1. Economics is best defined as the study of:
A. inflation, interest rates and the stock market.
B. supply and demand.
C. how people make choices in the face of scarcity and the implications of
those choices for society as a whole.
D. the financial concerns of businesses and individuals.
Ans: C
Difficulty: 01 Easy
Learning Objective: 01-01
Topic: Economics: Studying Choice in a World of Scarcity
Blooms: Remember
AACSB: Reflective Thinking
Feedback: Economics is the study of how people make choices under
conditions of scarcity and the implications of those choices for society as a
whole.
2. Economics is the study of:
A. the financial concerns of businesses and individuals.
B. the role of government in limiting the choices people make.
C. choice in the face of limited resources.
D. whether we will have enough resources in the future.
Ans: C
Difficulty: 01 Easy
Learning Objective: 01-01
Topic: Economics: Studying Choice in a World of Scarcity
Blooms: Remember
AACSB: Reflective Thinking
Feedback: Economics is the study of how people make choices under
conditions of scarcity and the implications of those choices for society as a
whole.
3. Economists recognize that because people have limited resources:
A. government intervention is necessary.
B. they have to make trade-offs.
C. they will never be happy.
D. our future is bleak.
Ans: B
Difficulty: 01 Easy
Learning Objective: 01-01
Topic: Economics: Studying Choice in a World of Scarcity
Blooms: Remember
AACSB: Reflective Thinking
,Feedback: Economists recognize that the resources available to us are
limited, so having more of one good thing means having less of another.
5. An implication of scarcity is that:
A. people will never be happy.
B. making trade-offs becomes unnecessary as wealth increases.
C. some people will always be poor.
D. people must make trade-offs.
Ans: D
Difficulty: 01 Easy
Learning Objective: 01-01
Topic: Economics: Studying Choice in a World of Scarcity
Blooms: Remember
AACSB: Reflective Thinking
Feedback: Although we have boundless needs and wants, the resources
available to us are limited. So having more of one thing means having less of
another.
6. If all the world’s resources were to magically increase one hundredfold,
then:
A. people would still have to make trade-offs.
B. economics would no longer be relevant.
C. scarcity would disappear.
D. trade-offs would become unnecessary.
Ans: A
Difficulty: 02 Medium
Learning Objective: 01-01
Topic: Economics: Studying Choice in a World of Scarcity
Blooms: Understand
AACSB: Reflective Thinking
Feedback: Economists assume that resources will always be scarce relative
to people's wants.
8. Forest lives in complete isolation in Montana. He is self-sufficient and
feeds himself through hunting, fishing, and farming. Which of the following
statements about Forest is true?
A. Forest has unlimited resources.
B. Forest is not required to make trade-offs because he is self-sufficient.
C. Forest has to make trade-offs.
D. Forest doesn’t have to consider costs and benefits.
Ans: C
Difficulty: 01 Easy
Learning Objective: 01-01
Topic: Economics: Studying Choice in a World of Scarcity
Blooms: Understand
, AACSB: Reflective Thinking
Feedback: Even if Forest is self-sufficient, he still has limited resources and
unlimited wants. For example, he might want to have more than 24 hours in
a day. Thus, he still has to make trade-offs.
10. Chris has a one-hour break between classes every Wednesday. Chris can
either stay at the library and study or go to the gym and work out. The
decision Chris must make is:
A. not an economic problem because neither activity costs money.
B. not an economic problem because it’s an hour that Chris has no matter
what he does.
C. an economic problem because the tuition Chris pays covers the cost of
both the gym and the library.
D. an economic problem because Chris has only one hour, and engaging in
one activity means giving up the other.
Ans: D
Difficulty: 02 Medium
Learning Objective: 01-01
Topic: Economics: Studying Choice in a World of Scarcity
Blooms: Understand
AACSB: Reflective Thinking
Feedback: Chris has to make a trade-off: if Chris goes to the gym, Chris
cannot also study and vice versa.
12. Whether studying the output of the U.S. economy or how many classes a
student will take, a unifying concept is that:
A. wants are limited and resources are unlimited, so trade-offs are
unnecessary.
B. wants are unlimited and resources are scarce, so trade-offs have to be
made.
C. wants are limited and resources are unlimited, so trade-offs have to be
made.
D. both wants and resources are unlimited.
Ans: B
Difficulty: 02 Medium
Learning Objective: 01-01
Topic: Economics: Studying Choice in a World of Scarcity
Blooms: Understand
AACSB: Reflective Thinking
Feedback: Although we have boundless needs and wants, the resources
available to us are limited. So having more of one thing means having less of
another.
13. The Cost-Benefit Principle indicates that an action should be taken if, and
only if:
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