Mr. Mengani Economics
Test 1
Part I: (1–25; 2pts) Directions: For each statement or question, write on the separate answer sheet
the number of the word or expression that, of those given, best completes the statement or answers
the question.
an incentive?
1. Scarcity exists when A. money
A. things are rare. B. grades
B. prices change. C. a promotion
C. there is less of a good than people D. All of the above
would like to have. 9. The opportunity cost of going to college is
D. there is an unlimited supply of a A. whatever the student would have
good. been doing if not attending
2. Which of the following groups is faced college.
with scarcity? B. nothing, since a degree will
A. individuals eventually earn more for a student
B. businesses later.
C. society C. the bill for tuition, books, dorm,
D. All of the above food, and transportation to college.
3. Which of the following is scarce? D. nothing for a student who receives
A. resources a scholarship.
B. clothing 10. Economists believe that people respond to
C. cars A. politicians.
D. All of the above B. incentives.
4. Economics would not exist if it were C. theories.
not for D. unlimited wants.
A. mathematics. 11. According to economic thinking, certain
B. scarcity. people earn more than others because:
C. incentives. A. They work harder
D. money. B. Their human capital commands a
5. To an economist, physical capital refers to higher wage
A. money. C. They have better jobs
B. machinery and tools. D. They have riskier jobs
C. resources found in nature. 12. On average, which group is likely to earn
D. new business opportunities. the largest income?
6. Opportunity cost could be described as A. A person who completes college.
A. the dollar price paid for your B. A person who completes high
selection. school.
B. your first choice. C. A person who earns a professional
C. all the alternatives you consider. degree (doctor, lawyer, PhD.)
D. your second choice. D. A person who completes a
7. Scarcity exists because graduate degree.
a. resources are limited and wants 13. Human capital consists of:
are limited. A. stocks and bonds
b. wants are unlimited and resources B. knowledge and skills
are unlimited. C. factories and equipment
c. wants can be satisfied and D. savings and investment
resources are unlimited. 14. All of the following are ways to invest in
d. resources are limited and wants your human capital except:
are unlimited. A. Going to college to obtain a
8. Which of the following is an example of bachelor’s degree
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Mr. Mengani Economics
B. Going to a technical school to D. Never buy goods or services on
obtain a certificate credit
C. Developing a resume and cover 20. A budget is:
letter A. a record of only a person’s
D. Practicing a sport and/or playing income.
on an official school team B. a record of only a person’s
15. Some people chose to stop attending high expenses.
school before graduation. What is the C. a plan to buy something
opportunity cost to the individual of inexpensively.
dropping out of high school? D. a plan to manage income,
A. The lower income earned in the spending and saving.
job market 21. If your Income is greater than your
B. The lower interest rates one is expenses, your budget is said to be:
charged for credit A. in surplus
C. The higher taxes one pays for B. in deficit
leaving school early C. balanced
D. The payments made to companies D. None of the Above
hiring drop-outs 22. After reviewing last month’s budget,
16. Which of the following occupation groups Alisha decided she should reduce her
is expected to decline in total employment variable expenses. Which of the following
over the next 10 years? are most likely variable expenses for
A. Service Alisha?
B. Farming, fishing and forestry A. Car payment.
C. Professional (doctors, lawyers, B. Car Insurance
etc.) C. Rent and tuition.
D. Management, business and D. Clothing and food.
financial 23. Liabilities are:
17. Which of the following occupational A. people who are important to you.
groups is expected to grow the most in B. people who are difficult to work
total employment over the next 10 years? with.
A. medical and related services C. financial obligations that must be
B. computer technology paid.
C. education and teaching D. possessions that have economic
D. construction value.
18. What is the difference between gross and 24. Assets are:
net income? A. people who are important to you.
A. Net income is gross income minus B. people who are difficult to work
savings. with.
B. Gross income is net income minus C. possessions that have economic
savings. value.
C. Gross income is net income minus D. financial obligations that must be
payroll deductions. paid.
D. Net income is gross income minus 25. A positive net worth means that:
payroll deductions. A. income is less than savings
19. Which of the following is a positive B. assets are less than liabilities
habit/rule of financial literacy C. income is greater than saving
A. Spend less than you earn. D. assets are greater than liabilities
B. Spend more than you earn.
C. Try to get the highest paying job
possible.
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Mr. Mengani Economics
Part II (26-28; 25 pts): Directions Answer any two of the following questions as completely as
possible (no extra credit for answering more than two).
26. Your friend receives her first paycheck and is amazed by how much money is taken out.
Explain to her what the four major mandatory payroll deductions are and why they are taken out
of her paycheck.
27. List and explain the four parts of a budget. Why is each part important? Why should people
create a budget?
28. You are having lunch with your cousin and you both see an expensive car drive by. Your
cousin remarks “I can’t wait to be wealthy like that guy there!” Explain to your cousin what
common mistake he has made with regard to wealth and what it truly means to be “wealthy.” Be
sure to mention income, expenses, assets, liabilities and net worth (and the relationship between
them) in your explanation.
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