,2 ❖ Chapter 1/Ten Principles Of Economics
1. The word “economy” comes from the Greek word oikonomos, which means
a. “environment.”
b. “production.”
c. “one who manages a household.”
d. “one who makes decisions.”
ANS: C PTS: 1 DIF: 1 REF: 1-0
2. Resources are
a. scarce for households but plentiful for economies.
b. plentiful for households but scarce for economies.
c. scarce for households and scarce for economies.
d. plentiful for households and plentiful for economies.
ANS: C PTS: 1 DIF: 1 REF: 1-0
3. Economics deals primarily with the concept of
a. scarcity.
b. money.
c. poverty.
d. banking.
ANS: A PTS: 1 DIF: 1 REF: 1-0
4. The overriding reason why households and societies face many decisions is that
a. resources are scarce.
b. goods and services are not scarce.
c. incomes fluctuate with business cycles.
d. people, by nature, tend to disagree.
ANS: A PTS: 1 DIF: 2 REF: 1-0
5. The phenomenon of scarcity stems from the fact that
a. most economies’ production methods are not very good.
b. in most economies, wealthy people consume disproportionate quantities of goods and services.
c. governments restrict production of too many goods and services.
d. resources are limited.
ANS: D PTS: 1 DIF: 2 REF: 1-0
6. Approximately what percentage of the world's economies experience scarcity?
a. 10%
b. 40%
c. 85%
d. 100%
ANS: D PTS: 1 DIF: 1 REF: 1-0
7. When a society cannot produce all the goods and services people wish to have, it is said that the economy is expe-
riencing
a. scarcity.
b. surpluses.
c. inefficiencies.
d. inequalities.
ANS: A PTS: 1 DIF: 2 REF: 1-0
8. Oil is considered to be a non-renewable energy source. Oil
a. is an unlimited resource.
b. is a scarce resource.
c. is not a productive resource.
d. has no opportunity cost.
ANS: B PTS: 1 DIF: 1 REF: 1-0
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
,4 ❖ Chapter 1/Ten Principles Of Economics
HOW PEOPLE MAKE DECISIONS
1. The principle that "people face tradeoffs" applies to
a. individuals.
b. families.
c. societies.
d. All of the above are correct.
ANS: D PTS: 1 DIF: 1 REF: 1-1
2. Guns and butter are used to represent the classic societal tradeoff between spending on
a. durable and nondurable goods.
b. imports and exports.
c. national defense and consumer goods.
d. law enforcement and agriculture.
ANS: C PTS: 1 DIF: 1 REF: 1-1
3. When society requires that firms reduce pollution, there is
a. a tradeoff because of reduced incomes to the firms' owners and workers.
b. a tradeoff only if some firms are forced to close.
c. no tradeoff, since the cost of reducing pollution falls only on the firms affected by the requirements.
d. no tradeoff, since everyone benefits from reduced pollution.
ANS: A PTS: 1 DIF: 3 REF: 1-1
4. Economists use the word equality to describe a situation in which
a. each member of society has the same income.
b. each member of society has access to abundant quantities of goods and services, regardless of his or
her income.
c. society is getting the maximum benefits from its scarce resources.
d. society's resources are used efficiently.
ANS: A PTS: 1 DIF: 2 REF: 1-1
5. Efficiency means that
a. society is conserving resources in order to save them for the future.
b. society's goods and services are distributed equally among society's members.
c. society's goods and services are distributed fairly, though not necessarily equally, among society's
members.
d. society is getting the maximum benefits from its scarce resources.
ANS: D PTS: 1 DIF: 1 REF: 1-1
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, Chapter 1/Ten Principles of Economics ❖ 5
6. When the government attempts to improve equality in an economy the result is often
a. an increase in overall output in the economy.
b. additional government revenue since overall income will increase.
c. a reduction in equality.
d. a reduction in efficiency.
ANS: D PTS: 1 DIF: 2 REF: 1-1
7. A likely effect of government policies that redistribute income and wealth from the wealthy to the poor is that
those policies
a. enhance equality.
b. reduce efficiency.
c. reduce the reward for working hard.
d. All of the above are correct.
ANS: D PTS: 1 DIF: 2 REF: 1-1
8. The opportunity cost of an item is
a. the number of hours needed to earn money to buy the item.
b. what you give up to get that item.
c. usually less than the dollar value of the item.
d. the dollar value of the item.
ANS: B PTS: 1 DIF: 1 REF: 1-1
9. A student spends an hour studying instead of watching tv with his friends. The opportunity cost to him of studying
is
a. the improvement in his grades from studying for the hour.
b. the improvement in his grades from studying minus the enjoyment of watching tv.
c. the enjoyment he would have received if he had watched tv with his friends.
d. zero. Since he chose to study rather than to watch tv, the value of studying must have been greater
than the value of watching tv.
ANS: C PTS: 1 DIF: 3 REF: 1-1
10. A rational decisionmaker
a. ignores marginal changes and focuses instead on “the big picture.”
b. ignores the likely effects of government policies when he or she makes choices.
c. takes an action only if the marginal benefit of that action exceeds the marginal cost of that action.
d. takes an action only if the combined benefits of that action and previous actions exceed the
combined costs of that action and previous actions.
ANS: C PTS: 1 DIF: 2 REF: 1-1
11. A woman eats two bananas during a particular day. The marginal benefit she enjoys from eating the second banana
a. can be thought of as the total benefit she enjoys by eating two bananas minus the total benefit she
would have enjoyed by eating just the first banana.
b. determines her marginal cost of the first and second bananas.
c. does not depend on how many bananas she has already eaten.
d. All of the above are correct.
ANS: A PTS: 1 DIF: 3 REF: 1-1
.
