Section+1.3

=**Chapter 1 Assessment**=


 * 1) **Economists define //scarcity// as the "limited quantities to meet unlimited wants."**
 * 2) **All the decisions involve //trade offs// because we must give up some alternatives when we choose a certain course of action.**
 * 3) **The term //land// refers to all natural resources that are used to produce goods and services.**
 * 4) **Economists use the phrase //"guns or butter"// to describe the trade-offs a country has to make when choosing between military and the consumer production.**
 * 5) **An //opportunity cost// is the most important sacrifice that results from making a decision.**
 * 6) **A person who starts a new business or develops an original idea is known as an //entrepreneur//.**
 * 7) **Underutilization of resources occurs when an economy uses fewer resources than it is capable of expending.**

9. **Using examples of land, labor, and capitol, explain why economists believe that all goods and services are scarce.** Goods and services are scarce to economists because there is not an unlimited amount of everything.

10. **Explain how each of the following people would talk about scarcity and trade offs.**
 * a. The President of the United States:**
 * b. The leader of a developing nation:**
 * c. A U.S. citizen whose income is in the top percent:**
 * d .A U.S. citizen whose income is in the bottom 5 percent:**

11. **What three important pieces of information can we learn by reading a production possibilities graph?** You can determine mass employment, output, and efficiency

12. **Explain the law of increasing costs.**
 * The Law of increasing costs says that as the production of the product increases, the cost to produce the an additional unit of that product increases as well.**