labor costs.
____ 18. The law of increasing costs means that when an economy increases the production of one item the
a. opportunity cost goes up.
b. actual cost of making the item goes down.
c. actual cost goes up but the opportunity cost goes down.
d. production costs will increase also.
3
Name: ________________________
ID: A
____ 19. The community of Desertville traditionally produces a large number of tires and a small amount of kiwi fruit.
Kiwis are becoming increasingly popular, and Desertville has decided to expand kiwi cultivation and decrease
tire manufacturing. According to the law of increasing costs,
a. the opportunity cost of producing tires will increase.
b. the opportunity cost of producing kiwis will increase.
c. the opportunity cost of producing tires will decrease.
d. the opportunity cost of producing kiwis will decrease.
____ 20. A nation’s automakers install new robotic machinery to build cars. As a result, cars take only a day to make,
and the factories can produce many more cars than before. This is an example of growth caused by
a. natural resources.
b. labor.
c. technology.
d. production possibility curves.
Short Answer
Critical Thinking and Writing
Directions: Use complete sentences to answer the questions below.
21. How does a production possibilities curve illustrate the law of increasing costs?
22. If an economy’s production possibilities curve indicates that the economy is working at its most efficient
level, is this proof that an economy is growing over time?
23. How do resources and technology affect a country’s production possibilities?
4
ID: A
Economics Chapter 1 Section 3 Review (NOT an assignment)
Answer Section
MATCHING
1. ANS:
OBJ:
TOP:
2. ANS:
OBJ:
TOP:
R
PTS: 2
DIF: L3
REF: A.15
1.3.3 Explain why a country's production possibilities depend on its resources and technology.
Economic Choices | Efficiency
Q
PTS: 2
DIF: L3
REF: A.15
1.3.3 Explain why a country's production possibilities depend on its resources and technology.
Economic Choices | Efficiency
COMPLETION
3. ANS: production possibilities curve
PTS:
OBJ:
TOP:
4. ANS:
2
DIF: L3
REF: A.13
1.3.1 Interpret a production possibilities curve.
Economic Systems | Production Possibilities Curves
production possibilities frontier
PTS:
OBJ:
TOP:
5. ANS:
2
DIF: L3
REF: A.14
1.3.2 Explain how production possibilities curves show efficiency, growth, and cost.
Economic Systems | Production Possibilities Frontier
underutilization
PTS:
OBJ:
TOP:
6. ANS:
2
DIF: L3
REF: A.15
1.3.2 Explain how production possibilities curves show efficiency, growth, and cost.
Economic Systems | Underutilization
efficiency
PTS:
OBJ:
TOP:
7. ANS:
2
DIF: L3
REF: A.15
1.3.2 Explain how production possibilities curves show efficiency, growth, and cost.
Economic Systems | Efficiency
law of increasing costs
PTS: 2
DIF: L3
REF: A.18
OBJ: 1.3.2 Explain how production possibilities curves show efficiency, growth, and cost.
TOP: Economic Systems | Law of Increasing Costs
1
ID: A
MULTIPLE CHOICE
8. ANS: D
A production possibilities curve is a graph that shows alternative ways to use an economy’s productive
resources.
PTS: 3
DIF: L3
REF: A.13
OBJ: 1.3.1 Interpret a production possibilities curve.
TOP: Economic Systems | Production Possibilities Curves
9. ANS: B
Without a change in resources, the number of roads must decrease in order for the number of schools to
increase.
PTS: 5
DIF: L4
REF: A.13
OBJ: 1.3.1 Interpret a production possibilities curve.
TOP: Economic Choices | Production Possibilities
10. ANS: A
The production possibilities frontier shows the maximum combination of two types of goods that can be
produced using all resources.
PTS: 3
DIF: L3
REF: A.14
OBJ: 1.3.1 Interpret a production possibilities curve.
TOP: Economic Systems | Production Possibilities Curves
11. ANS: C
The production possibilities frontier would shift to the right if there was an increase in one of the factors of
production.
