Economics Grade Flashcards

A bakery sells cupcakes for $3 each. When the price drops to $2, customers buy more cupcakes. This illustrates the law of:

Answer: Demand

The law of demand states that as price decreases, the quantity demanded increases, all else being equal.

A country can produce either 100 cars or 200 tons of wheat using all its resources. If it currently produces 50 cars and 100 tons of wheat, what does this represent?

Answer: A point inside its production possibilities frontier

A point inside the production possibilities frontier indicates resources are not being fully or efficiently used.

Which government action is an example of a fiscal policy tool?

Answer: Increasing government spending on infrastructure

Fiscal policy involves government spending and taxation decisions, while monetary policy involves the money supply and interest rates.

A factory dumps waste into a river, harming nearby communities. This is an example of:

Answer: A negative externality

A negative externality occurs when the production or consumption of a good imposes costs on third parties not involved in the transaction.

When a country imports more goods than it exports, it has a:

Answer: Trade deficit

A trade deficit occurs when a country's imports exceed its exports in value.

A student chooses to spend Saturday studying instead of working at a part-time job. The opportunity cost of studying is:

Answer: The wages not earned from working

Opportunity cost is the value of the next best alternative forgone, which in this case is the wages the student could have earned.

Which of the following best describes a command economy?

Answer: The government makes most economic decisions

In a command economy, the government controls production, distribution, and pricing rather than market forces.