1. The word that comes from the Greek word for \
household\a. market. b. consumer. c. producer. d. economy. 2. The word “economy” comes from the Greek word oikonomos, which
a. “environment.” b. “production.”
c. “one who manages a household.” d. “one who makes decisions.” 3. 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. 4. Economics deals primarily with the concept of
a. scarcity. b. poverty. c. change. d. power.
5. Which of the following questions is not answered by the decisions that
every society must make?
a. What determines consumer preferences? b. What goods will be produced? c. Who will produce the goods? d. Who will consume the goods? 6. The overriding reason as to 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.
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7. 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 restricts production of too many goods and services. d. resources are limited. 8. Approximately what percentage of the world's economies experience
scarcity? a. 25% b. 50% c. 75% d. 100% 9. When a society cannot produce all the goods and services people wish to
have, it is said that the economy is experiencing a. scarcity. b. shortages. c. inefficiencies. d. inequities. 10. For society, a good is not scarce if
a. at least one individual in society can obtain all he or she wants of the good.
b. firms are producing the good at full capacity.
c. all members of society can have all they want of the good.
d. those who have enough income can buy all they want of the good. 11. Which of the following products would be considered scarce?
a. golf clubs
b. Picasso paintings c. apples
d. All of the above are correct. 12. Economics is the study of
a. production methods.
b. how society manages its scarce resources.
c. how households decide who performs which tasks. d. the interaction of business and government.
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14. In most societies, resources are allocated by
a. a single central planner.
b. a small number of central planners.
c. those firms that use resources to provide goods and services. d. the combined actions of millions of households and firms. 15. The adage, \
the principle that a. goods are scarce.
b. people face tradeoffs.(to get something we like, we usually have to give up another thing we like) c. income must be earned.
d. households face many decisions. 18. Which of the following statements best represents the principle
represented by the adage, \a. Melissa can attend the concert only if she takes her sister with her. b. Greg is hungry and homeless.
c. Brian must repair the tire on his bike before he can ride it to class. d. Kendra must decide between going to Colorado or Cancun for spring break. 19. The principle that \
a. individuals. b. families. c. societies.
d. All of the above are correct.
20. A typical society strives to get the most it can from its scarce resources.
At the same time, the society attempts to distribute the benefits of those resources to the members of the society in a fair manner. In other words, the society faces a tradeoff between a. guns and butter.
b. efficiency and equity.
c. inflation and unemployment. d. work and leisure. 21. Guns and butter are used to represent the classic societal tradeoff
between spending on
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a. durable and nondurable goods.
b. imports and exports.
c. national defense and consumer goods. d. law enforcement and agriculture.
22. 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. 23. A tradeoff exists between a clean environment and a higher level of
income in that
a. studies show that individuals with higher levels of income actually pollute less than low-income individuals.
b. efforts to reduce pollution typically are not completely successful. c. laws that reduce pollution raise costs of production and reduce incomes.
d. by employing individuals to clean up pollution, employment and income both rise. 24. Which of the following phrases best captures the notion of efficiency?
a. absolute fairness b. equal distribution c. minimum waste d. equitable outcome 25. Which of the following is true?
a. Efficiency refers to the size of the economic pie; equity refers to how the pie is divided.
b. Government policies usually improve upon both equity and efficiency. c. As long as the economic pie continually gets larger, no one will have to go hungry.
d. Efficiency and equity can both be achieved if the economic pie is cut into equal pieces. 26. Efficiency means that
Chapter 1/Ten Principles of Economics ? 5
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. 27. Economists use the word equity 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. the benefits of society's resources are distributed fairly among society's members. 28. Senator Smith wants to increase taxes on people with high incomes and
use the money to help the poor. Senator Jones argues that such a tax will discourage successful people from working and will therefore make society worse off. An economist would say that a. we should agree with Senator Smith. b. we should agree with Senator Jones.
c. a good decision requires that we recognize both viewpoints. d. there are no tradeoffs between equity and efficiency. 29. Which of the following words and phrases best captures the notion of
a. minimum waste b. maximum benefit c. sameness d. fairness ANS: D DIF: 1 REF: 1-1 TOP: Equity MSC: Definitional