PTS: 5
DIF: L4
REF: A.14
OBJ: 1.3.1 Interpret a production possibilities curve.
TOP: Economic Choices | Production Possibilities
12. ANS: A
A rise in a factor of production increases the maximum amount of goods an economy can produce.
PTS: 3
DIF: L3
REF: A.15
OBJ: 1.3.2 Explain how production possibilities curves show efficiency, growth, and cost.
TOP: Economic Systems | Production Capacity
13. ANS: A
An economy is producing efficiently when it is producing the maximum amount of goods and services that its
production resources allow.
PTS: 3
DIF: L3
REF: A.15
OBJ: 1.3.2 Explain how production possibilities curves show efficiency, growth, and cost.
TOP: Economic Systems | Efficiency
14. ANS: C
An efficient economy uses resources in such a way as to maximize the output of goods and services.
PTS: 3
DIF: L3
REF: A.15
OBJ: 1.3.2 Explain how production possibilities curves show efficiency, growth, and cost.
TOP: Economic Choices | Efficiency
2
ID: A
15. ANS: C
A natural disaster such as a flood could cause a region’s output to go down until the damage is repaired.
PTS: 3
DIF: L3
REF: A.15
OBJ: 1.3.1 Interpret a production possibilities curve.
TOP: Economic Choices | Underutilization
16. ANS: D
Underutilization is the use of fewer resources than an economy is capable of using.
PTS: 3
DIF: L3
REF: A.15
OBJ: 1.3.3 Explain why a country's production possibilities depend on its resources and technology.
TOP: Economic Choices | Efficiency
17. ANS: C
The law of increasing costs states that as production shifts from making one good or service to another, more
and more resources are needed to increase production of the second good or service.
PTS: 3
DIF: L3
REF: A.17
OBJ: 1.3.2 Explain how production possibilities curves show efficiency, growth, and cost.
TOP: Economic Systems | Law of Increasing Costs
18. ANS: A
According to the law of increasing costs, as production shifts from making one item to another, more and
more resources are necessary to increase production of the second item. Therefore, the opportunity cost
increases.
PTS: 3
DIF: L3
REF: A.17
OBJ: 1.3.2 Explain how production possibilities curves show efficiency, growth, and cost.
TOP: Economic Choices | Cost
19. ANS: B
The law of increasing costs states that as production shifts from making one item to another, more and more
resources are necessary to increase production of the second item. Therefore, the opportunity cost increases.
PTS: 3
DIF: L3
REF: A.17
OBJ: 1.3.2 Explain how production possibilities curves show efficiency, growth, and cost.
TOP: Economic Choices | Cost
20. ANS: C
Technology is the process used to create goods and services. It usually increases efficiency of workers.
PTS: 3
DIF: L3
REF: A.18
OBJ: 1.3.3 Explain why a country's production possibilities depend on its resources and technology.
TOP: Economic Choices | Technology
3
ID: A
SHORT ANSWER
21. ANS:
As you move along the production possibilities curve from the middle toward either end, you trade off more
and more for less and less added output. This increasing cost that is not proportional to the increased output
shows up on the graph as a curved line.
PTS: 7
DIF: L4
REF: A.13
OBJ: 1.3.2 Explain how production possibilities curves show efficiency, growth, and cost.
TOP: Economic Choices | Production Possibilities
22. ANS:
No. A production possibilities curve is a snapshot. An economy could be maximizing its production or output
of goods and services at a point in time, but events can move the curve in either direction over time.
PTS: 7
DIF: L4
REF: A.15
OBJ: 1.3.2 Explain how production possibilities curves show efficiency, growth, and cost.
TOP: Economic Choices | Efficiency
23. ANS:
A country can only produce as much as its resources will allow. Technology can help make production more
efficient.
PTS: 5
DIF: L3
REF: A.18
OBJ: 1.3.3 Explain why a country's production possibilities depend on its resources and technology.
TOP: Economic Choices | Resources
4