1.Which combination of terms gives the general definition of the economic problem?

A bigger families, less food, starvation

B falling supply, rising demand, shortage

C higher population, fewer jobs, unemployment

D limited resources, unlimited wants, scarcity

2.A monopoly takes over an industry from competitive firms. What is not likely to be true about a monopoly compared with a competitive firm?

Amonopoly will earn a higher rate of profit.

Bmonopoly will gain a greater share of the market.

Cmonopoly will offer a wider choice to the consumer.

Dmonopoly will operate on a larger scale of production.

3.A newspaper reported that a country's economy had grown by 3% during the last year. What must have increased in that year?

A costs of production

B gross domestic product

C unemployment

D wage levels

4.What is necessarily involved in international free trade?

Aabsence of transport costs

Bgift of foreign aid from charities

Csupply of zero interest rate government loans

Dunrestricted exchange of goods and services

5.A government subsidised a new factory in a rural area to create jobs. It also provided training courses at a college. Objectors claimed the development would destroy an area of natural beauty. What concepts are involved in this statement?

A economic growth, resource allocation, free market equilibrium

Bgovernment intervention, monetary policy, opportunity cost

C public good, market prices, fiscal policy

Dnegative externalities, factors of production

6.Reena makes a living by selling paintings of the town in which she lives. She sells them in an open-air market once a week. In order to be able to sell more pictures in a week she decides to buy a studio, pay someone to help in the studio and try to increase demand by advertising in the local paper. Which factors of production were changed?

A capital only

B labour and capital

C labour and land

D labour only

7.Governments sometimes intervene in the economy when the market fails. What is the most likely reason why government intervention may make the situation worse?

A Government decisions can take a long time to have an effect.

B Governments consider the views of both consumers and producers.

C Governments have more resources to calculate costs and benefits than private firms.

D Governments may take decisions to reduce negative externalities.

8.Why might a government encourage a monopoly?

A It can compete against foreign firms.

B It can have high average costs.

C It can make excessive profits.

D It can prevent innovation.

II Fill in the Blanks, Insert the correct word.

a. capital goods f. opportunity cost b. consumer goodsg. scarcity c. economicsh. servicesd. factors of productioni. utility e. human capitalj. value

1. The _____ of a CD player can be expressed in dollars and cents.

2. Haircuts and appliance repairs are examples of _____ .

3.. _____ arises because society does not have enough resources to produce all the things people would like to have.

4.. The _____ of going to a football game instead of working would include the money not earned at your job.

5. _____ is another name for the capacity of a product to be useful.

6. Land, capital, labor, and entrepreneurs are _____ .

7. ______ is the study of how people use limited resources to satisfy unlimited wants.