10 Principles of Economics

With what concept does economics deal primarily with?

• scarcity

• poverty

• change

• power

For what reason do both households and societies face many decisions?

• because resources are scarce

• because populations may increase or decrease over time

• because wages for households and therefore society fluctuate with business cycles

• because people, by nature, tend to disagree

When is a good considered scarce in a society?

• when more output of the good is possible

• when everyone in that society cannot have all they want of the good

• when the government restricts production of the good

• when only the richest people in the economy can buy all they want of the good

What does economics study?

• how society manages its scarce resources

• the government's role in society

• how to increase production

• How firms make profits

Which of the following is NOT a major area of study for economists?

• how people make decisions

• how countries choose national leaders

• how people interact with each other

• how forces and trends affect the overall economy

What concept is illustrated by the adage, "There is no such thing as a free lunch"?

• tradeoffs

• scarcity

• productivity

• efficiency

What does the adage, "There is no such thing as a free lunch," mean?

• Even people on welfare have to pay for food.

• The cost of living is always increasing

• To get something we like, we usually have to give up another thing we like

• All costs are included in the price of a product

Henry decides to spend 2 hours playing golf rather than working at his job which pays $8 perhour. What is Henry's tradeoff?

• the $16 he could have earned working for 2 hours

• nothing, because he enjoys playing golf more than working

• the increase in skill he obtains from playing golf for those 2 hours

• nothing, because he spent $16 for green fees to play golf

Daniel decides to spend the last two hours of the night before his economics exam studyinginstead of sleeping. For Daniel, what would his tradeoff be?

• nothing, since no dollar value can be put on sleep

• nothing, since studying would be more beneficial than sleep

• the six hours of sleep he could have had if he had gone to bed before midnight

• the two hours of rest he would have gotten

In which of the following situations would economists use the word equity?

• Each member of society has the same income.

• Society is getting the most it can from its scarce resources

• Those in society who have the least will receive the most.

• The benefits of society's resources are distributed fairly among society's members