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
1. The word “economy” comes from the Greek word oikonomos, which means
a. “environment.”
b. “production.”
c. “one who manages a household.”
d. “one who makes decisions.”
ANS: C PTS: 1 DIF: 1 REF: 1-0
2. Resources are
a. scarce for households but plentiful for economies.
b. plentiful for households but scarce for economies.
c. scarce for households and scarce for economies.
d. plentiful for households and plentiful for economies.
ANS: C PTS: 1 DIF: 1 REF: 1-0
3. Economics deals primarily with the concept of
a. scarcity.
b. money.
c. poverty.
d. banking.
ANS: A PTS: 1 DIF: 1 REF: 1-0
4. The overriding reason why households and societies face many decisions is that
a. resources are scarce.
b. goods and services are not scarce.
c. incomes fluctuate with business cycles.
d. people, by nature, tend to disagree.
ANS: A PTS: 1 DIF: 2 REF: 1-0
5. The phenomenon of scarcity stems from the fact that
a. most economies’ production methods are not very good.
b. in most economies, wealthy people consume disproportionate quantities of goods and services.
c. governments restrict production of too many goods and services.
d. resources are limited.
ANS: D PTS: 1 DIF: 2 REF: 1-0
6. Approximately what percentage of the world's economies experience scarcity?
a. 10%
b. 40%
c. 85%
d. 100%
ANS: D PTS: 1 DIF: 1 REF: 1-0
7. When a society cannot produce all the goods and services people wish to have, it is said that the economy is expe-
riencing
a. scarcity.
b. surpluses.
c. inefficiencies.
d. inequalities.
ANS: A PTS: 1 DIF: 2 REF: 1-0
8. Oil is considered to be a non-renewable energy source. Oil
a. is an unlimited resource.
b. is a scarce resource.
c. is not a productive resource.
d. has no opportunity cost.
ANS: B PTS: 1 DIF: 1 REF: 1-0
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
,4 ❖ Chapter 1/Ten Principles Of Economics
HOW PEOPLE MAKE DECISIONS
1. The principle that "people face tradeoffs" applies to
a. individuals.
b. families.
c. societies.
d. All of the above are correct.
ANS: D PTS: 1 DIF: 1 REF: 1-1
2. Guns and butter are used to represent the classic societal tradeoff between spending on
a. durable and nondurable goods.
b. imports and exports.
c. national defense and consumer goods.
d. law enforcement and agriculture.
ANS: C PTS: 1 DIF: 1 REF: 1-1
3. When society requires that firms reduce pollution, there is
a. a tradeoff because of reduced incomes to the firms' owners and workers.
b. a tradeoff only if some firms are forced to close.
c. no tradeoff, since the cost of reducing pollution falls only on the firms affected by the requirements.
d. no tradeoff, since everyone benefits from reduced pollution.
ANS: A PTS: 1 DIF: 3 REF: 1-1
4. Economists use the word equality to describe a situation in which
a. each member of society has the same income.
b. each member of society has access to abundant quantities of goods and services, regardless of his or
her income.
c. society is getting the maximum benefits from its scarce resources.
d. society's resources are used efficiently.
ANS: A PTS: 1 DIF: 2 REF: 1-1
5. Efficiency means that
a. society is conserving resources in order to save them for the future.
b. society's goods and services are distributed equally among society's members.
c. society's goods and services are distributed fairly, though not necessarily equally, among society's
members.
d. society is getting the maximum benefits from its scarce resources.
ANS: D PTS: 1 DIF: 1 REF: 1-1
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, Chapter 1/Ten Principles of Economics ❖ 5
6. When the government attempts to improve equality in an economy the result is often
a. an increase in overall output in the economy.
b. additional government revenue since overall income will increase.
c. a reduction in equality.
d. a reduction in efficiency.
ANS: D PTS: 1 DIF: 2 REF: 1-1
7. A likely effect of government policies that redistribute income and wealth from the wealthy to the poor is that
those policies
a. enhance equality.
b. reduce efficiency.
c. reduce the reward for working hard.
d. All of the above are correct.
ANS: D PTS: 1 DIF: 2 REF: 1-1
8. The opportunity cost of an item is
a. the number of hours needed to earn money to buy the item.
b. what you give up to get that item.
c. usually less than the dollar value of the item.
d. the dollar value of the item.
ANS: B PTS: 1 DIF: 1 REF: 1-1
9. A student spends an hour studying instead of watching tv with his friends. The opportunity cost to him of studying
is
a. the improvement in his grades from studying for the hour.
b. the improvement in his grades from studying minus the enjoyment of watching tv.
c. the enjoyment he would have received if he had watched tv with his friends.
d. zero. Since he chose to study rather than to watch tv, the value of studying must have been greater
than the value of watching tv.
ANS: C PTS: 1 DIF: 3 REF: 1-1
10. A rational decisionmaker
a. ignores marginal changes and focuses instead on “the big picture.”
b. ignores the likely effects of government policies when he or she makes choices.
c. takes an action only if the marginal benefit of that action exceeds the marginal cost of that action.
d. takes an action only if the combined benefits of that action and previous actions exceed the
combined costs of that action and previous actions.
ANS: C PTS: 1 DIF: 2 REF: 1-1
11. A woman eats two bananas during a particular day. The marginal benefit she enjoys from eating the second banana
a. can be thought of as the total benefit she enjoys by eating two bananas minus the total benefit she
would have enjoyed by eating just the first banana.
b. determines her marginal cost of the first and second bananas.
c. does not depend on how many bananas she has already eaten.
d. All of the above are correct.
ANS: A PTS: 1 DIF: 3 REF: 1-1
.
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
